Social washing: What is it and why could COVID-19 be making it worse?

Social washing “is becoming a giant headache for ESG investors”. Bloomberg argued this upon taking up the recent analysis by Arthur Krebbers, Head of the Sustainable Finance Area at NatWest Markets, the Investment Banking division of the Royal Bank of Scotland Group.

What is “social washing”?

The expression is reminiscent of “greenwashing”, a well-known topic which we have discussed quite a bit on this site. The concept of social washing is more or less the same: appease the public and investors by giving them a misleading picture of the company, in this case, regarding social and human rights issues.

Social washing can be defined as a practice aimed at improving a company’s reputation through social responsibility initiatives which are not really effective or, in the worst cases, under the guise of social responsibility but with the goal of economic return.

This creates a growing risk for those who are diligent in their work. And it creates a distorted image of the company in the eyes of investors.

social washing giustizia sociale

The Social factor becoming more the focus of ESG selection

According to Bloomberg, “The coronavirus epidemic is a wake-up call for fund managers concerned about environmental, social and governance issues in the company analyses. While, up to now, combating climate change has been the top priority for many ESG funds, the coronavirus explosion has now pushed investors to pay more attention to social factors and consider how companies are treating their employees during the pandemic”.

In this rush towards social issues, among the operators who choose social washing as a marketing strategy, there are certainly those who have always sought to seriously and rigorously approach social rights in their investments.

This is why transparency with customers, measuring ESG results (impact reports, integrated financial statements, carbon footprints) and company policies are becoming increasingly more important.

Etica SGR genuinely mindful of social issues since the beginning

The topic of welfare—which includes education, healthcare, supporting society’s most vulnerable—is now in the spotlight and everyone feels it. The COVID-19 emergency has proved first of all to be a social emergency, then a financial and economic one.

The pandemic has brought to light several problems of which we were already aware, but which are now being revealed in all their seriousness, from tax evasion to the frailty of off-the-books labour, from healthcare to major social inequality.

Since its foundation, Etica SGR has been tuned into social issues and their countless implications for human rights, labour, equality and justice. It is in our DNA that the ‘S’ in ESG has always been valued along with environment and governance. As Pope Frances said, “We are faced not with two separate crises, one environmental and the other social, but rather with one complex crisis which is both social and environmental”.

For more information, please see the Impact Report.

Please read the Legal notes.

Social and governance coronavirus ESG impatto sociale Responsabilità Sociale d'Impresa
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