Companies might not be disclosing their climate goals to avoid scrutiny, Australian Securities and Investments Commission (Asic) chair, Joseph Longo, said. The practice, known as ‘greenhushing’, allows companies to claim to have good ESG strategies without allowing them to be tested, he added.
Companies worldwide may increasingly hide from openly communicating their climate goals due to a growing global trend dubbed “greenhushing.”
This trend enables businesses to report strong environmental, social, and governance (ESG) policies without having these measures thoroughly examined.
This form of response mirrors an aspect of greenwashing – an attempt to obtain an unearned “green halo” effect without committing to the work.
“Greenwashing” pertains to the act of misleadingly amplifying a company’s ESG commitments, a practice that has increasingly captured regulatory attention.
It’s argued that ESG reporting forms a critical step towards achieving heightened transparency and improved disclosure standards for investors.
In a study by Swiss consultancy South Pole, it was reported that a growing number of companies have ceased discussing their climate policies publicly, even when these organisations have set science-based targets.
Greenhushing hinders the scrutiny of corporate climate objectives and restricts knowledge sharing.
Many companies, even those involved in industries like coal, oil, and gas production, publicly support the Paris agreement’s objective to limit global warming to 1.5C above pre-industrial levels. However, these firms often face heavy criticism due to policies that permit new fossil fuel reserve development.
As per the Intergovernmental Panel on Climate Change’s analysis following the landmark 2015 Paris agreement, existing fossil fuel infrastructure’s greenhouse gas emissions are sufficient to surpass the world’s climate targets.
Four key behaviours are said to constitute problematic “greenwashing” in today’s context.
These behaviours include setting net zero targets without a realistic plan to achieve them; misuse of terms like “carbon neutral”; exaggerating sustainability investment screens; and employing inaccurate or vague labelling.
The importance of ESG disclosures is now of paramount importance to businesses, especially as more investors now depend on this information to guide their decision-making process.
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