By THERESE BAPTISTE – CORNELIS

My re­cent ESG book (Empow­ering Social Growth – An ex­ploration of the intricate rela­tionship between ESG and social impact) has in­deed appeared to have awak­ened interest amongst academics and C-Suite executives in the Caribbean about ESG, which has already been in focus globally.

However as the corporate world increasingly embrac­es Environmental, Social, and Governance (ESG) policies globally, a trou­bling trend of “Social-Im­pact washing” and “Hush­ing” has emerged. These practices involve compa­nies pretending to imple­ment ESG policies without genuine commitment, aim­ing to maintain a positive public image while avoid­ing substantial changes.
Understanding Social-Impact Washing and Hushing
Social-Impact Wash­ing refers to companies overstating or fabricating their social responsibility efforts. This can include exaggerating community involvement, diversity ini­tiatives, or environmental conservation efforts with­out meaningful action. The primary goal is to deceive stakeholders, including consumers and investors, into believing that the com­pany is more socially re­sponsible than it actually is.
Hushing, particularly “greenhushing,” is when companies deliberately un­derreport or remain silent about their ESG efforts and progress. This can be driven by various factors, including fear of backlash, litigation, political pres­sure, or the complexity of accurately measuring and reporting sustainability metrics.

Industries Most Affect­ed

Several industries are particularly prone to social-impact washing and hush­ing:

1. Energy Sector: Fossil fuel companies often face scrutiny over their environ­mental impact. Some have been known to exaggerate their renewable energy in­vestments or underreport their carbon emissions.
2. Fashion and Apparel: With growing awareness of labor practices and en­vironmental impact, many brands claim to be sustain­able without transparent evidence. Terms like “eco-friendly” or “ethical fash­ion” are frequently used without substantial back­ing.
3. Technology: Tech gi­ants often highlight diversi­ty and inclusion initiatives. However, the actual demo­graphic data and internal practices sometimes reveal a different story, indicat­ing that these claims may be more about image than reality.
4. Food and Beverage: Companies in this sector may promote organic or sustainably sourced prod­ucts without transparent supply chain practices, leading to accusations of greenwashing and social-impact washing.
   Investor Consider­ations
   Investors play a crucial role in holding companies accountable for their ESG claims. Here are key areas they should focus on:
5. Transparency and Reporting: Investors should demand detailed and regular reports on ESG metrics. Companies should provide clear, verifiable data on their sustainability efforts, social impact, and governance practices.
6. Third-Party Audits and Certifications: Inde­pendent verification of ESG claims through third-party audits or certifications can provide more confidence in a company’s claims. In­vestors should look for rec­ognized certifications like LEED, Fair Trade, or ISO standards.
7. Engagement and Shareholder Activism: Active engagement with companies through voting, dialogue, and shareholder proposals can push for better ESG practices. In­vestors can leverage their influence to demand more transparency and genuine commitment to ESG goals.
8. Performance Metrics and Outcomes: Beyond promises and initiatives, investors should exam­ine the actual outcomes of ESG policies. This includes reductions in carbon emis­sions, improvements in diversity metrics, and tan­gible social impact.
9. Regulatory Compli­ance: Companies should adhere to regulations like the Corporate Sustainabil­ity Reporting Directive (CSRD) in the EU, which mandates detailed report­ing on ESG metrics. In­vestors should ensure that companies are compliant and transparent in their re­porting.
   The Role of Corporate Sustainability Reporting Directive (CSRD)
   The CSRD aims to stan­dardize and enhance ESG reporting across industries, ensuring that companies provide comprehensive and comparable sustainability data. By 2024, large com­panies in the EU will be required to adhere to these reporting standards, signifi­cantly improving transpar­ency and accountability.

Conclusion

Social-Impact washing and hushing undermine the integrity of ESG initiatives and hinder genuine prog­ress toward sustainability and social responsibility. Investors must remain vigi­lant and demand transpar­ency, third-party verifica­tion, and tangible outcomes from companies. By doing so, they can ensure that their investments con­tribute to meaningful and impactful ESG practices, driving corporate respon­sibility and sustainability forward.
Investors should focus on transparency, third-party audits, active engagement, performance metrics, and regulatory compliance to ensure they receive proper metrics on their compa­nies of interest. Adhering to these practices will help counteract the rising trend of Social-Impact washing and hushing, promoting genuine ESG efforts in the corporate world.
I encourage those inter­ested in improving their or­ganisation’s understand­ing of how they can truly play a part In Empowering Social Growth to contact me via my website There­seBaptiste.com.