In recent years, we’ve witnessed a tidal wave of greenwashing. From overplaying green credentials to using misleading labels, companies all over the world have been employing all sorts of deceptive tactics to appeal to a growing base of environmentally-conscious consumers.
But, in the wake of high-profile exposés, legal action and regulations, research shows companies are rolling back on claims – even when they can back them up.
A new report from Swiss carbon finance consultancy South Pole highlights that not only are the vast majority of companies worldwide doing either “nothing” or “very little” on climate action, but the companies that are taking action are staying silent.
Working hard or hardly working
The report, which is now in its fourth year, highlighted that from its proprietary database of 77,000 companies – including the Global Fortune 500, major stock indices, and all CDP and GRI reporting companies – a shocking 92 per cent have not set a net zero emissions target, and have no progress to show.
This figure stands in stark contrast to the recent Copernicus climate report, which revealed that climate records tumbled ‘like dominoes’ in 2023 – now confirmed as the hottest year on record.
On top of this lack of commitment to climate action from the world’s corporations, greenwashing remains rampant.
In fact, a report from ESG data science company RepRisk last year found that the banking and financial services sectors saw a 70 per cent increase in the number of climate-related greenwashing incidents in 2023.
RepRisk data also found that a third of greenwashing companies are also social washing, a practice whereby companies make misleading claims about their social impact.
Companies leading the way on climate
While noting this staggering display of global inaction, the report itself focused on a sample composed of climate-conscious companies, those in the minority with a “clear mandate” to act on climate or sustainability.
To qualify for the categorisation, the company had to have a dedicated Head of Sustainability, with decision-making authority over their company’s sustainability strategy and teams and more than 1,000 employees, with the exception of companies in Singapore.
The survey, based on 2023 data collected by an independent market research provider, brought together insights from 1,400 global sustainability executives from across twelve countries in fourteen sectors and found that 83 per cent of climate-conscious companies have set a net zero target, compared to just 8 per cent of the “everyday companies.”
Likewise, almost four-fifths (76 per cent) have actually increased their net zero budgets, even in the shadow of a bleak global economic outlook.
And while 28 per cent said that meeting the net zero goal has been harder than expected, 81 per cent said they are on track – that being said, South Pole did note that it wondered whether this is realistic.
Indeed, many of the companies surveyed who said they are on track come from hard-to-abate sectors, including metals and mining and oil and gas production.
Climate-conscious minority increasingly silent on sustainability
However, despite ramping up both action on and finance for net zero, these companies are drawing back from publicising their efforts, something which South Pole noted is a troubling trend.
“We find this trend concerning, since action from leaders inspires action by followers,” the report said.
Although 93 per cent of the companies surveyed identified communication of their net zero strategies as key to commercial success, 70 per cent admitted to greenhushing, with 58 per cent actively decreasing their external communications.
In the food and beverage sector, specifically, 86 per cent were communicating less.
Some 44 per cent of those surveyed noted that communicating their climate goals has indeed become more difficult than before.
Those who struggled the most in communicating their efforts were those in automobiles and components (67 per cent), utilities (62 per cent), and real estate management and development (60 per cent).
What’s behind this new normal?
The report found that companies cited various reasons for pulling back, the top being changing regulations and industry requirements (57 per cent).
“Many companies seem to be interpreting the rise in regulation around climate claims as an effective ban. Regulation should bring clarity, build trust and level the playing field. Instead, in the short term, it has removed confidence and slowed action: companies who are not yet equipped to report find it easier to step back and say nothing,” the report noted.
Indeed, against a backdrop of regional greenwashing regulations, the majority (54 per cent) of French companies cited more demanding regulation or industry requirements on communicating environmental goals (54 per cent) as the main reason for pulling back, with 72 per cent saying they are finding it increasingly difficult to communicate their net zero goals.
Alongside regulation, heightened scrutiny from both the consumer (45 per cent) and the media (41 per cent ) was found to be a driver, alongside a lack of sufficient data to inform claims (43 per cent).
Another reason that ranked highly was a lack of clear industry guidance on communicating climate claims (41 per cent), while investor pressure and scrutiny ranked the lowest (38 per cent).
Cutting out climate action quiet and driving forward progress
To those companies keeping quiet on their climate action efforts, South Pole’s Kata Bors advised that they consider the business case of their greenhushing, set realistic targets that are periodically reviewed and updated, and be driven by the climate impact cause rather than brand profile.
Further, Bors highlighted the importance of sharing both successes and failures, promoting knowledge-sharing across businesses.
On the solutions side of things, the survey found that tech is leading the charge, with a specific focus on technologies that reduce emissions from industrial processes (40 per cent) and those that neutralise emissions from those processes (32 per cent).
Nature-based solutions were also ranked highly as a net-zero enabler by respondents.
Renewable energy and resource efficiency, which the report noted previously ranked as top choices, have now dropped to 29 per cent and 28 per cent, respectively.
Further, despite Scope 3 being responsible for more than 70 per cent of many businesses’ carbon footprints, only 27 per cent said they were prioritising Scope 3 emissions reductions in their net zero strategy.
That being said, 84 per cent of respondents said they were actively investing beyond their direct value chains.
Ultimately, the window to act and limit global warming is rapidly closing, and those making strides in sustainability must not shy away from disclosure; it’s a central component of motivating others to act and step up their game.
“It is possible that our research findings are simply an indication of a corporate ‘hush’ before the regulatory storm, which will inevitably require all companies to communicate their climate impact and progress on net zero goals. As corporate climate action continues to mature, now is the time for business leaders to meet the moment, and openly share both progress and challenges on climate action, so that we can monitor this and also learn from mistakes,” said John Davis, Interim CEO, South Pole.
By Madaline Dunn, Lead Journalist, ESG Mena.