The illusion of sustainable value: evidence on greenwashing

Abstract

Purpose This study aims to examine whether greenwashing, defined as the discrepancy between environmental disclosure and substantive environmental performance, creates shareholder value. While prior studies generally report positive associations between environmental engagement and firm value, most rely on disclosure-based measures that do not distinguish between genuine environmental improvements and symbolic sustainability communication. This study reassesses the environmental–performance relationship by explicitly separating environmental rhetoric from environmental substance. Design/methodology/approach Using a panel data set of publicly listed nonfinancial firms across the Middle East and North Africa economies, greenwashing is measured as the gap between environmental disclosure and environmental performance. The analysis evaluates its association with profitability, market valuation and financial stability using fixed-effects, nonlinear, threshold, dynamic panel and instrumental-variables estimators. Additional robustness tests use alternative measures of greenwashing and performance. Findings The results indicate that greenwashing does not generate persistent improvements in profitability, market valuation or financial stability. The findings are sensitive to model specification, with baseline associations weakening after controlling for firm fixed effects. Originality/value By modeling greenwashing as the disclosure–performance gap, this study provides a more rigorous assessment of environmental value creation and demonstrates that symbolic environmental communication is not systematically rewarded in the absence of substantive environmental performance.