Research in the greenwashing field: concepts, theories, and potential impacts on economic and social value

Abstract

This paper aims to define a theoretical background for investigating greenwashing from a business economic perspective. We consider possible research questions in the relevant field of study, which is business economics studies. The first research step proposes a path that will orient scholars to the multifaceted perspectives of greenwashing. The second step analyzes the main theories that can support researchers and might motivate the possible greenwashing strategies. The third step highlights the potential link between greenwashing, reputational and relational capital, and a broad concept of value that includes the social dimension. Finally, we propose a conceptual framework that highlights some emerging research issues and anticipates the effects of greenwashing. Considering that self-regulation is not effective in reducing the gap between substantive and symbolic behaviors, the main practical implication of this study lies in addressing the need for stronger regulation and effective legal enforcement, not only to improve mandatory environmental disclosure but also to develop an audit process of such disclosure. Our analysis offers a number of suggestions for future research. Considering the centrality of disclosure in the theoretical framework we defined for greenwashing, future research could adopt the legitimacy theory perspective to focus on the role of mandatory environmental, social, and corporate governance (ESG) disclosure as well. Further, our conceptual framework highlights a possible research issue that investigates how a social value destruction resulting from inconsistent environmental strategies, may impact shareholders’ economic value.

The impact of a firm’s ESG score on its cost of capital: can a high ESG score serve as a substitute for a weaker legal environment

“…It is thus suggested for policymakers to both improve country institutions as well as stimulate firms to invest in ESG projects. This article also illustrates the necessity for regulators to screen for possible greenwashing practices (see also Bernini and La Rosa, 2023). If firms know that a higher ESG score leads to a lower cost of capital, they do not only have incentives to invest in ESG projects but also to unethically claim that they are green.…”