It’s hard to miss Spring entering its early bloom in recent weeks following the warmest February on record last month. Blossoms have appeared around a month earlier than usual in recent years, creating disruptive effects on ecosystems, and 2024 has seen a continuation of the recent extreme weather trend that has dominated headlines. With further warnings of the coming months setting fresh temperature records around the world, climate change has maintained its grip as one of today’s most pressing global issues.

And, as more voters than ever head to the polls this year, companies are grappling with their responsibilities to the planet and the extent to which they uphold and communicate their climate ambitions.

In the wake of new legislation approved by the European Parliament in January to curb greenwashing, businesses face a new reality. Generic environmental claims and misleading product information are banned, with only sustainability labels backed up by certification schemes permissible under the new rules. It comes as the UK government announced its consultation to regulate the ESG ratings sector this month. HM Treasury seeks to improve “clarity and trust” in the sector, highlighting the need for more transparent and accountable data on companies’ climate credentials.

Sustainable positioning on the retreat

While these developments, and others, will go a long way towards stamping out instances of greenwashing and increasing data quality, they could also lead to unintended consequences. Companies may opt to stay quiet on their net zero progress out of fear of falling foul of regulations.

Some financial institutions, including Blackrock and HSBC, have decided to downgrade their funds under the EU’s Sustainable Finance Disclosure Regulation from the most sustainable category to one that requires a looser definition. Vanguard deleted two paragraphs about its “dedication to responsible investing” from its webpage on sustainable investing for several months last year. Meanwhile, ASOS has removed the “Responsible Edit” filter section from its website without any public announcement.

A recent study by South Pole confirms this concerning trend of businesses shifting away from their sustainable positioning. The study found that most respondents in nine of the 14 industries surveyed are intentionally decreasing their climate communications, otherwise known as ‘greenhushing’. It found that 44% of companies stated that external communications on climate targets have become more challenging, and 7 in 10 listed companies admitted to greenhushing. They blame a heady mix of factors, including growing regulatory scrutiny, investor pressure, customer activism and data scarcity.

Companies may underreport their sustainability efforts for genuine reasons, such as being unable to fulfil the demand for data or the regulatory costs. Some prefer to test their green credentials over time to avoid scrutiny or fines. However, research has shown that the world’s biggest brands are missing out on billions of pounds of potential value by failing to communicate their sustainability achievements and progress appropriately.

Avoiding the greenhushing trap

So, how can companies avoid the greenhushing trap? The same principles to prevent greenwashing apply, such as ensuring the communication of environmental claims is substantiated with verifiable data and providing regular reporting on progress against clearly defined goals.

But, more than that, widespread greenhushing could set a dangerous precedent that may cause the recent momentum on corporate sustainability to stall. Communications leaders and their bosses must get comfortable with a degree of scrutiny that comes with talking about their impact on the planet. No business is perfect and scrutiny can be planned for and mitigated against. Ultimately, companies have a responsibility to tell authentic stories in order to catalyse a more sustainable future. A good example of this was Apple’s short video with Oscar winner Octavia Spencer last year. By embracing the sceptic in the Mother Nature character, Apple was able to directly address her concerns, and with it, address its critics while admitting that it still has more work to do in key areas.

While the path to net zero is not straightforward for any business, and uncomfortable headlines will occasionally need to be stomached, those that preserve and demonstrate accountability will reap the benefits both commercially and reputationally. After all, companies that lead this movement can set the benchmark, prompt others into action and, more broadly, encourage an era of more authentic sustainability communications.

You can read all of our Financial Services Pulse content here. For more information about the Financial Services team and our sustainability expertise, contact Ben Carr, Associate Director & Sustainable Finance Lead, at [email protected].