What drives and curbs brownwashing?

Abstract

Numerous studies have investigated the factors that drive or curb greenwashing activities, but few have discussed the other side of the coin, brownwashing, the underreporting of environmental achievements, another form of corporate decoupling that is harmful for stakeholders. Using a sample of 5459 firm–year observations over the period 2007–2017, this study tests and finds that industry leaders brownwash their environmental performance to avoid peer pressure and excessive stakeholder attention, and to preserve their firm's leadership. Consequently, legitimate firms tend to converge toward informal industry standards that engender standardized environmental disclosures. Nevertheless, this phenomenon can be curbed by adopting sound environmental governance mechanisms aimed at improving corporate transparency and environmental practices.

Determinants and consequences of corporate social responsibility decoupling—Status quo and limitations of recent empirical quantitative research

“…Moreover, results remain constant before and after the financial crisis of 2007–2008. In line with empirical research on financial reporting quality, increased financial pressure promotes the opportunistic use of CSR reporting (Huang et al, 2022). According to Zhang (2022a) and Xia et al (2023), financial constraints and greenwashing are positively related.…”

“…Next to corporate governance, as financial determinants, industry (Ruiz‐Blanco et al, 2022), product market competition (Arouri et al, 2021), financial performance (output growth, net income; Kim & Lyon, 2015), financial constraints and leverage (Xia et al, 2023; Zhang, 2022a), analyst coverage (Zhang, 2022b), internationalization (Tashman et al, 2019), political connections (Xia et al, 2023) and cross‐listings (Yu et al, 2020) were recognized. Related to CSR factors , researchers relied on voluntary adoption of GRI reporting (Garcia‐Sanchez et al, 2022; Ruiz‐Blanco et al, 2022), UN Global Compact participation (Li & Wu, 2020), corporate environmental damage costs (Marquis et al, 2016), and corporate reputation risk score (Huang et al, 2022).…”

“…Second, prior reviews did not explicitly differentiate between CSR decoupling, greenwashing, and brownwashing research. Thus, we present a more detailed and useful research structure, as recent studies have also addressed brownwashing as an important management strategy (e.g., Huang et al, 2022). Finally, precise research recommendations on empirical-quantitative studies are missing in this context in prior reviews.…”

Employees' response to corporate greenwashing

“…By empirically demonstrating the detrimental impact of greenwashing on employees, our research highlights the need for well‐balanced communication and management strategies that are both externally and internally focused. Companies should be aware that inadequate and inconsistent communication of green activities to employees may make it difficult for employees to gain a complete understanding of their company's environmental goals and programs, resulting in unfavourable evaluations of the company's overall environmental engagement (Falchi et al, 2022; Heras‐Saizarbitoria et al, 2020, Huang et al, 2022). On the other hand, a heavy emphasis on external activities, especially in the absence of a strong internal environmental strategy, may cause employees to question the motives of the company (de Vries et al, 2015; Scheidler et al, 2019), contributing to employees' negative perceptions.…”

How does multi‐agent govern corporate greenwashing? A stakeholder engagement perspective from “common” to “collaborative” governance

“…“Common” governance refers that multi‐agent (e.g., government, companies, media, nonprofit organizations and citizens) participate in governance individually, without information sharing and cooperation. Previous studies have explored the government supervision (e.g., government regulation [Sun & Zhang, 2019], European Union’ classification regulations [Pacces, 2021], government subsidies and penalties [Yang et al, 2021]), corporate internal supervision (e.g., independent directors and institutional investors [Yu et al, 2020], committee on corporate strategy and corporate social responsibility [Huang, Francoeur, & Brammer, 2022]) and media supervision (Fernando et al, 2014). However, the phenomenon of greenwashing is still not effectively managed.…”