In a fascinating twist, the Environmental, Social, and Governance (ESG) investing market is shifting with the winds of change, with prominent Wall Street and other financial institutions backing away from their climate and social impact initiatives in recent times. Global industry leaders for sustainability like Unilever have divested or shifted some of their more problematic arms. For example, Unilever unloaded many of its tea brands in 2022, and in 2024 Lipton divested its tea gardens to Sri Lankan Browns Investment Group –a sale that’s currently being fought in the Kenyan courts.
Particularly in the United States, the “ESG backlash” is in effect, says Bradley Intelligence Report. “Following a late 2010s and early 2020s investing furor over ESG investing, recent years have brought with them rising backlash to climate-focused investing as political division in the U.S. has grown.” As investing portfolios become increasingly politicized, money managers responded: recently some major institutions including BlackRock, JPMorgan, and Pimco+ have withdrawn or stepped back from the influential Climate Action 100+ initiative.
Although it is obvious the primary problems with climate and other sustainability initiatives tend to be centered around conflicting mandates, recent settlements by prominent companies Starbucks and Keurig Dr. Pepper for fraudulent advertising highlight another problem of the market’s ESG focus: “Coffeewashing” (to use the term coined by writer Fionn Pooler and covered in fascinating detail in his piece A Short Introduction to Coffeewashing).
Coffeewashing is defined as “when coffee companies deceive or mislead the public about the positive social, economic and environmental impact of their products or actions.” Think of it as an industry-specific term aligned with “greenwashing” or “woke-washing”, decried by Unilever CEO Alan Jope as “undermining purposeful marketing by launching campaigns which aren’t backing up what their brand says with what their brand does.”
Daily Coffee News reports that Keurig Dr. Pepper was recently charged by the Securities and Exchange Commission of the United States (SEC) with “making inaccurate statements regarding the recyclability of its single-use plastic K-cups.” The SEC found that Keurig was deceptive in obscuring the fact that two of the largest recycling facilities in the country had “expressed significant concerns to Keurig regarding the commercial feasibility of curbside recycling of K-Cup pods at that time and indicated that they did not presently intend to accept them for recycling.”
Just two years ago, Keurig Dr. Pepper settled for $10 million in Canada in a class action lawsuit over misleading recyclability claims after another recent settlement of $2.3 million for similar reasons. The recyclability claims on single-serve pods are usually suspect given how specific local recycling centers are about what they can intake, and it is still an industry in process (as we cover in more detail in the upcoming October/November 2024 issue of STiR).
Starbucks has also been battling public sentiment and a class action lawsuit from the National Consumer’s League alleging deceptive advertising, recently replacing its CEO in hopes of righting the ship.
However it is not only the large, multinational brands which engage in “coffeewashing”. Sustainability claims of various types have become the norm for coffee companies. Three years ago, Food Navigator reported that at least 48% of coffee companies made a sustainability claim in 2020, whether it was “Direct Trade” or “Good for the Earth.” Assuaging “eco-anxiety” was important and also riding the train to the higher margins which can be captured through differentiated marketing.
As these larger movements take place, and as corporate policies shift away from the trend of social responsibility, we must acknowledge that a surface veneer of ESG focus didn’t really help the actual day-to-day operations of small farms in coffee-growing regions in the past ten years and that we still have a long way to go to understand exactly how the greater world around us will be impacted by these pendulum policy swings.