Readers of this blog know that one of the more significant recent developments in the ESG arena has been the rise of the ESG backlash – that is, moves by state legislators and others to try to push back against a supposed ESG agenda. These developments have put company executives squarely in the crossfire, as they struggle, on the one hand, to address continued efforts by activist stakeholders to push companies toward expanded ESG commitments, and conflicting efforts by conservative politicians to punish companies for supposedly pursuing a “woke” agenda. How are companies to respond to these competing forces? Evidence suggests that increasingly companies are responding by “greenhushing” – that is, by keeping quiet about their ESG initiatives.
I first encountered the term “greenhushing” in a Cydney Posner’s May 3, 2023, post on the Cooley law firm’s PubCo blog (here), in which Posner noted that one effect of the anti-ESG movement has been to motivate companies to “keep quiet about, or at least lower their volume, on their ESG initiatives – a phenomenon so common it now has a name: ‘greenhushing’.”
Posner in turn described earlier antecedents for the use of the term going back as far as 2004, noting that the term may have developed to describe a sustainability marketing strategy in contrast to the strategy of “greenwashing.” Posner quotes several different sources to suggest that companies may be turning down the volume not only to avoid unwanted attention from conservative politicians and activists, but also because of a perception that regulators and others are paying more attention to companies’ ESG-related claims.
A June 12, 2023, Wall Street Journal article entitled “Companies Quiet Diversity and Sustainability Talk Amid Culture War Boycotts” (here) detailed a statistical analysis of company disclosures showing that companies have indeed recently reversed a “more boastful approach” to ESG and instead have “significantly quieted down in public settings about their environmental and employee diversity efforts as opposition has mounted from a confluence of interests.”
Companies concerns about trying to stay out of the ESG spotlight have a legitimate basis. The concern is not only trying to avoid the kind of complicated publicity in which, for example, Target and Bud Light have recently found themselves embroiled. The concern can also be about trying to stay out of anti-ESG litigation.
For example, as I noted at the time (here), American Airlines and Delta Airlines both recently found themselves caught up in litigation relating to the efforts to provide ESG-based investment options in 401(k) plans or to publicize their efforts to achieve carbon neutrality.
The Journal article makes the interesting point that while instances of “green-hushing” may be “part of a larger strategy for many companies to avoid weighing in on divisive issues,” there is “little sign that public companies are pulling back from the initiatives themselves.” Posner also asked the question in her blog post to which I linked above about whether companies that are turning down the volume on ESG are also trimming their aspirations and objectives. Indeed, companies may well conclude, as a matter of long-term strategic and operational decision making, that they must continue to assess ESG-related factors and take them into account in the operational planning.
In the current environment, companies face, as respected New York attorney Martin Lipton put it in a May 23, 2023 post on the Harvard Law School Forum on Corporate Governance (here), a “challenging balancing act,” as various stakeholders become “more divided on ESG.” Lipton suggests that there are “two guiding principles” that boards and management should keep in mind: “(1) approach important ESG issues as one would approach other important business decisions and risks and (2) recognize that political pressure on ESG is a risk that needs to be managed (rather than a missive that needs to be obeyed).”
I will say that it, at least at one level, it is hardly surprising in the current polarized political environment in this country, the ESG has become yet another front in the seething political wars. While I accept that ESG is a topic that unquestionably has a political component, it is and cannot be solely a political topic. There are legitimate social, environmental, and economic issues at stake in the ESG-related debate that must be considered.
It is not enough just to force companies and others to stop talking about ESG. There are underlying issues about, for example, climate change, or fairness and social justice, that need to be taken into account and addressed. Eliminating the discussion of these issues through forced silence is not in anyone’s interests.