An Empirical Investigation of the Greenwashing Sin of the Hidden Trade-off
Firms make positive discretionary disclosures about their environmental efforts in order to signify attention to the environmental impacts of their operations. On the one hand, firms may choose to make these disclosures to deflect attention away from other activities that may contribute negatively to their environmental performance (i.e., greenwashing in the form of the “sin of the hidden trade‐off ”). On the other hand, firms making these disclosures may legitimately improve their overall environmental performance.
This study by Georgia Tech researchers Dr. Manpreet Hora and Dr. Ravi Subramanian found encouraging evidence that this type of greenwashing trade-off does not appear to be prevalent. Additionally, their post hoc analysis explores factors based on the content of disclosures and industry, that may help explain differences in environmental performance among the firms making the disclosures.