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

Manpreet Hora and Ravi Subramanian

Journal of Industrial Ecology, 2019, vol. 23, issue 4, 855-868

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.

Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (11)

Downloads: (external link)
https://doi.org/10.1111/jiec.12823

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:inecol:v:23:y:2019:i:4:p:855-868

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1088-1980

Access Statistics for this article

Journal of Industrial Ecology is currently edited by Reid Lifset

More articles in Journal of Industrial Ecology from Yale University
Bibliographic data for series maintained by Wiley Content Delivery ().