Corporate ‘greenwashing’ can satisfy stakeholders without environmental results, study finds

New research suggests that while higher levels of greenhouse gasses produced by businesses initiate negative associations from stakeholders, a company’s market value remains positively linked if they promise climate change initiatives.

However, the actual outcome of those sustainability measures is less important than the optics they create, blurring the line between environmental improvements and corporate greenwashing.

This is according to an analysis published in the British Journal of Management, which reviewed 592 firms from 35 countries that have operated between 2002 and 2019 – 17 years that saw a drastic transformation in public perception toward climate change.

“Despite the steadily growing research within the climate change literature, limited attention has so far been paid to process-based corporate climate change initiatives aimed at improving corporate carbon performance by actual emissions and financial outcomes,” the study reads.

The research attempted to investigate the effects of carbon reduction measures and the actual outcome of these measures amidst companies operating in various national economies. The data also considered the effects of carbon-reduction measures being moderated by company sustainability boards.

The findings determined that carbon emissions rose along with climate change initiatives, and that low results from those initiatives did not weaken company value.

“The presence of a board sustainability committee — which plays a crucial role in designing environmental initiatives and introducing best sustainability management practices — was also associated with higher greenhouse gas emissions,” read a press release.

The authors of this study suggest that companies are likely to deploy greenwashing strategies to “create positive impressions among stakeholders and protect legitimacy.”

Although carbon-reduction boards throughout companies are working to promote sustainability and satisfy stakeholders, researchers suggest that deeper investigations should be conducted on the results of such efforts to ensure that measures are actually achieving what they set out to do, rather than just appearing to do so.

“We suggest that examining the moderating role of [sustainability boards] in this context may provide useful insights into corporate climate change strategies/practices across countries with different institutional frameworks and regulatory systems,” the study says.