Insight: Companies walk ESG tightrope, under fire from all sides over disclosures
29/02/2024 01:00
*
Anti-ESG backlash in U.S. prompts new trend:
'greenhushing'
*
Environmental statements from U.S. finance sector drop 20%
in Q3
*
Statements from autos, healthcare also down -Permutable
data
By Richa Naidu and Simon Jessop
LONDON, Feb 29 (Reuters) - Since joining Asahi Group
2502.T in 2020 as sustainability chief, Preeti Srivastav has
helped the Japanese brewer make several environmental and social
pledges but has not got it to disclose all its progress.
Asahi said on Feb. 9 it had brought forward its target to
2040 from 2050 for lowering net greenhouse emissions to zero. It
has not fully explained how it plans to get there.
Asahi is keeping private a sustainability and diversity,
equity and inclusion (DE&I) "dashboard" launched in December
2020 to monitor progress in environmental, social and corporate
governance (ESG), Srivastav said in an interview.
The dashboard serves as an internal system for collecting
the data which is then used for external reporting, Asahi said.
"There's so many landmines in some of these areas,"
Srivastav said. She noted that peer Anheuser-Busch InBev
ABI.BR saw Bud Light sales slide as some U.S. beer drinkers
bristled at a promotion featuring transgender influencer Dylan
Mulvaney.
Srivastav also cited fears that employees and consumers
could criticize slow progress on ESG targets or that regulators
or investors could file "greenwashing" lawsuits accusing Asahi
and other firms of exaggerating ESG accomplishments.
"A lot of companies are hesitant, including us, to talk
about any of our sustainability work until we can show even
marginal improvement or impact," Srivastav said.
Reuters interviews with more than 20 company executives,
data firms, consultants and investors shed light on how
corporate ESG disclosures have become an ever more challenging
balancing act for companies.
Environmentally and socially minded shoppers, employees
and business partners seek ambitious ESG goals and want
companies to document progress, while regulators and investors
scrutinize ESG statements for accuracy. Meanwhile, some
politicians, especially U.S. Republicans, have pressured
companies to drop ESG policies altogether.
The result often is discretion about ESG policies and
accomplishments, or "greenhushing" as business leaders call it.
Analysis of more than 10,000 news sources for environmental
statements shared with Reuters by data firm Permutable shows
greenhushing has been most prominent in the U.S., particularly
for companies relying on Republican-led states for revenue or
regulatory support.
Financial sector companies worth $10 billion or more
collectively showed the biggest drop in ESG-related statements
year-on-year in the third quarter of 2023, down 20%. U.S.
Republican politicians have targeted banks and asset managers
that support the transition away from fossil fuels to cleaner
forms of energy.
A recent survey by The Conference Board, a U.S. think tank,
showed 37% of financial and insurance industry respondents had
experienced some type of ESG backlash. That far outpaced the
next most impacted sector, business and professional services,
at 8%.
ESG mentions by autos and healthcare companies also fell
according to the Permutable data. Food and beverage company
statements were flat.
Politicians in Republican-controlled U.S. states have
already launched 150 anti-ESG bills in 2024, which has had a
chilling effect, according to Andrew Behar, chief executive of
activist group As You Sow, which pressures companies, including
the big U.S. banks, over ESG issues.
"We have to walk a very fine line... we're in a particularly
tough situation in the United States right now. The way we talk
is impacted," an executive at a U.S-based bank said on condition
of anonymity.
A European banking source said U.S. clients were also
affected:
"Look, the environment in the U.S., you go to a client who
does an 'E' environment-focused project, he doesn't even want
to name it 'E'... Everyone is hesitant right now."
The trend is completely different elsewhere in the world.
Governments in many heavily polluted Asian countries are
pressuring companies to do more on sustainability. Asian
financial companies showed a collective 70% increase in ESG
mentions over the same period while European financials posted a
51% jump, the data showed.
'DIFFERENT TENSIONS'
In the U.S. ESG announcements in sectors including retail,
and food and beverage were up, according to the Permutable data,
as some consumers put a premium on environmentally and socially
friendly products.
This led to "different tensions" between companies and their
legal teams over being vocal about environmental strategy, even
in the same industry, "depending on who their customer base is",
As You Sow's Behar said.
Starbucks, for instance, increased environmental
announcements by 56% in the third quarter, and started 2024 by
announcing it was cutting down on paper waste by letting
customers use their own cups in its stores.
"Customers care about their communities and the planet," a
Starbucks SBUX.O spokesperson said, adding this has
contributed to it reporting more on the environment and linking
executive pay to progress on the targets.
In the U.S. utilities sector, which has suffered from
extreme weather events such as storms and wildfires, total
statements rose 5% year on year. One exception was regional
utility Black Hills, which said its investors prioritized its
near-term financial wellbeing.
"Once earnings growth rates were in jeopardy, the investors
and analysts were suddenly less interested in ESG topics," said
Jerome Nichols, director of investor relations.
Other companies said they were concerned about negative
press or consumers misinterpreting nuances of sustainability
initiatives.
It's too "complicated" to put into a few words on a package,
Oriol Margo, head of EMEA sustainability transformation at
Huggies diapers maker Kimberly-Clark, told Reuters on the
sidelines of the Reuters IMPACT conference in London.
"This is a problem -- I cannot claim we have an answer to
it... We don't talk sustainability a lot. We don't talk enough."
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Asia sectors https://tmsnrt.rs/3NsTH6L
U.S. sectors https://tmsnrt.rs/3RLhPUx
Europe sectors https://tmsnrt.rs/3RLVfv5
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Reporting by Richa Naidu and Simon Jessop in London
Additional reporting by Isla Binnie in New York
Editing by Greg Roumeliotis and David Gregorio)
((simon.jessop@thomsonreuters.com; +44 (0) 207 542 5052;
Reuters Messaging: Reuters Messaging:
simon.jessop.thomsonreuters.com@reuters.net))