ESG disclosures, green innovation, and greenwashing: All for sustainable development?

As stakeholder concerns about corporate sustainability intensify, greenwashing—where companies deceptively report their environmental performance for short‐term economic gain—poses a significant threat to long‐term sustainability, making it crucial to explore effective ways to curb this practice. Using data from 1,270 Chinese listed companies from 2009 to 2019, this study constructs two‐way fixed effects and moderating effects models to explore the crucial role of green innovation in curbing greenwashing. Green innovation not only reduces the incentives for greenwashing, but also makes a genuine contribution to environmental protection, thus promoting a “win‐win” scenario for both sustainability and corporate development. Moreover, the positive impact of green innovation on curbing greenwashing can be significantly amplified by easing financial constraints and enhancing firms’ risk‐taking capabilities to foster a stable financial environment, as well as by strengthening the governance structure through increased gender diversity and environmental background among managers. Heterogeneity tests show that this pathway is particularly effective in companies with heavy pollution and higher economic performance. The research findings help to formulate more effective management strategies and incentive mechanisms to reduce greenwashing and achieve sustainable development.