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28 Jun 2022

Is your business at risk of “Pinkwashing” this Pride Month?

June is Pride Month, and you may have noticed an increase in businesses incorporating the rainbow flag into their marketing, talking and posting about Pride Month and the actions they take, or intend to take, to advocate for and support the LGBT+ community.

Whilst a statement about this topic (and other important and topical social issues) is often made with the best of intentions, businesses should take steps to ensure that they have a strong internal framework to support their position, or else risk being exposed for “pinkwashing”.

What is pinkwashing?

You may have heard of “greenwashing” in relation to businesses that purport to be environmentally conscious but are not taking any notable sustainability action. Pinkwashing is a similar concept in relation to LGBT+ rights, and refers to the practice of using Pride Month, or the rainbow flag, to suggest it is a supporter and ally to the LGBT+ community, without having taken any substantial action to reflect that position.

Businesses and social matters

Businesses are increasingly using their positions in society to choose social matters to support for a variety of reasons, for example reputational gain, a desire to demonstrate good corporate social responsibility, or to attract employees or customers. Although there are often good intentions underlying talk about social issues, businesses can risk appearing disingenuous if using these social matters as a catalyst to increase reach and reputation, unless the business has its own house in order in respect of that matter.

What is the risk of pinkwashing?

Pinkwashing can lead to reputational and legal risk, both of which can lead to financial consequences for the business, which can easily be minimised.

A likely outcome of pinkwashing is reputational damage as a result of being exposed as not having taken any substantial action to support the LGBT+ community. This reputational damage can lead to a decrease in the profits and success of the business.

The LGBT+ community is well known for taking a stance against businesses who have behaved poorly in respect of matters affecting the LGBT+ community, which could result in boycotts, social media campaigns and other action. Aside from the immediate issues this would cause a business, it could have long lasting impacts and leave an entire stakeholder group disenfranchised from the business.

Reputational damage in respect of social matters can also lead to business partners distancing themselves from the company in questions so as to avoid any reputational damage themselves by association. This could include financiers, customers, suppliers, and any other third parties or business partners that have ties to the company in question.

Just as with greenwashing, there are also legal risks attached. With the ever increasing expansion of directors duties, directors should be confident that the business can back up what it says during Pride Month, or else risk legal consequences or shareholder action being taken against the company.

What can businesses do to minimise this risk?

There is an increasing expectation and understanding from the public that businesses will engage on social issues. The risks surrounding pinkwashing (and other topics) should not discourage businesses from taking action in relation to those social matters, but rather, serve as a reminder that stakeholders and shareholders alike will see through any disingenuous positions.

Before taking a position in relation to matters affecting the LGBT+ community, or other social matters, consider whether the business has matters such as the below in order:

  • internal policies that set out the businesses position and expectations, and those policies are actively used/enforced;
  • there is quantifiable action that demonstrates the businesses position;
  • action and consideration is given to the issue year round, not only when there is significant attention on the issue (i.e., during Pride Month);
  • policies, goals and procedures are in place to ensure equality in the hiring process, and during employment;
  • ensuring active engagement with all relevant stakeholder groups;
  • building a culture of diversity, safety, respect and inclusion;
  • keep corporate social responsibility and good ESG (environment, social and governance) practices at the core of the business;
  • promptly address any failings by the business in a transparent and genuine way.

This article provides general commentary only. It is not legal advice. Before acting on the basis of any material contained in this article, seek professional advice.


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