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Greenwash: Corporate Environmental Disclosure under Threat of Audit

dc.contributor.authorLyon, Thomas P.
dc.contributorMaxwell, John W.
dc.description.abstractWe develop an economic model of "greenwash," in which a firm strategically discloses environmental information and a non-governmental organization (NGO) may audit and penalize the firm for failing to fully disclose its environmental impacts. We identify conditions under which NGO punishment of greenwash backfires, inducing the firm to become less rather than more forthcoming about its environmental performance. We show that complementarities with NGO auditing may justify public policies encouraging firms to adopt environmental management systems. Mandatory disclosure rules offer the potential for better performance than NGO auditing, but the necessary penalties may be so large as to be politically unpalatable. If so, a mix of mandatory disclosure rules, NGO auditing and environmental management systems may be needed to induce full environmental disclosure.en
dc.format.extent601305 bytes
dc.subjectEnvironmental Strategyen
dc.subject.classificationBusiness Economicsen
dc.titleGreenwash: Corporate Environmental Disclosure under Threat of Auditen
dc.typeWorking Paperen_US
dc.contributor.affiliationumRoss School of Businessen
dc.contributor.affiliationotherKelley School of Business, Indiana Universityen
dc.contributor.affiliationumcampusAnn Arbor
dc.owningcollnameBusiness, Stephen M. Ross School of - Working Papers Series

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