‘Greenhushing’ and the risk of quiet quitting on climate goals

By WONG PEI TING

The Business Times, 30 January 2024

SUSTAINABILITY consultancy South Pole’s latest report on “greenhushing” confirms a visible undercurrent in the way some Singapore companies deal with more contentious corporate governance disclosures, such as director remuneration: When in doubt, stay silent.

Fifty-five per cent of the climate-conscious companies here that responded to the consultancy’s survey said they find it increasingly difficult to communicate their climate action and progress to external parties.

In the face of their difficulties, four in 10 of these companies said they acted by decreasing their external communications on climate change.

Greenhushing, the opposite of greenwashing, takes place when corporates deliberately under-report their environmental, social and corporate governance (ESG) initiatives for fear of backlash.

Such fears are not unfounded. Apart from the very public fallout from companies being called out for greenwashing, ESG-related lawsuits have started flying about. This is especially so in litigious markets such as the US.

One of the more high-profile suits involves one of ESG’s fiercest proponents. BlackRock, the world’s largest fund manager, was sued by the US state of Tennessee for making ESG-related misrepresentations and omissions in the marketing or sale of its investment products and services.

Given the risks of being accused of making “false” and “misleading” sustainability claims, companies would rather not say more than they absolutely have to.

South Pole’s data suggest that most companies are struggling to adapt to new regulations and compliance schemes, and they are no longer communicating their climate strategies and goals with confidence.

Its findings have been corroborated elsewhere. A December survey by advisory firm Teneo found that 8 per cent of chief executives are scaling back their companies’ ESG programmes amid the politicisation of ESG over the past year.

The rest are staying the course, but many of them (72 per cent) are making changes to how they operate. There is greater caution in external communication of ESG initiatives to avoid regulatory scrutiny or political criticism.

The Wall Street Journal recently reported that advisers are telling CEOs to be “more precise and to set goals that can be achieved”, and that it is recommended that they say “as little as possible”.

Being modest makes sense, of course. Yet, there is also a danger that companies may “quiet quit” on their climate goals.

The concept of quiet quitting, part of a post-pandemic zeitgeist, describes employees re-evaluating how emotionally invested they should be in their work, with a number ending up putting in the minimum amount of effort to keep their jobs.

How might this apply to companies and green goals?

Assuming that most companies in one sector hold back on communicating their net-zero progress, the collective pressure within the industry to do more weakens.

Greenhushing might sound harmless, but it has the dangerous potential to stymie corporate climate action.

There is an implication here for regulators: Where rules are applied on a “comply or explain” basis, silence is the best resort for an unprepared or unconverted company.

Singapore’s Code of Corporate Governance, first introduced in 2001, took this approach.

Over 20 years later, regulators still find it hard to get companies to uphold the Code.

According to a 2022 KPMG survey commissioned by an industry-led Corporate Governance Advisory Committee, around half of listed companies here still provide boilerplate corporate governance disclosures.

Up till last year, “comply or explain” was the blanket approach for climate reporting among listed companies, too.

Fortunately, the regulator now requires issuers in several industries – energy, finance and agriculture, food and forest products – to publish disclosures in accordance with recommendations from the Task Force on Climate-Related Financial Disclosures (TCFD).

Those in the materials and buildings industry and transportation industry will join in on publishing mandatory TCFD disclosures from next year.

For the other issuers, however, climate reporting will remain optional.

Prof Lawrence Loh, director of the Centre for Governance and Sustainability at the National University of Singapore Business School, said “comply or explain” could be seen as a greenhushing enabler.

“In much of my research, including in ESG, a lot of companies – even if there is some regulation – neither comply nor explain,” he added.

“They all are stuck in the middle. They end up doing nothing. They just ignore the requirement to disclose, and they don’t explain. They just keep quiet totally.”

While the regime’s intention is partly to set goals for companies that are not yet able to comply and allow them to pace themselves and learn from others, Prof Loh noted that this creates “a lot of grey zones” around what to disclose and how much disclosure is deemed adequate.

These grey areas, in turn, make it difficult for regulators to enforce the compliance regime.

“There are just too many (companies with explanations). We just don’t have the resources,” Prof Loh added.

John Lim, the past chairman of the Singapore Institute of Directors, told an audience of listco directors and executives on Jan 23 when changes to the Asean Corporate Governance Scorecard were introduced that “Singapore has a habit of doing more, disclosing less”, unlike some other countries that are inclined to “disclose more, but do less”.

That is all very well, as long as disclosing less does not eventually result in doing less.