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Relationship between Positive Environmental Disclosures and Environmental Performance: An Empirical Investigation of the Greenwashing Sin of the Hidden Trade‐off

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  • Manpreet Hora
  • Ravi Subramanian

Abstract

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. Our study empirically addresses the following question: Do firms that make positive discretionary environmental disclosures improve their overall environmental performance more than the firms that do not make such disclosures? Specifically, because press announcements have been shown to be a popular medium for positive discretionary disclosures, we examine the relationship between announcements in the press of firms’ environmental efforts beyond compliance, and suitably weighted‐aggregated firm‐level releases of the range of pollutants reported to the U.S. Environmental Protection Agency's Toxics Release Inventory (TRI). We employ matching methods (coarsened exact matching and propensity score matching) that account for potential sources of endogeneity, including the relationship between firms’ prior environmental performance and their propensity to disclose environmental information. Our findings from the matching methods provide encouraging evidence that greenwashing in the form of the sin of the hidden trade‐off does not appear to be prevalent. Additionally, our 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.

Suggested Citation

  • Manpreet Hora & Ravi Subramanian, 2019. "Relationship between Positive Environmental Disclosures and Environmental Performance: An Empirical Investigation of the Greenwashing Sin of the Hidden Trade‐off," Journal of Industrial Ecology, Yale University, vol. 23(4), pages 855-868, August.
  • Handle: RePEc:bla:inecol:v:23:y:2019:i:4:p:855-868
    DOI: 10.1111/jiec.12823
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    Cited by:

    1. Zhang, Ziqi & Su, Zhi & Wang, Ke & Zhang, Yongji, 2022. "Corporate environmental information disclosure and stock price crash risk: Evidence from Chinese listed heavily polluting companies," Energy Economics, Elsevier, vol. 112(C).
    2. Junming Zhu, 2020. "Suggested use? On evidence‐based decision‐making in industrial ecology and beyond," Journal of Industrial Ecology, Yale University, vol. 24(5), pages 943-950, October.
    3. Chris Kennedy & Reid Lifset, 2020. "Winners of the 2019 Graedel Prizes: The Journal of Industrial Ecology Best Paper Prizes," Journal of Industrial Ecology, Yale University, vol. 24(5), pages 940-942, October.
    4. Pengyu Chen & Abd Alwahed Dagestani, 2023. "Greenwashing behavior and firm value – From the perspective of board characteristics," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 30(5), pages 2330-2343, September.
    5. My Hanh Doan & Remmer Sassen, 2020. "The relationship between environmental performance and environmental disclosure: A meta‐analysis," Journal of Industrial Ecology, Yale University, vol. 24(5), pages 1140-1157, October.
    6. Amina Laaroussi & Denis Lemaître & Soumia Bakkali & Souad Ajana, 2020. "Improving the environmental performance of Moroccan industries: An assessment study of industrial projects," Post-Print hal-03104023, HAL.
    7. Wei Wang & Dechao Ma & Fengzhi Wu & Mengxin Sun & Shuangqing Xu & Qiuyue Hua & Ziyuan Sun, 2023. "Exploring the Knowledge Structure and Hotspot Evolution of Greenwashing: A Visual Analysis Based on Bibliometrics," Sustainability, MDPI, vol. 15(3), pages 1-35, January.
    8. Xing, Chao & Zhang, Yuming & Tripe, David, 2021. "Green credit policy and corporate access to bank loans in China: The role of environmental disclosure and green innovation," International Review of Financial Analysis, Elsevier, vol. 77(C).
    9. Evangelia Ktisti & Leonidas Hatzithomas & Christina Boutsouki, 2022. "Green Advertising on Social Media: A Systematic Literature Review," Sustainability, MDPI, vol. 14(21), pages 1-25, November.

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