Does it pay to be a greenwasher or a brownwasher?

Abstract

The growing attention to corporate green practices and the increased competition in global markets have pressed companies to disclose information about their environmental footprints. In doing so, some firms tend to either overstate or understate their environmental commitments by adopting so‐called “greenwashing” or “brownwashing” strategies, respectively. In this paper, we analyze the impact of different types of environmental communication strategies on firm value and operating performance using a panel of 3,490 publicly traded companies from 58 countries and 19 industries. Results show that it does not pay to be a greenwasher, whereas the decision to not properly communicate a firm's environmental commitment is associated with lower financial performance. Therefore, this study highlights the importance of having not only effective green practices, but also coherent communication of environmental strategies. This is the first attempt to empirically model the impact of greenwashing and brownwashing strategies on corporate financial performance in a longitudinal setting.

Greenwashing and environmental communication: Effects on stakeholders' perceptions

“…Currently, the level of attention towards corporate environmental impacts and commitments is very high, and environmental scandals are a topical issue (Siano et al, ). Many studies have focused on the effects of stakeholder discovery of greenwashing; some have highlighted the effects on financial performance (Du, ; Testa, Miroshnychenko, Barontini, & Frey, ; Walker & Wan, ), whereas others have examined the impact on trust (Dekhili & Achabou, ; Perrini, Castaldo, Misani, & Tencati, ) and loyalty (Guo et al, ). We expect that the type of communication and the level of greenwashing will significantly affect stakeholder reactions to an environmental scandal relating to a greenwashing discovery.H4 The environmental sensitivity of the industry will amplify the influence of different levels of greenwashing.…”

The extended theory of planned behavior in Turkish customers' intentions to visit green hotels

“…Jay Westerveld described the hypocrisy of hotels that describe towel re‐use programs as an example of being a green hotel (Pearson, ); in fact, they implemented this to save money. Companies should be aware of these types of misleading activities and avoid implementing these communication failures, which were conducted for financial aims but shown as false and misleading communication activities (Jansson, Nilsson, Modig, & Hed Vall, ; Kahraman & Kazancoglu, ; Seele & Gatti, ; Testa, Miroshnychenko, Barontini, & Frey, ).…”

Beyond win–win: A syncretic theory on corporate stakeholder engagement in sustainable development

“…Rather, they may act as the Tsimshians and use masking, externally maintaining the symbols and modes of representation of business as usual, while inconspicuously greening their microactivities, for instance, purchasing greener products, favoring greener suppliers, selecting greener projects and technologies, introducing green criteria in reporting, or simply greening day‐to‐day practices, all this without disclosing to top decision makers or using profits, risks‐related, operational, or health and safety arguments to justify their actions. This tallies, for instance, with research into brown washing (Delmas & Grant, ; Kim & Lyon, ; Testa, Miroshnychenko, Barontini, & Frey, ) showing how firms understate or hide their environmental performance when experiencing nongreen stakeholders pressures and with findings by Liston‐Heyes and Vazquez‐Brust () showing that middle managers in firms with environmentally reactive top decision makers will still implement proactive environmental practices unbeknownst to them. Here, syncretism theory informs us that the success of masking requires two things: affinity without concepts and distance between the actors holding different values.…”