Exaggerating corporate
environmental credentials may offer temporary market gains, but it ultimately
destroys long-term business value when exposed. A systematic literature review
conducted in 2026 by researchers Jonnardi from Universitas Tarumanagara alongside
Dessy Adelin, Laela Lanjarsih, and Primadonna Ratna Mutumanikam from the
Perbanas Institute Jakarta reveals the double-edged nature of misleading
sustainability claims. Published in May 2026, the study synthesizes global
empirical evidence to explain how "greenwashing"—the practice of
providing exaggerated or deceptive environmental claims—impacts corporate value
and financial health. The findings underscore that authentic sustainability is
essential for maintaining investor confidence, customer loyalty, and long-term
economic competitiveness.
Background and Context
As global concerns over climate
change and resource depletion intensify, Environmental, Social, and Governance
(ESG) metrics have become crucial for corporate evaluation. Investors and
consumers increasingly favor businesses that demonstrate strong environmental
stewardship. Consequently, companies face mounting pressure to showcase
eco-friendly operations through sustainability reports and disclosures. This
pressure has driven many firms to adopt symbolic green strategies without
implementing genuine operational shifts. Understanding the financial risks of
these misleading signals is vital for regulatory bodies, financial markets, and
corporate strategists seeking to build a transparent economic ecosystem.
Research Methodology
The research team performed a
Systematic Literature Review (SLR) across major peer-reviewed academic
databases, including Scopus, Web of Science, ScienceDirect, SpringerLink,
Emerald Insight, and Google Scholar. The authors filtered and analyzed peer-reviewed
articles focused on greenwashing, firm valuation, ESG disclosures, and
financial metrics. Using thematic analysis and narrative synthesis, the
researchers categorized data points to identify consistent valuation patterns,
risk mechanisms, and contextual factors across various geographic markets and
industry sectors.
Key Research Findings
The systematic review revealed a
distinct dynamic between short-term market reactions and long-term financial
consequences:
- Short-Term Valuation Boost: In the initial
stages, greenwashing can positively influence stock prices, brand
reputation, and sales by appealing to eco-conscious consumers and
investors who lack immediate verification tools.
- Long-Term Capital Destruction: Once a
discrepancy between environmental claims and actual performance is
exposed, investor trust sharply declines, leading to falling share prices,
reduced firm valuation, and higher capital costs.
- Erosion of Customer Loyalty: Uncovering
false green claims damages brand equity, triggering customer churn, lower
sales volumes, and boycotts.
- Increased Operational Costs: Firms caught
greenwashing face substantial financial liabilities, including legal
penalties, regulatory fines, and elevated expenses required to rebuild
damaged public trust.
- Governance and Regulatory Moderation: The
negative economic impact of greenwashing is stronger in regions with
strict environmental regulations and among companies with weak corporate
governance structures.
Real-World Impact and Industry
Implications
The findings offer clear
strategic directions for policymakers, investors, and business leaders:
- For Policymakers and Regulators: The study
emphasizes the need for stricter sustainability reporting standards,
standardized ESG auditing, and proactive oversight mechanisms to minimize
misleading disclosures.
- For Investors: Institutional and retail
investors are urged to look beyond self-reported ESG marketing disclosures
and rely on verifiable operational data to prevent risk mispricing.
- For Corporate Management: Executives must
align external sustainability communications with verifiable internal
practices. Symbolic green marketing without substantive backing presents a
high-risk financial strategy that threatens long-term corporate viability.
Expert Perspective
Addressing the strategic
implications of the research findings, Jonnardi and co-authors from Universitas
Tarumanagara and Perbanas Institute Jakarta emphasize the essential link
between transparency and corporate stability:
"The practice of
greenwashing has a significant impact on company value and financial
performance. While it can initially provide temporary short-term benefits,
authentic and transparent sustainability strategies backed by real
implementation are far more effective in creating a competitive edge, boosting
company value, and maintaining sustainable financial performance."
Author Profiles
- Jonnardi, SE, M.Si., Ak., CA: Faculty member
and researcher in the Department of Accounting, Faculty of Economics and
Business at Universitas Tarumanagara, specializing in financial reporting,
auditing, and corporate accounting practices.
- Dessy Adelin, SE, M.Ak.: Academic and
researcher at Perbanas Institute Jakarta, focusing on corporate finance,
accounting systems, and financial performance analysis.
- Laela Lanjarsih, SE, M.Ak.: Researcher and
lecturer at Perbanas Institute Jakarta, with expertise in managerial
accounting, financial reporting, and corporate governance.
- Primadonna Ratna Mutumanikam, SE, M.Ak.:
Faculty member at Perbanas Institute Jakarta, specializing in accounting
disclosures, financial management, and corporate sustainability.
Source Information
- Article Title: Greenwashing and Corporate
Value: A Systematic Literature Review of its Impact On Financial
Performance
- Journal Name: International Journal of
Applied Economics, Accounting and Management (IJAEAM)
- Publication Year: 2026
- DOI: https://doi.org/10.59890/ijaeam.v4i3.197
- Official URL: https://mrymultitechpublisher.my.id/index.php/ijaeam/index
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