Who's Greenwashing Via the Media and What are the Consequences? Evidence From China

Abstract

We show that those Chinese listed companies that are riding high on the media corporate social responsibility (CSR) ranking lists tend to have greater advertising (sales) expenses and poor environmental performance. This observation suggests that some companies opportunistically use media to greenwash their image, hoping to capture economic rents. Indeed, our evidence shows that greenwashing firms benefit in the lending market by exploiting the media to gain a kind of environmental, social, and governance (ESG) endorsement, thereby allowing them to achieve a lower cost of debt and to experience lower collateral obligations. The evidence suggests an adverse incentive to exploit ESG awareness via media coverage in weak institutional environments and opaque ESG disclosure regimes.

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

“…Included studies also stressed that CSR decoupling and greenwashing are negatively related to ROA (Walker & Wan, 2012), Tobin's Q (Liu et al, 2023; Hawn & Ioannou, 2016, more pronounced by CSR intensive industries), cumulative abnormal returns (Du, 2015), and access to finance (Garcia‐Sanchez et al, 2021). Moreover, CSR decoupling lowers interest rates and collateral loans for blue and yellow, but not for green grade firms (Cao et al, 2022). However, according to Schons and Steinmeier (2006), CSR decoupling is rewarded by higher financial performance if it is directed at low‐proximity stakeholders.…”

“…Du (2015) used the Chinese greenwashing list, published by the South Weekend newspaper. According to Cao et al (2022), the simultaneous firm inclusion in the CSR media list (China Research Center) and the inclusion of environmental credit evaluations as blue and yellow grades indicate greenwashing behavior. Based on manual content analyses, Wang et al (2023) and Walker and Wan (2012) differentiated between symbolic (qualitative) and substantive (quantitative) descriptions within the environmental report.…”

“…Agency problems and symbolic use of CSR issues may lead to impaired firm reputation. Regarding financial consequences, included studies recognized ROA as accounting‐based performance (Walker & Wan, 2012), interest rates and collateral loans (Cao et al, 2022), stock price crash risk (Liu et al, 2023), Tobin's Q (Chen & Dagestani, 2023;Hawn & Ioannou, 2016; Liu et al, 2023), cumulative abnormal returns (Du, 2015), economic performance score (Schons & Steinmeier, 2006), analyst forecast errors, cost of capital, and access to finance (Garcia‐Sanchez et al, 2021). Relying on CSR performance , CSR donations during the COVID‐19 crisis (Zhong et al, 2022), customer satisfaction (Ioannou et al, 2022), green trust (Chen & Chang, 2013) and firms' actual employee turnover and intentions (Robertson et al, 2023; Scheidler et al, 2019) were recognized.…”

Do pilot zones for green finance reform and innovation avoid ESG greenwashing? Evidence from China

“…According to research, there is a higher probability for individuals or organizations to participate in the misrepresentation of environmentally friendly practices and the dissemination of inaccurate ESG information, leading to the manifestation of ESG greenwashing behavior [ 56 ]. Companies that engage in greenwashing also leverage media channels to enhance their reputation and gain support for their environmental, social, and governance (ESG) initiatives [ 57 ]. According to research, corporations that effectively handle and reveal data regarding environmental, social, and governance (ESG) concerns tend to enjoy a more favorable public image [ 58 ].…”

Does the “Greenwashing” and “Brownwashing” of Corporate Environmental Information Affect the Analyst Forecast Accuracy?

“…In essence, "greenwashing" refers to a corporate strategy of projecting a socially responsible image while doing nothing to actually implement it [33,[35][36][37]. The various economic consequences of corporate "greenwashing" behavior have been extensively investigated in previous studies, including negative market reactions [38][39][40], reduced/no impact on financial performance [36,41,42], reduced audit fees [43], and benefits in the loan market [44]. Li additionally found that cheap talk on environmental responsibility led to a decrease in the number of securities analysts who released forecasts, a rise in the divergence of earnings forecasts, and a decline in the forecast accuracy of analysts with a poor reputation [10].…”