The “S” in “ESG” (environmental, social, and governance) includes an extensive list of factors like workplace culture; environmental justice; health and safety; policies on diversity, equity, and inclusion; labor standards; data privacy; human rights; racial justice; and product safety. In the past several years, consumers and shareholders have become increasingly focused on company performance in these areas and any perceived disconnects between a company’s stated commitments to social action and its actions. The failure to follow through on stated social commitments, even if negligent, can create valuation risk for a company and mislead investors who prioritize this non-financial factor in investment decisions. These perceived disconnects can also capture the attention of plaintiffs and regulators who seek legal remedies to align company practices with stated goals.
Social washing, like its older sibling greenwashing, also relates to the lack of substantiation and veracity in an entity’s ESG credentials. Greenwashing, however, resolves solely around misleading environmental benefit claims about a product, policy, or activity, whereas social washing strictly relates to the misalignment between a company’s perceived commitment to social issues and its actions.
In this article published in The Global Trade Law Journal, Thompson Hine partner Tanya C. Nesbitt and associate Kerem Bilge examine “social washing” and offer some steps that companies should consider using to avoid accusations of social washing and mitigate potential violations of existing human rights laws.