Greenwashing erodes resilience: evidence from manufacturers

A manufacturing firm recently released a glossy ESG report, pledging a green transition, and its share price edged up. But three months later, when raw material price volatility and an unannounced environmental inspection occurred simultaneously, this company was the first to experience a liquidity crunch and production stoppages. Behind this seemingly contradictory situation lies a non‑intuitive management logic: greenwashing may buy short‑term legitimacy, but over the long run, it systematically erodes a firm's ability to withstand shocks. Recently, Professor Lujie Chen of International Business School Suzhou (IBSS) at Xi'an Jiaotong-Liverpool University published a study in the international journal Technological Forecasting and Social Change. Using data from Chinese listed manufacturing firms from 2017 to 2023, the study quantifies, for the first time, the damaging effects of corporate greenwashing (CGW) on resilience and reveals the underlying transmission mechanisms.

The study highlights that under pressure from heightened environmental expectations, market turbulence, and regulatory scrutiny, many manufacturers rush to "appear green" through disclosures and symbolic commitments, even when operational upgrades and genuine green innovation lag behind. The gap between symbolic green behaviour and substantive green action is defined as "greenwashing". The research team constructed a quantifiable CGW indicator and used period‑to‑period changes in total factor productivity (TFP) as a proxy for firm resilience, applying rigorous methods such as double machine learning for causal inference. The results show that greenwashing significantly undermines firm resilience — the more inconsistent a firm's words and actions, the more vulnerable it becomes when shocks hit.

So through which channels does greenwashing damage resilience? The study identifies two key pathways. First, greenwashing exacerbates financing constraints. Firms gain short‑term acceptance through greenwashing, but inconsistent disclosure increases distrust from capital providers, leading to higher financing costs and greater liquidity pressure. Second, greenwashing is associated with operational slack (measured by the quick ratio) — firms consume buffer resources in response to external scrutiny, thereby weakening their crisis‑response capacity. Notably, green innovation (e.g., green patent applications) does not exhibit a statistically significant mediating effect, meaning that simply accumulating "green patents" cannot compensate for the systemic risks brought by greenwashing.

More importantly, the study reveals an easily overlooked "amplifier" effect: when external scrutiny is stronger, the negative impact of greenwashing on resilience is magnified further. Whether through tighter environmental regulation intensity (policy pressure based on textual analysis) or higher investor attention (e.g., Baidu Search Index), both exacerbate the penalty effect of greenwashing. Private enterprises are especially susceptible due to their limited access to policy‑based resource buffers. In other words, under the watchful eyes of many, the cost of inconsistency between words and actions is far higher than commonly imagined.

These findings offer firms a clear practical pathway: elevate ESG communication from a "narrative layer" to an "auditable operational system". The research team proposes four specific recommendations. First, establish a traceable control loop from "claims to actions", ensuring that every major environmental claim corresponds to verifiable investments, process changes, and measurable milestones. Second, recognise financing constraints as a key transmission channel by improving disclosure consistency, reducing information asymmetry, and enhancing credibility through robust evidence retention and verification processes. Third, proactively build operational slack as dedicated resilience capacity — ring‑fence buffer resources and conduct regular stress testing. Fourth, when regulatory and investor attention rise — especially for private firms — activate a "high‑scrutiny protocol": tighten pre‑disclosure review, strengthen evidence chains, and prepare scenarios for reputational or financing shocks.

Professor Lujie Chen notes: "Greenwashing is not a safe 'pass'; it is a high‑interest liability — it buys legitimacy in the short term but drains a firm's ability to absorb shocks over the long term. When the spotlight of regulation and public scrutiny grows brighter, the cost of saying one thing and doing another moves from hidden to explicit."

In the long run, whether a firm can truly build resilience in the green transition does not depend on the length of the ESG report, but on the alignment between environmental communication and verifiable action. When "what firms say and what they do” becomes an auditable operational discipline, firms can turn sustainable development into a genuine competitive advantage rather than a source of vulnerability amid increasingly stringent environmental scrutiny and market volatility.

Lujie Chen is a full Professor of Management at Xi’an Jiaotong-Liverpool University. Professor Chen is recognised as one of Elsevier-Stanford University’s World's Top 2% Scientists (2024 and 2025). She is a . She is a Fellow of the Higher Education Academy in the UK and an expert in the fields of supply chain management and business analytics. Professor Chen has published over 60 high-quality and impactful papers in top-tier journals such as the Journal of Operations Management (UTD 24), Harvard Business Review (FT50), International Journal of Operations and Production Management (ABS 4), British Journal of Management (ABS 4), and European Journal of Operational Research (ABS 4), among others. She has served as a guest editor for special issues of several respected journals, including  International Journal of Operations and Production Management, Industrial Marketing Management, International Journal of Production Economics, and Journal of Business Research. She is currently serving as an Associate Editor for the International Journal of Operations and Production Management (ABS 4), Department Editor for IEEE TEM (ABS 3), and a member of the editorial board for Humanities and Social Sciences Communications (Nature Portfolio CAS Humanities Q1 & JCR Q1).

Technological Forecasting and Social Change (TFSC) is committed to publishing research with a clear technological focus that significantly contributes to both theory and practice. Technological innovation can optimise existing business activities, extend into new business areas, push the frontiers of markets, and contribute to mitigating and adapting to socioeconomic and environmental challenges.