Crosswashing: A company with a sustainable facade hiding an unsustainable core.

Is Your ESG Score a Lie? Unmasking 'Crosswashing' in Sustainable Investing

Mira Elwood in Business & Economy August 2025 • 3 min read.

"Companies are strategically boosting their Environmental, Social, and Governance (ESG) scores while keeping business as usual. Learn to identify and avoid this deceptive practice."

In today's world, businesses are increasingly judged not only by their profits, but also by their ethical and environmental impact. This shift has led to a surge in sustainable investing, where investors seek out companies committed to Environmental, Social, and Governance (ESG) principles. But are all ESG investments truly what they seem?

A growing concern is the practice of 'greenwashing,' where companies exaggerate or falsely promote their environmental credentials. Now, a new, more subtle form of deception is emerging: 'crosswashing.' This involves companies strategically investing in sustainable activities to boost their ESG scores, while their core business operations remain unsustainable.

This article will unveil the nuances of crosswashing, exploring how it impacts ESG scores and what investors can do to ensure their investments genuinely contribute to a sustainable future.

What is Crosswashing? A New Shade of Greenwashing

Crosswashing: A company with a sustainable facade hiding an unsustainable core.

Traditional greenwashing involves making misleading claims about a company's environmental performance. Crosswashing, however, is more sophisticated. It's a calculated strategy where companies invest in specific sustainable initiatives to create a positive image, deflecting attention from their unsustainable core operations. This allows them to attract ESG-conscious investors without making fundamental changes to their business model.

Imagine an oil company investing heavily in renewable energy projects while continuing to extract and process fossil fuels. The renewable energy investment boosts their ESG score, creating the illusion of a company committed to sustainability. However, the core business remains environmentally damaging.

Strategic Image Cultivation: Crosswashing is about creating a specific impression of moral responsibility.
Social Risk Protection: It provides a shield against potential social backlash.
Regulatory Compliance: It ensures adherence to existing regulations, minimizing penalties.

Unlike traditional greenwashing, crosswashing often involves genuine investments in sustainable activities. This makes it harder to detect and more deceptive, as the company can point to tangible examples of its commitment to sustainability. However, the scale of these investments is often dwarfed by the impact of their core operations.

Combating Crosswashing: A Call for Transparency and Vigilance

The rise of crosswashing poses a significant challenge to the integrity of sustainable investing. It requires a multi-faceted approach involving stricter regulations, industry cooperation, and increased consumer awareness. By demanding transparency and scrutinizing companies' investments, we can ensure that ESG scores reflect genuine sustainability efforts, not just a carefully crafted image.

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This article is based on research published under:

DOI-LINK: https://doi.org/10.48550/arXiv.2407.00751,

Title: Crosswashing In Sustainable Investing: Unveiling Strategic Practices Impacting Esg Scores

Subject: econ.gn q-fin.ec

Authors: Bertrand Kian Hassani, Yacoub Bahini

Published: 21-03-2024

Everything You Need To Know

What is 'Crosswashing' and how does it differ from traditional greenwashing?

'Crosswashing' is a deceptive practice where companies strategically invest in sustainable activities to boost their Environmental, Social, and Governance (ESG) scores, while their core business operations remain unsustainable. Unlike traditional greenwashing, which involves making misleading claims about a company's environmental performance, 'crosswashing' often involves genuine investments in sustainable activities. This makes it harder to detect because the company can point to tangible examples of its commitment to sustainability, even if the scale of these investments is dwarfed by the impact of their core operations. For example, an oil company might invest in renewable energy projects (a sustainable activity), but still continue its environmentally damaging fossil fuel extraction and processing (core business operations).

How does 'Crosswashing' impact Environmental, Social, and Governance (ESG) scores, and why is this concerning?

'Crosswashing' artificially inflates Environmental, Social, and Governance (ESG) scores by showcasing investments in sustainable initiatives. This creates a misleading impression of a company's overall sustainability performance. This is concerning because investors who rely on ESG scores to guide their investments may be misled into supporting companies that are not genuinely committed to sustainability. This can undermine the integrity of sustainable investing and divert funds away from companies that are making real, impactful changes. The practice also allows companies to attract ESG-conscious investors without making fundamental changes to their business model.

What are the key motivations behind a company engaging in 'Crosswashing'?

Companies engage in 'Crosswashing' for several strategic reasons. Firstly, it allows for Strategic Image Cultivation, creating a positive impression of moral responsibility and commitment to sustainability. Secondly, it serves as Social Risk Protection, shielding the company from potential social backlash related to their unsustainable practices. Thirdly, it can ensure Regulatory Compliance, minimizing penalties and adhering to existing environmental and social regulations. All these elements help attract investors and maintain a favorable public image.

What are some examples of 'Crosswashing' in practice?

A good example of 'Crosswashing' would be an oil company investing in renewable energy projects, such as solar or wind farms. This investment boosts their Environmental, Social, and Governance (ESG) score, making them appear more sustainable. However, if the company simultaneously continues its core business of extracting and processing fossil fuels – which have a significant negative environmental impact – they are engaging in 'crosswashing'. Another example could involve a fashion company investing in sustainable materials for a small portion of its products while still relying on unsustainable practices like fast fashion and exploitative labor within its core operations. The core business activities remain environmentally damaging or socially problematic despite these efforts.

How can investors and consumers combat 'Crosswashing' to ensure genuine sustainability efforts?

Combating 'Crosswashing' requires a multi-faceted approach. Investors and consumers need to demand Transparency, scrutinizing companies' investments and operations beyond the surface level. This includes analyzing the scale and scope of sustainable initiatives relative to the company's overall activities. Stricter regulations and Industry Cooperation are crucial for setting clear standards and holding companies accountable. Increased Consumer Awareness is also vital, as informed consumers can make better investment choices and put pressure on companies to adopt more sustainable practices. By being vigilant and demanding transparency, investors can help ensure that Environmental, Social, and Governance (ESG) scores accurately reflect genuine sustainability efforts, not just a carefully constructed image.