Environmental Uncertainty and Greenwashing: Insights from IBSS Research

Recently, a paper titled “Does Environmental Uncertainty Increase the Likelihood of Greenwashing? The Roles of Government Subsidies and Media Attention" co-authored by Dr Jie Zhang from the International Business School Suzhou (IBSS) at Xi’an Jiaotong-Liverpool University (XJTLU), and other researchers, has been accepted and published in the top journal Corporate Social Responsibility and Environmental Management. The study examines how environmental uncertainty influences corporate behavior, specifically the tendency to engage in greenwashing. The study, which analyzed data from Chinese listed companies over a ten‐year period, reveals that uncertainty in the external environment significantly raises the likelihood that firms will exaggerate or misrepresent their environmental performance.

The research indicates that when market conditions become unpredictable—due to factors such as regulatory shifts, fluctuating market demands, and rapid technological changes—companies may resort to greenwashing as a short-term strategy. In these conditions, firms may overstate their sustainability efforts to maintain investor confidence, consumer trust, and regulatory favor.

Beyond establishing this direct relationship, the study also investigates how external governance mechanisms can mitigate the negative impact of environmental uncertainty. Notably, government subsidies and heightened media attention are found to play critical roles. Financial incentives such as subsidies help alleviate resource constraints, encouraging firms to invest in authentic environmental initiatives rather than resort to superficial claims. Simultaneously, active media scrutiny serves as a powerful external check, ensuring that companies are held accountable for the accuracy of their sustainability disclosures. These findings suggest that a combined approach of supportive policy measures and rigorous public oversight can promote more transparent and sustainable business practices.

The implications of this research are profound for industry leaders and policymakers alike. Companies are urged to view transparency not merely as a compliance requirement but as a competitive asset in an era where stakeholders are increasingly discerning about corporate sustainability claims. Embracing robust internal governance and transparent reporting practices can help firms build long-term credibility, even in uncertain environments. For policymakers, the study highlights the importance of crafting supportive regulatory frameworks that go beyond coercive measures. By offering targeted subsidies and fostering responsible media practices, governments can create conditions that encourage genuine environmental innovation rather than superficial compliance.

Overall, the study provides valuable insights into how environmental uncertainty can drive greenwashing and offers actionable strategies to counteract this trend. By reinforcing the importance of both financial support and external accountability, the research lays a foundation for more sustainable corporate practices. In a marketplace where authenticity is increasingly rewarded, this research serves as a clarion call for businesses to invest in long-term sustainability rather than short-term image management. The findings not only enhance our understanding of corporate behavior under pressure but also emphasize the potential of coordinated public and private efforts to promote transparency and genuine environmental responsibility.

Dr Jie Zhang joined IBSS at XJTLU in the summer of 2013. She has extensive experience teaching Accounting and Finance-related subjects and has been recognized with several awards, including the XJTLU Honours Award and the IBSS Teaching Excellence Award. Dr. Zhang is a member of CPA Australia. Her main research interests include corporate finance, corporate governance, behavioral finance with a focus on decision-making under uncertainty, and business education.

Corporate Social Responsibility and Environmental Management is an international journal focused on the social and environmental responsibilities of businesses in the context of sustainable development. Its impact factor is 8.3. It also publishes case studies and cross-country surveys of best practice helping organizations improve performance and accountability in these areas. The focus of the journal is on research and practical advice for the development and assessment of social responsibility and environmental tools, practical case studies and an assessment of the relative strengths and weaknesses of different approaches to sustainability. It encourages debate over the development of sustainability issues as well as monitoring the demands being made by various stakeholder groups.