RISKY BUSINESS — Corporations across the economy are at risk of losing financial value by either underplaying or overplaying their hand when it comes to sustainability. Both greenwashing and greenhushing are hurting companies’ bottom lines, according to new research analyzing more than 150,000 consumers’ perceptions of corporate sustainability performance. The report released last week from Brand Finance, a global brand and strategy consultant, shows that companies are at risk of consumer backlash given the gap between favorable perceptions of their sustainability and their actual performance. The report put a price tag on that gap: Tesla, which particularly lags on social impacts and governance, is at risk of losing $4.1 billion in value, more than any of the more than 4,000 brands in 36 countries analyzed. Aramco, Netflix, Disney, Mercedes-Benz and Toyota had the next highest negative sustainability perception gaps, each potentially risking hundreds of millions of dollars in value. The report also identifies companies that are performing much better across sustainability metrics than the public gives them credit for — a gap that can be financially capitalized on. Microsoft has the highest positive gap value at $1.5 billion, according to the research. Walmart, Lowe’s and CVS also had high positive gap values. But the risks outweigh the opportunities on the whole, given widespread greenwashing, the report says. “More than ever, we see and hear brands using similar claims or motives to showcase their intent and ambition to do good,” Sasan Saeidi, the world president and chair of the International Advertising Association, said in the report. “In some cases, this is genuine intent, but for most, it’s a trend and a tickbox; a tactic vs. a long-term ambition to solve real-life challenges, and simply not believable." The report was first compiled through a questionnaire in which respondents are asked about a given brand’s commitment to protecting the environment, whether that brand is professionally and responsibly managed and if that brand is committed to supporting communities and society at large. Researchers then ran multiple correlation analyses to determine the relative role ESG plays in driving consumer consideration. The resulting percentage reflects the level of each attributes’ contribution to revenue and brand value. These outcomes were also determined at the sector level. The average role of sustainability in driving choice in the luxury auto sector is 22.9 percent, compared with 2.8 percent for engineering and construction. The finding related to luxury vehicles in particular is consistent with Brand Finance’s research, which is that sustainability carries greater weight at the premium end of all sectors. To find the gap between perception and performance, Brand Finance uses performance data from CSRHub, which aggregates 13,000 indicators from more than 850 sources. The brand’s overall score is then compared to their perception value to determine the “gap,” as in whether the performance score exceeds perception or vice versa.
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