How does 1. c4 2. g3 avoid or make hedgehog undesirable? I don't quite get it. Can't black play b6 and Nc6 and then Bg7?

In general, in a hedgehog, the knight is better off on d7 than c6. But it's perfectly playable, just a bit awkward.

I suppose that since white fianchettos their bishop on g2 right away, black may not want to fianchetto their bishop on a contested diagonal.

Is the Hedgehog so fearsome that White must avoid it? 

The problem with 1 c4 Nf6 2 g3 is that it doesn't challenge Black at all, poses no threat or hint of a problem for him at all - except for the possibility of play on the long diagonal, which Black can immediately counter with 2 ...c6 if he chooses.

You can't solve the problem of not being able to achieve a working advantage against the Hedgehog by adopting a different line which promises Black even easier equality!

I don't think Mihail Murin, author of Grandmaster Repetoire - English Opening, has a problem getting an advantage over the hedgehog. He writes that his move order 1. c4 2. g3 avoids the hedgehog amongst other effects but doesn't explain why. (he also says the move order 2.Nc3 ofcourse has other desirable effects also but that 2.g3 makes it easier for white to gain an edge in his oppinion) I just want to know why because I'm building my repetoire around 2.g3 and if someone tries to play the hedgehog I want to know why it is bad.

Ah ofcourse. That seems to be the reason I guess.

You simply play d4 at some point. c6 isn't so bad if you know what's going on.