Greenwash vs. Brownwash: Exaggeration and Undue Modesty in Corporate Sustainability Disclosure

36 Pages Posted: 15 Feb 2015 Last revised: 25 Feb 2015

See all articles by Eun-Hee Kim

Eun-Hee Kim

George Washington University

Thomas P. Lyon

University of Michigan, Stephen M. Ross School of Business

Date Written: November 1, 2014

Abstract

Corporate greenwash has accelerated in recent years, bringing in its wake growing skepticism about corporate green claims. Although a theory of the drivers and deterrents of greenwash has begun to emerge, it is static in nature and does not incorporate the full range of ways in which firms can misrepresent their environmental performance. Our contribution is three-fold. First, we extend the theory of organizational information disclosure to incorporate the possibility of undue modesty about a firm’s environmental, social and governance practices. Second, we hypothesize about the drivers of exaggeration and undue modesty based on which of a firm’s stakeholders are salient at a given point in time; to do so we place the firm within a dynamic context that has largely been missing in the prior literature. Third, we test our hypotheses using a dataset that allows us to directly compare corporate green claims against actual performance. Results reveal that corporate output growth, deregulation, and low profits under deregulation significantly affect the choice between greenwash and brownwash. The effects of growth and profits are mitigated by external scrutiny.

Keywords: greenwash, brownwash, symbolic management, sustainability, greenhouse gas emissions

JEL Classification: D82, M14, Q30

Suggested Citation

Kim, Eun-Hee and Lyon, Thomas P., Greenwash vs. Brownwash: Exaggeration and Undue Modesty in Corporate Sustainability Disclosure (November 1, 2014). Ross School of Business Paper No. 1266, Available at SSRN: https://ssrn.com/abstract=2546497 or http://dx.doi.org/10.2139/ssrn.2546497

Eun-Hee Kim

George Washington University ( email )

2121 I Street NW
Washington, DC 20052
United States

Thomas P. Lyon (Contact Author)

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States
734-615-1639 (Phone)

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