Research: How Some Companies Avoid Accusations of Greenwashing

📆 9/27/2023 7:13 PM
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Recent research reveals a troubling trend: apex firms in Business Groups often promote sustainability without substantial action. Analyzing data from 515 companies in 35 countries, the authors found that apex firms, especially those sharing a brand with affiliates, engaged less in sustainability initiatives than their lower-tier counterparts. This potential “greenwashing” might be tolerated due to the unique BG structure, where apex firms play communicators and affiliates act as implementers. Despite market tolerance, such discrepancies could harm long-term reputations. For genuine sustainability, firms must ensure accurate communication, inspire affiliates with shared values, diffuse best practices groupwide, and stay attuned to evolving stakeholder expectations. Sustainability is not just a symbolic gesture but a commitment requiring consistent, substantive action.

. Yet, our recent research suggests that some companies may be engaging in similar behavior while escaping, to a certain degree, scrutiny and sanctions.

To shed light on this phenomenon, we analyzed data from 515 publicly listed companies that are members of BGs across 35 different countries. Specifically, we obtained environmental, social, and governance data from Refinitiv which measures each company’s ESG performance relative to its industry peers, relying on company-reported information. We used it to distinguish between a company’s substantive sustainability actions and symbolic ones .

What explains this discrepancy? It’s possible that what might be perceived as blatant greenwashing elsewhere could be interpreted as a legitimate division of labor in the unique BG ecosystem. Apex firms, using their influential role and symbolic power, can act as “communicators,” that amplify the group’s overall sustainability initiatives; lower-tier affiliates, in contrast, take on the role of “implementers,” substantively implementing these initiatives.

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