Companies Using Green in their Marketing Should Be Careful

Goelzer said using the term “ESG” is an evolutionary process for many organizations that primarily use sustainability disclosure for marketing purposes – that is, to put the company in a good light with the public.  What is disclosed depends on what the company’s customer base consists of, whether it deals with the retail public or is a supplier to other businesses.

“…Then the kind of disclosure made will begin to evolve over time, particularly management sees where they get inquiries about things that fall under the broad ESG umbrella,” he said. “So disclosure tends to grow in not always a well-thought-out way, and that poses part of the risk that companies take on  because they begin having sort of a parallel disclosure process to their more formal SEC or securities market oriented disclosures, but without the same kinds of controls or procedures around it.”

According to Hank Boerner, Chairman and Chief Executive Officer at the Governance & Accountability Institute, when a company brands itself as sustainable, and positions its products that way, it should sometimes be taken with a grain of salt.

He demonstrates this by comparing Clorox and BP, two of the largest household names in the country, to show how green marketing is not always indicative of environmentally-friendly practices.

Clorox, listed as the number one or two marketer in most categories of household goods, publishes an annual integrated report in an effort to present the company as sustainable and consumer friendly. They also separately brand a small line of products that are green and environmentally friendly, Boerner added.

“The opposite of that is BP which before their [2010] spill, changed their logo and everything about how they presented the company to the public, including changing every sign on a gas station to a beautiful green and yellow sun,” he explains. “Meanwhile, BP had the biggest oil spill in history in the Gulf of Mexico, which is still doing damage to the environment. So that is an egregious example of a company that has strived to present itself as rebranded and sustainable, but whose behavior demonstrates it is anything but.”

Goelzer said any official claim that is made to the public regarding ESG and CSR validity runs that risk.

“This is one of the points we try to make to people – that whenever you make a public statement about anything, you are running a risk that someone is going to be able to plausibly say, ‘That was important to me in deciding whether to invest in your company, and I think I can show [your claim] was not true, and I was defrauded as a result,’” he said. “This is an element of the BP situation.”

When advising companies how to best assure their claims of good ESG are validated, emphasizing documentation is key, Goelzer said.