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When is greenwashing an easy fix?

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  • Richard Paul Gregory

Abstract

Greenwashing has long been considered a viable strategy in the literature and academic research has explored its drivers from an institutional viewpoint. This paper extends the literature by considering greenwashing from a financial management viewpoint. It is found that when firm stock volatility is low, when the weighted average cost of capital is high, when firm pricing power is strong, and when information asymmetry is high, that the financial incentives for greenwashing are strong. The potential returns to greenwashing are weakly related to the level of systemic risk of the firm. The simulation results of the model indicate that in the current era that the returns to greenwashing are quite limited without a lot of information asymmetry. The results indicate that in previous eras, there were more opportunities for greenwashing. Overall, the results suggest that for low-and average-beta firms that organizational-level drivers and individual-level psychological drivers are more important in driving greenwashing decisions. The results also show why stock-based incentives do not support corporate social responsibility.

Suggested Citation

  • Richard Paul Gregory, 2023. "When is greenwashing an easy fix?," Journal of Sustainable Finance & Investment, Taylor & Francis Journals, vol. 13(2), pages 919-942, April.
    • Handle: RePEc:taf:jsustf:v:13:y:2023:i:2:p:919-942
    DOI: 10.1080/20430795.2021.1907091
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    Citations

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    Cited by:

    1. Alexandra Horobet & Alexandra Smedoiu-Popoviciu & Robert Oprescu & Lucian Belascu & Alma Pentescu, 2025. "Seeing through the haze: greenwashing and the cost of capital in technology firms," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 27(9), pages 21651-21682, September.
    2. Yongheng Luo & Liming Ge & Kening Yang, 2026. "Does Automated Monitoring Technology Enhance Corporate Sustainability?," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 17(2), pages 5180-5201, April.
    3. Peng Hu & Xuming Li & Nian Li & Yiying Wang & Derek D. Wang, 2024. "Peeking into Corporate Greenwashing through the Readability of ESG Disclosures," Sustainability, MDPI, vol. 16(6), pages 1-23, March.
    4. Liwen Wang & Weixue Lu & Xirui Chen, 2024. "Sustainable Update Investment Strategy Under Overreaction Based on Hidden Markov Models: A Case Study of Chinese Low-Carbon Policies," Sustainability, MDPI, vol. 16(23), pages 1-22, November.
    5. Ravita Kharb & Charu Shri & Pragati Singh & Shabani Bhatia & Neha Saini, 2026. "Modelling the barriers of green financing in achieving environmental sustainability: an analysis using TISM," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 28(3), pages 7173-7206, March.
    6. Richard Paul Gregory, 2024. "How Greenwashing Affects Firm Risk: An International Perspective," JRFM, MDPI, vol. 17(11), pages 1-30, November.
    7. Abdullah, Mohammad & Wali Ullah, G M & Turner, Jason, 2025. "50 shades of dark green: The nexus of narcissistic leadership and corporate greenwashing," International Review of Financial Analysis, Elsevier, vol. 104(PA).

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