Oversight Mechanisms and the Reduction of Greenwashing

Abstract

Purpose: This study aimed to identify oversight mechanisms that reduce greenwashing behavior. Method: Data come from Bloomberg and Refinitiv ESG scores of 88 Brazilian public companies listed on the Brazilian stock exchange B3 from 2010 to 2021. The estimation method was the FGLS (Feasible Generalized Least Squares). Result and Discussion: The results suggest the action of institutional investors, independent board members, and being an environmentally sensitive industry company can reduce greenwashing. However, a series of divergences in the results might indicate that the practice of greenwashing is due to unequal awareness and a developing regulatory framework. Research Implications: This study contributes to ESG policymakers, managers, and investors by exploiting oversight mechanisms to reduce greenwashing behavior and encourage companies' sustainable development. Originality/Value: ESG disclosure intentions and actions help stakeholders' decision-making process, especially investors, through sustainability reports. However, the unaudited content can be misleading by pointing out greenwashing behavior, which means what is said does not correspond to company actions. Such context is still to be intensely exploited, and that value to an extensive range of stakeholders.