Surprisingly, many companies are understating their environmental performance in corporate communications. Their reasons for doing so can depend on their organizational status. Middle status companies, without the reputations of high-status companies or invisibility of low-status companies, are more likely to be accurate and transparent.
When Toyota achieve zero waste-to-incineration production, it never publicized this remarkable accomplishment. While significant research has focused on companies exaggerating their sustainability and environmentally friendly records, known as “greenwashing”, less attention has been paid to “brownwashing” or “greenhushing” the decision to hide or understate environmental successes.
The reasons for companies under-reporting their environmental accomplishments can vary.
One study argues that the reasons for overreporting or under-reporting environmental accomplishments can vary with the status of a company.
High-status companies, who enjoy significant prestige and a high level of stakeholder recognition, may under-report out of concerns about increasing stakeholder demands, the potential for revealing competitive advantages, and the additional costs of collecting and disseminating information. Under-reporting also mitigates the risks of accidentally issuing in inaccurate or misleading information, which could damage their reputation.
Low-status companies have limited visibility and influence, which demotivates costly disclosure efforts and expenditure that few will notice. They may also not have the expertise to prepare and disseminate environmental reports. Finally, their environmental practices are often not on par with higher-status, which means that disclosure could only invite negative comparisons.
Unlike high- and low-status companies, middle-status companies were more likely to report their environmental performance accurately. One reason is their urgent desire to move up the status ranks; disclosing their environmentally friendly practices and policies can increase their standing. Failing to report these practices, on the other hand, may cause stakeholders to suspect the companies of poor environmental performance; the resulting backlash could hurt the companies financially. Another factor: unlike low-status companies, they often have the expertise to develop and disseminate environmental reports.
Perhaps the fundamental reason middle-status companies are more likely to be transparent is their unique position in the middle of the hierarchy, which requires greater attention to societal norms and expectations. With their limited visibility and power, the failure of low-status firms to follow the norms elicits little reaction. Meanwhile, the solidly established reputations of top-status companies give them some freedom to challenge norms without immediately inciting suspicion or disapproval. With neither the low visibility of low-status companies, nor the rock-solid reputations of high-status companies, middle-status companies recognize that the best course for their standing and ambitions is to heed the expectations and norms for environmentally friendly practices and policies. The best communication strategy, therefore, is transparency.
The study found that three contextual conditions altered the relationship between status and environmental under-reporting described above:
Operating in stakeholder-sensitive industries. In customer-facing industries such as consumer goods, energy, and manufacturing, paying attention to external stakeholders is vital to performance. Demonstrating environmental concern ensure community support and increased customer loyalty and sales.
Significant institutional ownership. Institutional investors are motivated and have the knowledge and experience to monitor the activities of a company, including its environmental commitments. To fulfil their monitoring responsibilities, they will insist on corporate disclosures, thus pushing the company towards transparency.
Having a board CSR committee. Corporate social responsibilities sub-committees of the board of directors elevates the importance of environmental issues in the company. Committees also play an important role in disseminating information to stakeholders. The presence of such committees, therefore, also incentivizes companies to publicly disclose their environmental activities. The research in the study is based on data from a wide range of corporate performance, communications, and environmental activity databases, including 2007-2023 statistics from the LSEG database (formerly named the Asset4 Refinitiv database). This database tracks hundreds of environmental, social, and governance (ESG) variables. The study also builds on corporate disclosure indices and corporate practice indices from previous research.
Middle-status companies must recognize the heightened scrutiny they face and be unequivocally transparent in their environmental reporting. Leaders should thus ensure the company has the expertise and mechanisms for developing and dissemination this information. Equally important is to develop a culture of transparency.
High-status companies may believe that under-reporting is the best strategy for maintaining their reputations. With continuously growing demands for transparency from regulators and the public-at-large, high-status companies may want to reconsider a strategy that in the long run could undermine their reputations.
Low-status companies may also want to reconsider their under-reporting strategy in light of the increasing focus on environmental performance. Publicizing as much as possible their positive environmental policies and activities may be an overlooked opportunity to enhance their status.
Yinglin Huang’s profile at LinkedIn
https://www.linkedin.com/in/yinglin-huang-830b6682/?originalSubdomain=cn
Claude Francoeur’s profile at HEC Montreal
https://www.hec.ca/en/profs/claude.francoeur.html
Shafu Zhang’s profile at Hunan University
https://ibschool-en.hnu.edu.cn/The_new_website_2024/FacultyStaff/Faculty/Accounting.htm
Stephen Bammer’s profile at Bath School of Management
Conditional Silence: Organizational Status and Under-Communication of Environmental Performance. Yinglin Huang, Claude Francoeur, Shafu Zhang, and Stephen Brammer. British Journal of Management. (February 2025).
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