Greenwashing Hurts Corporate Performance, Indonesian Study Finds
A new study from Universitas Dayanu Ikhsanuddin reveals that sustainability claims alone are not enough to improve corporate performance. The research found that companies engaging in greenwashing — promoting misleading environmental claims without real action — risk losing stakeholder trust, weakening credibility, and reducing long-term economic value.
The study was conducted by Sulhan Manaf from Universitas Dayanu Ikhsanuddin and published in 2026 in the Indonesian Journal of Economic & Management Sciences. The research examined how sustainability disclosures, stakeholder perceptions, and authentic environmental practices affect corporate performance in Indonesia’s growing green economy landscape.
The findings arrive at a time when businesses worldwide are increasingly promoting Environmental, Social, and Governance (ESG) commitments to attract consumers, investors, and regulators. However, the study warns that public sustainability messaging without measurable implementation can backfire economically.
Sustainability Claims Face Growing Scrutiny
In recent years, corporations across multiple industries have intensified efforts to market themselves as environmentally responsible. Sustainability reports, ESG disclosures, and “green” branding campaigns have become common tools for building public trust.
Yet concerns about greenwashing have also increased globally. Greenwashing refers to the practice of exaggerating or misleading the public about environmental performance or sustainability achievements.
According to the research, this growing gap between sustainability communication and actual environmental practices creates information asymmetry, making it difficult for stakeholders to distinguish genuine sustainability efforts from symbolic corporate messaging.
The study highlights that businesses today are expected not only to generate profits but also to demonstrate accountability toward environmental and social issues. Companies that fail to align sustainability claims with real practices may face reputational and financial consequences.
Research Combined Public Perception and Financial Data
To examine the economic reality behind sustainability claims, Sulhan Manaf used a quantitative research approach involving 100 respondents from Eastern Indonesia.
Participants included university students and young professionals aged 20–30 years who were considered familiar with sustainability issues through education, digital media exposure, or professional experience.
The research combined two sources of data:
- Public perception collected through structured questionnaires
- Corporate financial report data used to measure economic performance
The study then analyzed the relationship between sustainability claims, greenwashing practices, stakeholder trust, and corporate performance using regression analysis.
This integrated approach allowed the research to compare how public trust interacts with measurable business outcomes.
Key Findings From the Study
The study produced several important findings about sustainability communication and corporate economics.
Sustainability Claims Improve Trust
The research found that sustainability claims positively influence stakeholder trust and corporate image when the claims are perceived as credible.
Statistical analysis showed a significant positive relationship between sustainability communication and stakeholder trust, with a beta coefficient of 0.412.
This suggests that environmental disclosures and sustainability messaging still play an important role in shaping public perception.
Greenwashing Damages Credibility
The study also found that greenwashing has a strong negative effect on stakeholder trust.
Companies perceived as exaggerating environmental claims experienced declining credibility and weaker stakeholder confidence. Statistical analysis showed a negative beta coefficient of -0.368 for the relationship between greenwashing and stakeholder trust.
The findings indicate that misleading sustainability communication can quickly undermine corporate reputation.
Sustainability Claims Alone Do Not Improve Performance
One of the most significant findings showed that sustainability claims alone do not automatically improve corporate financial performance.
Although sustainability communication had a positive direction statistically, the effect was considered weak and insignificant.
This means that simply publishing sustainability reports or ESG statements is not enough to generate meaningful economic gains unless the claims are supported by authentic implementation.
Authentic Practices Produce the Strongest Economic Impact
The strongest positive effect in the study came from authentic sustainability practices.
The analysis found that companies implementing real environmental actions achieved better corporate performance, with a beta coefficient of 0.523 — the highest among all tested variables.
The research concludes that genuine sustainability implementation creates stronger economic value than corporate communication alone.
Stakeholder Trust Drives Corporate Success
The study further found that stakeholder trust significantly improves corporate performance.
According to the analysis, companies trusted by stakeholders are more likely to achieve stronger financial stability and market positioning.
This supports the growing view that trust has become a strategic economic asset in the modern business environment.
Greenwashing Creates Long-Term Economic Risks
The research emphasizes that greenwashing is not only an ethical problem but also a financial risk.
According to Sulhan Manaf from Universitas Dayanu Ikhsanuddin, sustainability communication only delivers economic value when it is supported by consistent and verifiable actions.
The study explains that companies may gain short-term reputational benefits from sustainability marketing, but credibility can collapse when stakeholders discover inconsistencies between claims and reality.
The research also notes that greenwashing may reduce market efficiency because investors and consumers receive misleading information about actual environmental performance.
As ESG investing continues to expand globally, transparency and accountability are becoming increasingly important for businesses seeking long-term competitiveness.
Implications for Companies and Policymakers
The findings carry important implications for businesses, regulators, and sustainability policymakers.
For companies, the study recommends:
- Strengthening transparency in sustainability reporting
- Supporting environmental claims with measurable actions
- Improving accountability mechanisms
- Avoiding symbolic or selective ESG disclosures
For regulators, the research highlights the need for stricter sustainability reporting standards to reduce misleading environmental communication.
The study also encourages stakeholders, investors, and consumers to critically evaluate sustainability information rather than relying solely on corporate branding campaigns.
According to the research, sustainable economic performance depends on the alignment between sustainability disclosure and real implementation.
Author Profile
Sulhan Manaf is a researcher from Universitas Dayanu Ikhsanuddin with expertise in green economy, sustainability reporting, corporate governance, and stakeholder perception in business management studies.
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