By Mark Seavy

While environmental, social, and governance (ESG) investing gets plenty of mentions in financial reports, some companies are reticent to discuss it publicly.

After a steep climb in ESG mentions between 2019 and 2021, there has been a flattening in conversations around the issue as a result of legal and political pressure to avoid accusations of greenwashing (making misleading or false statements about the environmental benefits of a product or practice) or appearing to make sustainability a priority over profits.

This doesn’t mean organizations are abandoning ESG. Rather, they’re increasingly rebranding these efforts more broadly as “sustainability” strategies. And, in fact, these sustainability targets are often being drafted into licensing contracts.

“About half of the companies who experienced backlash [related to ESG] have adjusted the terminology. They don’t use ESG. They might refer to sustainability instead,” Andrew Jones, senior researcher at non-profit research organization Conference Board, said to The Wall Street Journal. “We’re even seeing some companies talking more in the language of clean air, clean water, and economic opportunity—effective and palatable terms other than ESG.”

The vast majority of mentions of sustainability or ESG (97%) are made via financial disclosures and earnings reports, according to Dow Jones’ digital research platform Factiva. A much smaller amount is disclosed through corporate announcements and board meeting transcripts.

One reason behind this more low-key approach is that implementing sustainability goals can be expensive. And while nearly 75% of corporate climate commitments made in 2021 have been fully or partially implemented, according to the Harvard Business Review, a recent survey of 300 companies by Morgan Stanley revealed access to capital is a major hurdle to meet sustainability targets. Eighty-four percent of respondents to the Morgan Stanley survey said that gaining investor support for the initiatives remains key to getting them done.

Despite these challenges, several companies are moving forward with investments in sustainability. Toy companies, in particular, appear to be leading the way.

LEGO, for example, has pledged to eliminate oil from the production of its bricks by 2032. The company will gradually decrease the percentage of oil in its bricks, while at the same time adding renewable or recycled materials. The shift comes with added cost. The bricks needed to build a Hagrid’s Hut set, a Wicked set, and the Fortnight Battle Buses will cost LEGO 70% more for certified renewable resin, the company reported. So far, that additional cost has not been passed on to the retail price, LEGO said.

“With a family owner committed to sustainability, it’s a privilege that we can pay extra for the raw materials without having to charge customers extra,” LEGO CEO Niels Christiansen said.

For three years, LEGO tested the shift to recycled polyethylene terephthalate (PET), but discovered it caused more pollution than the current model as PET was unable to reduce carbon emission levels. LEGO has tested more than 600 materials over the past few years and has, in some cases, incorporated used plastic water bottles into its process.

Other toy companies have launched similar efforts, including Green Toys, which makes products from 100% recycled materials. Mattel pledged to drop plastic from its toys by 2030 and switch to recycled, recyclable, and bioplastic materials. It also plans to reduce plastic packaging by 25% by 2030.

“The creation of dedicated ESG teams, the rise of specialized roles, and investments in sustainability reporting all indicate a strategic shift toward embedding sustainability into core operations,” said Kristen Sullivan, Audit & Assurance Partner in Sustainability and ESG Services at Deloitte & Touche LLP.