Finance Faculty Publications and Presentations

Does Societal Trust Reduce Greenwashing? International Evidence

Document Type

Article

Publication Date

3-2025

Abstract

I investigate the influence of societal trust on greenwashing. Utilizing the ESG controversies score as a proxy for greenwashing, this research finds that firms in high-trust societies engage in fewer greenwashing activities. The effect is less pronounced for firms in countries with strong formal institutions, consistent with the notion that societal trust works as a substitute for country-level formal institution. However, the effect is more pronounced for highly visible firms. This study highlights three potential mechanisms through which societal trust reduces greenwashing practices: enhanced firm reputation, improved accounting transparency, and stronger stakeholder engagement. Overall, these findings underscore the significant role of societal trust in mitigating corporate greenwashing and fostering sustainable business practices.

Comments

© 2025 ERP Environment and John Wiley & Sons Ltd.

Publication Title

Business Strategy and the Environment

DOI

10.1002/bse.4126

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