As global ESG practices continue to evolve, some businesses are embedding ESG into their strategies faster than others. Although there are upfront costs, focusing on ESG can enhance financial performance and risk management. One key approach is leveraging sustainability credentials to differentiate from competitors, attract customers, foster loyalty, and secure better funding. However, effectively communicating these efforts can be challenging, as discrepancies between claims and reality may arise—whether intentional or not. Such misalignment can damage a business's reputation and impact its performance. 

The most well-known example of this is "greenwashing," a term coined in the 1980s by environmentalist Jay Westerveld to describe entities falsely presenting themselves as more sustainable than they truly are. The adverse impact of perceived greenwashing has been widely recognised and recorded across several recent studies. Some examples include:

1) A 2019 study published in the Journal of Marketing quantified that a 1% increase in perceived greenwashing could result in a 1.57% drop in brand loyalty.

2) Another study¹ found that firms accused of greenwashing experienced an estimated 1-2% drop in share price (on average) following a greenwashing scandal.

3) Furthermore, a 2022² survey found that 75% of institutional investors are wary of greenwashing and are likely to avoid investing in companies perceived to be making misleading environmental claims which can have a significant impact on access to capital. 

A more recent term known as greenhushing
has also made its way into ESG vocabulary.
This refers to any entity abstaining from
sharing certain ESG related information or
using its efforts in sustainability as a tool to
market their products and services. Ironically,
this often occurs because entities fear their
actions being labelled as greenwashing.
It too comes with its own risks as more
widespread reporting around sustainability
becomes the norm and withholding vital
information can be detrimental - for example,
in March 2024, the SEC issued a final rule that
requires registrants to provide climate-related disclosures in their annual reports and registration statements, including those for IPOs, beginning with annual reports for the year ending December 31, 2025, for calendar-year-end large accelerated filers.

Greenwishing, seemingly innocuous in comparison to greenwashing, is a term used to refer to those expressing a desire to become more sustainable, but setting unrealistic targets and not having the means to take significant actions to bring about meaningful change and ultimately, hit said targets. The fundamental difference when comparing to greenwashing is the intent, whereby the former refers to a deliberate attempt to mislead others whilst the latter is unintentional, but some would argue negligence.