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2022: ESG Leaves Greenwashing Naked and Cornered

The term Greenwashing originates from an earlier term: whitewashing. Whitewashing means “withholding true facts so that their agents are not punished”. When society imposed accountability on companies for their impact on the environment, the colorful derivation of the word emerged. It was first used in 1986 in an article by environmental activist Jay Westervel, in reference to hotels appealing to their guests to “help the planet” by using fewer towels. This had the purpose of reducing the costs of washing the towels and not needing to mitigate much more serious externalities. (and thus reducing their environmental impact.)

Also during the1980s, the oil company Chevron launched the multi-million-dollar ‘People Do’ campaign on TV, in newspapers and magazines. The campaign won the Effie Awards and became a case study at the Harvard Business School. The ads showed company employees protecting bears, butterflies, sea turtles and other cute critters. The campaign became emblematic of greenwashing because its cost was exponentially greater than the investment in actions of preservation, and which was largely done as a result of legal obligation. Worse still, at the time when it was publicizing its greenwashing, the company was violating environmental regulations and was also spilling oil in wildlife refuges.

For several decades, companies have been co-branding to add desired attributes and strengthen ties with their stakeholders. Since then, advertising and public relations firms have been dedicated to the complex and difficult task of convincing the valued public about the honorable attitudes of companies, as well as their products and services.

The 2022 edition of the Kantar ‘Who Cares, Who Does’ survey reveals the size of the challenge: for almost half of Brazilians, “companies only aim for profit and their ecological concerns are just a marketing tool”.

Since Chevron’s specious ads were screened, the need to align brands with the socio-environmental agenda has changed. In a few decades, corporate benevolence evolved into private social investment, expanded into corporate social responsibility, then into the tripod of sustainability, until it flowed into the ocean of the financial market through ESG precepts.

It is no longer a question of catching unsuspecting consumers with green bait on product packaging or requesting a social license in return for inconsequential community programs. Now it is necessary to convince regulators and financial analysts about the consistency of the company’s sustainable trajectory so that it has access to cheaper credits and broader markets.

Assets under management according to ESG criteria reached US$35.3 trillion in 2020, reports the Global Sustainable Investment Association; moreover, will exceed US$50 trillion by 2025, according to Bloomberg Intelligence calculations – a figure equivalent to more than a third of global assets . The search for these resources tends to inhibit greenwashing and stimulate greenaction.

While governments increasingly introduce legislation and the capital market, standardizations, this increases the pressure. With less room for ‘pretending’, companies are reviewing their business models and strategies and adopting ESG precepts to create, deliver and capture value. Thus, I believe capitalism may be reinventing itself.

The acronym ESG, which has so much impact on the market, is still little known by the population. In a recent Google survey, conducted in partnership with  MindMiners  and Sistema B, only one in five Brazilians declared that they were familiar with the term. However, when informed of its meaning, 87% considered ESG important, although 47% could not cite any company that adopts the practice.

Returning to the Kantar survey, 43.4% of respondents were able to associate a brand with sustainability. Natura appeared in first place, with 27% of mentions, well ahead of Ype in second, with 16%; and Omo in third, with 9%.

This hegemony of the iconic Brazilian cosmetics company (Natura), which has persisted for some time, seen in the diverse surveys, demonstrates and proves that the perception of a sustainable brand is not built with advertisements and press releases, but with consistent and coherent business performance. Communication undoubtedly has a role to play, but it is a later link in the chain and lacks credibility if the company’s purpose and performance are not aligned with the culture of the new economy.

It is also important to emphasize that ESG communication does not allow hype, exaggerations, half-truths, baseless statements, inaccurate information, pure falsehood, or cheap emotions. The road to business sustainability is long, complex and full of contradictions; and trust is built by exposing relevant and measurable goals and sharing not only achievements, but also the setbacks and impossibilities along the way.

Yacoff Sarkovas
Published in the magazine “Meio & Mensagem”, in October 3, 2022. >