Calling out ESG Washing

WHAT IS ESG WASHING?

Many of the awards and recognitions that companies use to illustrate their commitment to environmental and social responsibility are based on assessments by mainstream ESG rating and index providers. This is despite the fact that those assessments do not reflect a company’s actual environmental and social responsibility, but rather how well the company manages ESG-related risk to its bottom line.

This disconnect leads to ESG washing, whereby major corporations with egregious environmental and human rights records are “honored” for their ESG practices.

Companies routinely tout their inclusion in ESG rankings such as S&P Global’s Sustainability Yearbook, Sustainalytics’ ESG Top Rated companies list, the FTSE4Good and MSCI ESG Leaders index series, and other ESG-related recognitions as evidence of their responsible business practices.

Corporate social media posts, press releases and marketing materials suggest that appearance on these lists is proof they are among the world’s “most sustainable” companies and are “doing right” by the people and communities impacted by their business practices. News coverage often reflects this messaging, further entrenching the public perception that ESG labeling is a reliable and meaningful measure of corporate responsibility when it is not.

The number of companies in the ESG Watch database that have appeared on these lists demonstrates just how misleading the system is.

ESG Recognitions going to harmful companies

Recognition	ESG Watch companies included
S&P Sustainability Yearbook	Heidelberg Materials AG; KDDI Corporation; PTT Exploration and Production Public Company Limited
MSCI ESG Leaders Index Series*	Heidelberg Materials AG; JG Summit Holdings Inc.; Alphabet; KDDI Corp.; PTT Exploration and Production PCL; Sinotruk Hong Long Ltd.; Tokyo Tatemono Co., Ltd.; TotalEnergies SE; Daiwa House Industry Co., Ltd; Hilton Worldwide Holdings Inc.
FTSE4Good Index Series*	Alphabet Incorporated; Apple Incorporated; Manila Electric Company (Meralco); TotalEnergies
Sustainalytics Top Rated	Alcoa Corporation; Daiwa House Industry Co.

* Comprehensive lists of the companies that appear in these indexes are not publicly available, but we have been able to identify specific companies that are included through our ESG Watch database methods and corporate marketing materials.