Holding corporations accountable
The European Green Deal has placed environmental, social, and governance (ESG) principles at the heart of business strategy. However, as more companies claim to be sustainable, concerns about greenwashing have also increased. Sustainability has become a central theme in corporate strategy since the launch of the European Green Deal in 2019. Companies are now expected not only to maximise profits but also to reduce their environmental impact and promote social good.
ESG has emerged as a popular framework to guide and assess these efforts (European Commission, 2019). Not all corporations follow ESG, and many greenwashing strategies are implemented to deceive the masses. Delmas and Burbano (2011) noted that corporations have used greenwashing to create a false narrative about their environmental achievements.
Lyon and Montgomery (2015) explain how the use of greenwashing has been widely spread, whereby corporations are using environmental achievements to gain new customers and attract new shareholders. Lyon and Montgomery (2015) also mention how authentic ESG is not measured accurately, and corporations are using environmental initiatives which are unjust to sustain their competitive advantage.
Walker and Wan (2012) outline the mechanisms of greenwashing and how vague slogans are used, and eco-labels which are not verified by third-party manufacturers. Greenwashing creates a lack of transparency and destroys the reporting of ESG.
The European Green Deal aims to make Europe the first climate-neutral continent by 2050. It pushes companies to reduce emissions, invest in clean technologies, and report on sustainability efforts (European Commission, 2019). The EU Taxonomy Regulation and the Corporate Sustainability Reporting Directive (CSRD) are examples of policies designed to increase transparency and prevent greenwashing (EU, 2020; EU, 2022).
These regulations help create a common language for sustainability, making it easier to compare companies and assess real progress. Kotsantonis and Serafeim (2019) note that corporations continue to avoid this directive and publish false reports which show the authenticity of their ESG efforts.
To distinguish greenwashing from authentic ESG, it is important to use standardised and reliable metrics. Key performance indicators (KPIs) can include carbon footprint, waste reduction, gender diversity, and board independence. These indicators should be audited by third parties to ensure accuracy (Eccles, Ioannou and Serafeim, 2014). However, companies are carrying out inaccurate audits which present false claims about its ESG performance and how it is used to track KPIs.
Freeman (1984) indicates that stakeholder engagement, including feedback from employees, customers, and communities, is also essential for a full picture of ESG performance.
Digital tools like ESG dashboards, data analytics, and blockchain can also support better tracking and reduce the risk of greenwashing (Lozano, 2012). In addition, ESG ratings by independent agencies can provide useful insights, although rating methods still vary widely.
One of the main challenges in measuring sustainability impact is the lack of global standards. Different countries and industries often use different definitions and methods, which makes comparison difficult (Sullivan and Mackenzie, 2017). Another issue is the voluntary nature of many ESG disclosures, which allows companies to hide poor performance.
To solve these problems, stronger enforcement and clearer guidelines are needed, and trading blocs such as the EU need to implement strong penalties for companies that do not comply with their directives. Investors and regulators must demand more transparency and accountability. Dyllick and Muff (2016) highlight the importance of education and training, which can also help managers understand what authentic ESG looks like and how to achieve it.
The rise of ESG in the post-Green Deal era presents both an opportunity and a risk. While many businesses are taking real steps towards sustainability, others simply use ESG as a marketing tool. Measuring the true impact of corporate sustainability requires reliable data, clear standards, and honest reporting. We can only move beyond greenwashing and build a greener, fairer economy through transparency and accountability.
References
Delmas, M.A. and Burbano, V.C. (2011) ‘The drivers of greenwashing’, California Management Review, 54(1), pp. 64–87.
Dyllick, T. and Muff, K. (2016) ‘Clarifying the meaning of sustainable business: Introducing a typology from business-as-usual to true business sustainability’, Organisation & Environment, 29(2), pp. 156–174.
Eccles, R.G., Ioannou, I. and Serafeim, G. (2014) ‘The impact of a corporate culture of sustainability on corporate behaviour and performance’, Harvard Business School Working Paper, No. 12-035.
European Commission (2019) The European Green Deal. Available at: https://eur-lex.europa.eu (Accessed: 10 May 2025).
European Union (2020) EU Taxonomy Regulation. Regulation (EU) 2020/852. Official Journal of the European Union.
European Union (2022) Corporate Sustainability Reporting Directive (CSRD). Directive (EU) 2022/2464.
Freeman, R.E. (1984). Strategic Management: A Stakeholder Approach. Boston: Pitman.
Kotsantonis, S. and Serafeim, G. (2019) ‘Four things no one will tell you about ESG data’, Journal of Applied Corporate Finance, 31(2), pp. 50–58.
Lozano, R. (2012) ‘Towards better embedding sustainability into companies’ systems: An analysis of voluntary corporate initiatives’, Journal of Cleaner Production, 25, pp. 14–26.
Lyon, T.P. and Montgomery, A.W. (2015) ‘The means and end of greenwash’, Organisation & Environment, 28(2), pp. 223–249.
Sullivan, R. and Mackenzie, C. (2017). Responsible Investment: Guide to ESG Data Providers and Relevant Trends. London: Routledge.
Walker, K. and Wan, F. (2012) ‘The harm of symbolic actions and green-washing: Corporate actions and communications on environmental performance and their financial implications’, Journal of Business Ethics, 109(2), pp. 227–242.
