The Financial Impact of Greenwashing: Insights from Fashion Companies

Abstract

This study focuses on the effects of greenwashing on financial performance in the fashion sector, which is one of the most polluting industries in the world, in an effort to further the continuing research on the environmental impact of companies. A proxy for greenwashing is produced by calculating the difference between a company's symbolic environmental initiatives and its real performance. The study's foundation is an in-depth review of the literature on the drivers and mechanisms of "greenwashing," with a focus on the impact of stakeholder pressure and disclosure risks on corporate green behaviour. The empirical research makes use of information from the Eikon Refinitiv database that spans five years and includes financial and ESG data for 83 fashion companies. In contrast to the expectations, the data suggest that greenwashing has no apparent impact on financial performance, with companies exhibiting varying degrees of success in meeting CO2 reduction goals and an unexpectedly significant correlation between carbon emissions and market value. The findings emphasise the importance of sincere environmental initiatives while highlighting the complexity of the financial consequences of greenwashing. The thesis concludes by offering suggestions for further study to improve the understanding and evaluation of greenwashing, with the goal of creating a more transparent and sustainable fashion sector.