Greenwashing in Corporate Sustainability: Implications for Financial Reporting and Accounting Practices

Muhammed Zakir Hossain, Jobaer Rahman Rashed and Annatul Islam Hredoy
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Muhammed Zakir Hossain: Associate Professor, Department of Business Studies, State University of Bangladesh, Bangladesh
Jobaer Rahman Rashed: Humphrey School of Public Affairs, University of Minnesota, United States of America
Annatul Islam Hredoy: Carlson School of Management, University of Minnesota, United States of America

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Abstract: This study examines the impact of greenwashing on the accuracy of financial reporting and the reliability of accounting in corporate sustainability. Greenwashing—misleading environmental claims intended to enhance a company's image—can distort sustainability disclosures, undermining the integrity of financial statements and eroding stakeholder trust. The research, which employs data from 120 firms engaged in sustainability reporting, finds that greenwashing has a negative impact on the accuracy of sustainability disclosures and the reliability of financial statements. The research highlights that robust corporate governance and effective regulatory structures are crucial in mitigating the adverse effects of greenwashing. The findings underscore the importance of transparent sustainability reporting for investors and stakeholders, offering practical implications for businesses, accountants, and policymakers to improve corporate accountability.

Keywords: Investor Trust; Transparency; Regulatory Frameworks; Sustainability Reporting; Corporate Governance; Accounting Reliability; Financial Reporting; Greenwashing (search for similar items in EconPapers)
Date: 2025-11-18
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Published in European Journal of Innovative Studies and Sustainability, 2025, 1 (6), pp.45-57. ⟨10.59324/ejiss.2025.1(6).05⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05736598

DOI: 10.59324/ejiss.2025.1(6).05

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