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Greenhushing
Practical Law Glossary Item w-040-4008 (Approx. 4 pages)
Glossary
Greenhushing
Occurs when a company downplays, underreports, or withholds information on its green credentials or achievements, climate strategies, or targets to avoid:
- Greenwashing claims, criticism, or reputational harm if it falls short of its stated or public targets.
- The attention or scrutiny of politicians and regulators. Several states have banned financial institutions from using environmental, social, and governance (ESG) and other sustainability factors to discriminate against businesses or certain investments (see Practice Note, Key Developments in State ESG Law: 2022 Tracker and Article, ESG and State Law in 2022: Conflicts and Trends).
While greenhushing may allow companies to achieve their goals away from the critical glare of consumers, politicians, and other interested stakeholders, there are concerns that the lack of disclosure and public information on ESG or sustainability issues may:
- Cause some to believe that these issues have become less important, slowing the pace of decarbonization and the energy transition.
- Limit the sharing of key information that:
- may help other companies benchmark their own achievements or develop their own decarbonization strategies; or
- is needed for analysts to evaluate a company's physical risk and transition risk.
- Make it more difficult to hold companies accountable for their activities.
- Result in inaccurate or incomplete assumptions, analyses, or conclusions about a company's business or exposure to climate-related risks.
Instead of being less vocal about their ESG or sustainability strategies, targets, or achievements, some observers have suggested that companies implement the following strategies to mitigate litigation risk, regulatory risk, and reputational harm:
- Conduct thorough analyses of their operations to identify any vulnerabilities or challenges.
- Assess and understand what they can reasonably accomplish, accounting for their financial condition, personnel, and commitments to their consumers, clients, investors, and other stakeholders.
- Clearly and carefully define their goals to avoid confusion and inadvertently misleading their stakeholders.
- Carefully craft their ESG policies and statements and distinguish between statements and goals that are aspirational and those that are achievable within a specified time frame.
- Examine their policies for monitoring and assessing compliance with their stated goals.
- Evaluate their existing disclosures relating to ESG and sustainability to identify any gaps or areas for improvement and assess whether those disclosures can be substantiated.
- Consider whether their ESG and sustainability disclosures should be accompanied by any appropriate disclaimers.
For more information on these issues, see: