Greenhushing is Unsustainable – How the World’s Biggest Brands Let Billions Go to Waste

New research from leading valuation firm Brand Finance, in association with CSRHub and the International Advertising Association (IAA), indicates that the world’s biggest brands are missing out on billions of dollars of potential value by failing to properly communicate their sustainability achievements and progress.

Brand Finance’s Sustainability Perceptions Index is based on a study of over 150,000 respondents across 40 countries. Key outputs include:

• the role of sustainability in driving choice in each industry
• the brands that global consumers believe are most committed to sustainability
• the financial value of a reputation for sustainability
• the value at risk, or value to be gained, arising from a gap between sustainability perceptions and performance

Apple has the highest sustainability perceptions value of any brand, USD33.3 billion. This huge sum is driven by a combination of Apple’s financial scale and supportive consumer perception. Actual sustainability performance aside, our research shows that consumers have clear confidence that Apple is committed enough to minimising its negative impacts for them continue buying and paying a premium for its products.

Microsoft has the second highest total value (USD22.7billion), along with the highest ‘gap value’ of any brand in the index - USD3.2 billion. Microsoft has engaged extensively in sustainability initiatives, including committing to becoming carbon neutral, water positive, and zero waste by 2030. Yet its communication of its commitment and progress has been somewhat muted. The implication of this is that with concerted effort to communicate its sustainability achievements more effectively, Microsoft could add over USD3 billion of value for shareholders.

Microsoft is not alone in leaving value on the table in this way – 85 brands have a positive gap value of over USD100 million, totalling USD25 billion.

At the other end of the spectrum is Tesla. Tesla is well known as a pioneer of the electric vehicles and battery technology aiding the transition to a lower-carbon economy. This image has carried across into the sustainability perceptions held by global consumers. Tesla is seen in several countries, including Mexico and the UK, as the brand with the greatest commitment to environmental sustainability. However, the strength of this perception creates its own risk; whilst Tesla performs fairly well on perceived sustainability, it falls significantly short of peer average on sustainability performance. As a result, Tesla has USD1.5 billion of value at risk.

Brand Finance’s Strategy & Sustainability Director, Robert Haigh, commented, “Brands have to strike a fine balance when communicating about sustainability. Consumers are now rightly attuned to potential greenwashing; in response, brands are becoming too precautionary and restrictive in their approach to sustainability communications. This greenhushing could reduce the incentive for competitors to improve their performance, slowing progress industry-wide. Just as importantly, these brands are letting financial go to waste, short-changing shareholders and other stakeholders in the process.”

Bahar Gidwani, Cofounder and CTO of CSRHub, commented, “This study shows how critical it is for corporate strategists and brand managers to understand how their firms are perceived by a broad array of expert sustainability-oriented stakeholders. CSRHub provides transparent access to consensus ESG ratings data to help companies improve their corporate ESG performance and realize their full value potential.”

Dagmara Szulce Managing Director, IAA Global, commented, “We see this as an incredibly potent tool to incentivize action that aligns with the UN SDGs and wider aims of the UN Global Compact. By highlighting the financial value that is contingent on sustainability perceptions, we hope to harness businesses’ profit motive, moving them past the point where they see sustainability as a ‘hygiene factor’, to a point of rapid, concerted action.”

Brand Finance is the world’s leading brand valuation consultancy. Bridging the gap between marketing and finance for more than 25 years, Brand Finance evaluates the strength of brands and quantifies their financial value to help organizations of all kinds make strategic decisions.

Headquartered in London, Brand Finance has offices in over 20 countries, offering services on all continents. Every year, Brand Finance conducts more than 5,000 brand valuations, supported by original market research, and publishes over 100 reports which rank brands across all sectors and countries.

Brand Finance also operates the Global Brand Equity Monitor, conducting original market research annually on over 5,000 brands, surveying more than 150,000 respondents across 38 countries and 31 industry sectors. Combining perceptual data from the Global Brand Equity Monitor with data from its valuation database enables Brand Finance to arm brand leaders with the data and analytics they need to enhance brand and business value.

Brand Finance is a regulated accountancy firm, leading the standardization of the brand valuation industry. Brand Finance was the first to be certified by independent auditors as compliant with both ISO 10668 and ISO 20671 and has received the official endorsement of the Marketing Accountability Standards Board (MASB) in the United States.

Brand is defined as a marketing-related intangible asset including, but not limited to, names, terms, signs, symbols, logos, and designs, intended to identify goods, services, or entities, creating distinctive images and associations in the minds of stakeholders, thereby generating economic benefits.

Brand strength is the efficacy of a brand’s performance on intangible measures relative to its competitors. Brand Finance evaluates brand strength in a process compliant with ISO 20671, looking at Marketing Investment, Stakeholder Equity, and the impact of those on Business Performance. The data used is derived from Brand Finance’s proprietary market research programme and from publicly available sources.

Each brand is assigned a Brand Strength Index (BSI) score out of 100, which feeds into the brand value calculation. Based on the score, each brand is assigned a corresponding Brand Rating up to AAA+ in a format similar to a credit rating.

Brand Finance calculates the values of brands in its rankings using the Royalty Relief approach – a brand valuation method compliant with the industry standards set in ISO 10668. It involves estimating the likely future revenues that are attributable to a brand by calculating a royalty rate that would be charged for its use, to arrive at a ‘brand value’ understood as a net economic benefit that a brand owner would achieve by licensing the brand in the open market.

The steps in this process are as follows:

1 Calculate brand strength using a balanced scorecard of metrics assessing Marketing Investment, Stakeholder Equity, and Business Performance. Brand strength is expressed as a Brand Strength Index (BSI) score on a scale of 0 to 100.

2 Determine royalty range for each industry, reflecting the importance of brand to purchasing decisions. In luxury, the maximum percentage is high, while in extractive industry, where goods are often commoditised, it is lower. This is done by reviewing comparable licensing agreements sourced from Brand Finance’s extensive database.

3 Calculate royalty rate. The BSI score is applied to the royalty range to arrive at a royalty rate. For example, if the royalty range in a sector is 0-5% and a brand has a BSI score of 80 out of 100, then an appropriate royalty rate for the use of this brand in the given sector will be 4%.

4 Determine brand-specific revenues by estimating a proportion of parent company revenues attributable to a brand.

5 Determine forecast revenues using a function of historic revenues, equity analyst forecasts, and economic growth rates.

6 Apply the royalty rate to the forecast revenues to derive brand revenues.

7 Discount post-tax brand revenues to a net present value which equals the brand value.

Brand Finance has produced this study with an independent and unbiased analysis. The values derived and opinions presented in this study are based on publicly available information and certain assumptions that Brand Finance used where such data was deficient or unclear. Brand Finance accepts no responsibility and will not be liable in the event that the publicly available information relied upon is subsequently found to be inaccurate. The opinions and financial analysis expressed in the study are not to be construed as providing investment or business advice. Brand Finance does not intend the study to be relied upon for any reason and excludes all liability to any body, government, or organisation.

The data presented in this study form part of Brand Finance’s proprietary database, are provided for the benefit of the media, and are not to be used in part or in full for any commercial or technical purpose without written permission from Brand Finance.