Firms Talk, Suppliers Walk: Analyzing the Locus of Greenwashing in the Blame Game and Introducing ‘Vicarious Greenwashing’

Abstract

Greenwashing extensively deals with scandals at the supply chain; despite this, however, research on this subject remains in the early stages, while much more is needed to advance our understanding of stakeholder's reactions to greenwashing. We propose a new typology of greenwashing based on the locus of discrepancy, i.e., the point along the supply chain where the discrepancy between the responsible words and the irresponsible walks happens. With three experiments, we tested how the types affect investor reactions from ethical (blame attribution) and business (intention to invest) perspectives. We developed our hypotheses building on attribution theory, which explains how observers construct perceptions about events. We expected that the more the discrepancy is internal, controllable, and intentional, the higher the blame attributed to a company and the lower the investment intentions. We found that, when greenwashing occurs at a company level (direct greenwashing), it increases the blame while decreasing investment intentions. Indirect greenwashing refers to Firms Talk, Suppliers Walk 2 misbehavior perpetrated by a supplier that claims to be sustainable and results to be less negative for a company. We also propose a third and original type: vicarious greenwashing, which happens when the behavior of a supplier is in breach of a company's sustainability claim. Although stakeholders attribute less blame on a company when vicariously involved in greenwashing, this type of greenwashing is detrimental for investments. The findings here advance the understanding of how greenwashing shapes stakeholder reactions and call attention to the need of a careful management of the supply chain.

Greenwashing Behaviours: Causes, Taxonomy and Consequences Based on a Systematic Literature Review

“…The fourth type of greenwashing is also called deceptive handling. It implies misleading conduct in which sustainable communication creates a deliberate operation of business practices to promote the perception that a firm's products, aims and/or policies are environmentally friendly (Blome et al, 2017;Siano et al, 2017;Pizzetti et al, 2019).…”

“…The behaviour of a firm is affected by competitive pressure via certain channels through actions undertaken by other firms to reach the same group of consumers in the market. Greenwashing is a phenomenon linked to scandals that often occur at the supply-chain level (Pizzetti et al, 2019). Remarkably, MNCs often face lower competitive pressure when operating in host emerging markets in the early stage for following reasons.…”

“…This strategy can activate stakeholder support, but with little investment in corporate social actions (Husted & Allen, 2009). Stakeholders often lack sufficient information to assess the environmental footprint of different companies (Busch & Hoffmann, 2009;Lyon & Maxwell, 2011;Pizzetti et al, 2019). Second, investors and the community rely on advertising, but greenwashing behaviours betray their belief.…”

“…Finally, if the environmental, social, and governance information disclosed by firms is not reliable, a firm's greenwashing behaviour can be a barrier to integrating the environmental, social, and governance factors into investment decisions (Yu et al, 2020). The effect of greenwashing on the relationships with these stakeholders will eventually lead to a decline in financial performance, detrimental to investment (Pizzetti et al, 2019).…”

“…However, almost all critics have agreed that greenwashing is disadvantageous for the environment and consumers' health. For instance, some authors showed the effects of increase in greenwashing and argued that it can negatively affect the confidence of shareholders and consumers in green products (Delmas & Burbano, 2011;Guo et al, 2018;Pizzetti et al, 2019). Additionally, Ramus and Montiel (2005) and Horiuchi et al (2009) argued that greenwashing prevents customers from understanding the consequences of their acquisition behaviour when trying to choose between reliable and non-reliable claims.…”