SustainabilityGap Index:GreenwashingvsGreenhushing The inaugural report on the conflict between sustainabilityperceptions and performance. June 2023 Contents. Foreword3Communicating the Importance of the Allianceof Sustainability and Finance Methodology.4 Communicating the Importance of the In April, we celebrated the 54th anniversary of Earth Day. 2023’s theme is ‘Invest inour Planet’. Highlighting the link between finance and sustainability is timely andessential, but the message isn’t a new one. Investors, CFOs and CEOs have beentold by campaigners, NGOs, and sustainability teams for years that committing However, a sticking point has been that without articulating the case in financialterms, enabling evaluation of business cases and return on investment analysis, it Brand Finance has sought to solve this challenge. We have quantified the financialvalue of sustainability perceptions for hundreds of the world’s biggest brands. Ourresearch, first launched at the World Economic Forum in Davos earlier this year, Robert HaighStrategy &Sustainability Director, Equally, there can be billions at risk from insufficient action that leads to accusationsof greenwashing, or even misallocated or excessive investments in sustainabilitycommunication that does not cut through. We hope this report is a useful first step If you would like to continue the conversation, please get in touch. We havedeveloped an extensive program of research and a full suite of services intended todeliver actionable insight for our clients. We work with CEOs, strategists, recruitment •How important is sustainabilityin driving the choices of customers, employees,investors etc?•Which sustainability issuesare most relevant?•Howsustainableis your businesses perceivedto be vs competitors? If you have been wrestling with any of these questions, we look forward to helpingyou solve them! Methodology. Methodology - The starting point is our annual, flagship marketresearch exercise, the Global Brand Equity Monitor.We research the attitudes of over 150,000 members ofthe general public from over 36 countries about over4,000 brands. Respondents are asked a wide range of analysis), we have subdivided sustainability usingthe ‘ESG’ framework, i.e. ‘Environment’, ‘Social’ and +Is BRAND X committed to protectingthe natural environment? +Is BRAND X professionally, ethically,and responsibly managed? Sustainability is of course not a monolith. To capturesome of the nuance and varying themes within +Is BRAND X committed to supportingcommunities & wider society? SustainabilityDriver (%) Drivers analysis involves running multiplecorrelation analyses between the considerationof usage of a brand, and the various brand The Sustainability Driver % is the combined considerationdriver % score of the three ESG metrics in the GBEM In simple terms, the results of these correlationanalyses are layered on top of one another indifferent combinations to determine their relativerole in driving consumer consideration. The We have conducted brand drivers analysis atthe sector level. As might be expected, there isconsiderable variation between sectors, with a The final stage of the process involvesdetermining a brand-specific ‘SustainabilityPerceptions Score’. To do this we ask thefollowing question: How ‘sustainable’ is BRAND X Respondents are asked to select one of five options,which have an associated allocation of points: ‘Aleader in sustainability’ (10), ‘taking significantactions’ (5), ‘making some effort but could do more’(2), ‘making very limited efforts’ (1), ‘making no realeffort to be a sustainable business’ (0). The mean of and are the most direct KPI for long term managementof sustainability perceptions. These scores also feedinto the value calculation. The degree to which abrand’s score differs from the median for the sector isused to moderate the sector driver score. For example To complete the valuation process, the brand-specificmoderating factor, the sustainability driver for thesector and the brand’s value are combined to arrive To determine the sustainability gap value, wehave used sustainability ‘performance’ data fromCSRHub. Whilst here are dozens of reportingframeworks and data sources providing some levelof information on sustainability performance, these This represents an opportunity to capture value via A negative value indicates that performance lagspublic perception. This is value that could be at The source of this negative value could be intentionalover-claiming or ‘greenwashing’ by the brand inquestion. However just as likely, is that no deliberateaction has been taken to mislead, but rather positive Using CSRHub’s ‘overall’ sore for each brand, we re-run our analysis, calculating the value for each brandbased on their divergence from their sector mediansustainability performance score. The sustainability Disclaimer: The values included in this report areindicative only and should not be relied upon for ResearchAna