Brand valuation consultancy firm Brand Finance recently released their first annual “Sustainability Gap Index.” The index analyzes a brand’s perceived ESG value against its ESG performance data from CSR Hub. The result in many cases is that the company is perceived as having better ESG performance than it does, in which case the company is at risk of losing value due to greenwashing.
The flip side of that is that there are also many companies that are “greenhushing.” One way companies “greenhush” is when they exhibit better ESG performance than what they actually communicate. Companies typically limit or abridge their ESG communications in order to avoid anti-ESG backlash or concerns about ESG-related antitrust risk. Yet while this seems an effective way of managing risk, companies can stand to gain value by better communicating their ESG performance. The Brand Finance report points out that when perception doesn’t align with reality, the impact on value can cut both ways:
Where performance exceeds perception, there is an opportunity to rapidly generate value, by communicating the brand’s genuine commitment to sustainability more effectively. Conversely, where perception exceeds performance, value is at imminent risk, as brands leave themselves open to public backlash and a ‘correction’ of their sustainability perceptions value.
It can be difficult for companies to appropriately message their ESG performance to their customers. Companies that accurately message their sustainability efforts can capture value from positive public perception while avoiding greenwashing risk. To understand and manage greenwashing risk check out our Checklist: Avoiding Greenwashing and our Guidebook: Using the FTC’s Green Guides for Marketing.
