Abstract

As climate change increasingly challenges business models, the disclosure of firm environmental performance casts growing attention by corporate stakeholders. This creates wider opportunities and incentives for greenwashing behaviors. We propose a novel measure of greenwashing and investigate its determinants and consequences for US firms. We show the that board characteristics are variously associated with the apparent degree of corporate greenwashing. Importantly, we find that greenwashing reduces firm value.

Scientific Portfolio AI- Generated Summary

This paper from EDHEC-Risk Institute explores the concept of greenwashing and its impact on US firms. Greenwashing refers to the practice of making false or exaggerated claims about a company’s environmental performance or sustainability practices. The authors propose a measure of greenwashing based on the difference between a firm’s environmental performance score and its self-reported environmental performance.

The paper presents a comprehensive literature review on greenwashing, highlighting the various forms it can take and the potential consequences for firms and stakeholders. The authors then analyze a sample of US firms to investigate the determinants and consequences of greenwashing.

Their findings suggest that board characteristics, such as board independence and diversity, are associated with the degree of corporate greenwashing. Specifically, firms with more independent and diverse boards are less likely to engage in greenwashing. The authors also find that greenwashing has a negative impact on firm value, as investors are increasingly concerned with environmental and social issues.

Overall, this paper provides valuable insights for corporate stakeholders, including investors, regulators, and consumers. It highlights the importance of accurate and transparent reporting of environmental performance and sustainability practices, and the potential risks associated with greenwashing. The authors suggest that firms should focus on improving their actual environmental performance rather than making false or exaggerated claims, and that regulators should consider implementing stricter reporting requirements to prevent greenwashing.