Scrutinizing Corporate Sustainability Claims. Evidence from NGOs’ Greenwashing Allegations and Firms’ Responses

Standard setters, regulators, and auditors are in the process of devising mechanisms to detect and prevent corporate greenwashing. In this study, the authors examine whether NGOs can facilitate scrutiny of corporate sustainability claims. The authors find that advocacy NGOs increasingly campaign against greenwashing, targeting predominantly large, publicly visible firms in the consumer-facing and oil and gas industries. These campaigns mostly accuse firms of making misleading or false statements in communication outlets such as product labels, advertisements, and public relations campaigns about companies’ impacts on climate change and consumer health. Shareholders and the media react to NGO campaigns, especially when they allege greenwashing of material environmental or social performance dimensions. Finally, firms facing environment-related greenwashing allegations disclose less environmental information in the future, while companies criticized for climate-related greenwashing reduce future greenhouse gas emissions. Collectively, the findings in this study indicate that NGO scrutiny of corporate sustainability claims can complement the efforts of standard setters, regulators, and auditors who focus on different disclosure outlets than NGOs.