Regulating Greenwashing

Abstract

Greenwashing as a contentious topic has recently triggered enforcement actions by market regulators worldwide. Using primarily public textual materials, supplemented by five interviews, and insights from the sociology of regulation, the paper demonstrates four interrelated aspects of how greenwashing is regulated. First, regulators define greenwashing as misleading and deceptive claims that erode trust, deeming it appropriate for regulatory intervention. Second, despite unique challenges, regulators align actions with existing regulatory frameworks and deploy various measures typically used for other issues to target greenwashing cases. This process shapes the concept of greenwashing, both narrowing and broadening its scope in varying ways. Finally, despite stakeholder support and evidence of enhanced transparency following sanctions, regulatory interventions against greenwashing have limitations and unintended consequences, demanding further regulatory responses. This paper contributes to recent accounting research, which highlights the limitations of mandatory sustainability reporting and assurance in tackling greenwashing, by examining the role of market regulators.

Keywords: Greenwashing, Regulatory intervention, Sanctions, Sociology of regulation