Climate Disclosure is a Dialogue, Not a Declaration

February 16, 2023

Companies are increasingly under pressure to set targets that are in line with global climate goals and to get to grips with their climate-related financial risks and opportunities. This has led to a surge in disclosure of net-zero and climate transition plans, as well as an intense debate around how firms can fulfill them. 

The pressure to disclose is coming from two main sources: regulators and investors. In many jurisdictions, new or incoming regulations require companies to disclose their climate-related information in line with specific frameworks, like the Task Force on Climate-related Financial Disclosures (TCFD). Meanwhile, investors are asking companies for climate-related information so they can make better investment decisions.

However, in the rush to produce climate disclosures, there’s a danger that some companies fail to think through how to achieve their plans. These firms also risk mistaking climate planning as a ‘one-and-done’ exercise, instead of considering it as an iterative process that’s done in tandem with their investors, civil society, and other companies.

In fact, a growing number of companies are releasing climate plans and then refusing to talk about their progress — a trend called green-hushing.

What is green-hushing?

Green-hushing is the practice of companies announcing steps to improve their climate actions but then choosing to publicly stay quiet about their efforts. 

According to a 2022 report out of climate consultancy South Pole, nearly a quarter of companies it surveyed said they won’t publish their climate achievements and milestones beyond the bare minimum of what’s required. This should concern climate-focused investors and other stakeholders because it means they don’t get insights into how these companies are progressing on their climate journeys.

Why does green-hushing happen?

Companies may engage in green-hushing for a few reasons. For one, they may want to avoid investor, regulatory, or consumer backlash if they fall behind on meeting their climate targets or if they haven’t taken the appropriate steps to achieve them. They could also fear greenwashing allegations if they either accidentally or purposefully overstate their climate impact in public documents or marketing materials.

Some companies may also have made public climate pledges without having fully figured out how to honor them. These firms may want to keep quiet while they work out the details internally.

A third reason may be the recent backlash against environmental, social, and governance (ESG) investing. For example, the state of Texas recently banned state entities from investing with financial institutions that it says are boycotting fossil fuel companies. The states of Arizona, Idaho, Kentucky, North Dakota, and others have also taken similar actions. The politicians initiating these bans say the targeted financial institutions are unfairly restricting the flow of capital to the fossil fuel companies that underpin their states’ economies. Against this backdrop, some institutions may choose to green-hush in order to downplay their climate actions.

A lack of transparency

While companies may green-hush to avoid reputational risks, they may expose themselves to other threats by hiding their climate efforts.

Companies that don’t engage with their stakeholders may miss emerging climate transition risks that they should consider. For example, a company unaware that its investors have joined a net-zero alliance may find itself at risk of divestment if it does not meet the alliance’s expectations by publishing up-to-date information on its climate efforts. 

A lack of knowledge of companies’ climate actions also limits stakeholders’ abilities to compare how firms are doing relative to industry peers. This makes it harder for the market as a whole to learn best practices and identify the most effective climate metrics, targets, and strategies. 

If businesses don’t share their progress accurately, then they may also miss out on opportunities for collaboration, putting them behind on their climate journeys. This could negatively affect their overall strategies and bottom lines.

An absence of corporate climate transparency and communication could also have ripple effects for industries’ climate performance more broadly. If firms are actively working to hide their climate efforts, then there’s little room for discussion on how to improve them. This could ultimately slow down companies’ progress in accomplishing their climate goals, which could result in certain industries not meeting their climate targets on time.

In contrast, companies that are open about their plans and regularly update them in consultation with stakeholders are better able to improve their climate-related governance processes, strategies, risk management procedures, and metrics and targets. 

Climate as continuous dialogue

Setting a climate plan should be more than a public relations exercise. It should be the start of a two-way conversation with stakeholders that seeks to improve a company’s climate actions over time. Dialogue is needed to make meaningful climate progress. If organizations don’t talk about how they’re doing, there’s no way to make sure they’re on the right track.

Companies shouldn’t let perfect be the enemy of good, either. Starting the conversation is what’s important — not whether an organization has their climate plan fully figured out yet.

After all, climate change is a massive challenge and companies will have to evolve their responses as new risks and opportunities emerge. They will also have to iterate their plans to accommodate external pressures from investors and regulators, not to mention the most up-to-date climate science and research. Companies can’t go through this process solo — they need to talk it through with stakeholders. Green-hushing is not the answer.

How Manifest Climate can help

As the leading Climate Risk Planning solution, Manifest Climate helps businesses identify, manage, and communicate their climate-related financial risks and opportunities. Our proprietary software assesses how organizations disclose their climate-related information and identifies opportunities for improvement based on best practices. Our solution also provides insights on how your business stacks up against industry peers, as well as expert takeaways on business-relevant climate trends that help your leaders make better decisions. Request a demo to learn more.