Same Firms, Different Verdicts: ESG Rating Choice and the Measurement of Greenwashing

2026-06-30

AI Summary

This study proposes a “Disclosure–Performance Gap” (DPG) metric to quantify the discrepancy between voluntary environmental disclosures and actual emissions among large European firms at the close of the voluntary disclosure era, thereby measuring corporate greenwashing. Constructing a sample through a six-stage screening process, the authors employ OLS regressions with HC3 heteroskedasticity-robust standard errors and conduct multiple robustness checks. Results indicate that inclusion in flagship ESG indices (β = +0.78) and endorsement of the Task Force on Climate-related Financial Disclosures (TCFD) significantly widen the DPG, whereas renewable energy adoption (β = −0.31) and environmental capital expenditures (β = −0.22) effectively narrow it. The findings further reveal that greenwashing detection is highly sensitive to the choice of ESG rating framework, underscoring the DPG’s novel utility in providing a unified assessment of the authenticity of firms’ environmental performance.

Abstract

This paper investigates the Aggregate Confusion hypothesis (Berg, Kolbel, and Rigobon, 2022) at the firm level by measuring the Disclosure-Performance Gap (DPG), the standardised divergence between a firm's voluntary environmental disclosure ("Talk") and its realised emissions performance ("Walk"). The sample comprises 200 large European firms from the Energy, Materials, Industrials, and Utilities sectors of the STOXX Europe 600 in fiscal year 2023, the final cross-section of the voluntary reporting era before the Corporate Sustainability Reporting Directive. The model is selected through a six-stage process, candidate assembly, correlation screening, VIF based multicollinearity filtering, stepwise forward search under the corrected Akaike Information Criterion, Cook's distance screening, and HC3 re-estimation across 421 candidate specifications, estimated by ordinary least squares with HC3 robust standard errors on the full sample. Flagship index membership is the strongest predictor of a wider gap ($β$ = +0.78, p < 0.01), consistent with institutional ceremonial conformity. TCFD endorsement is also positive ($β$ = +0.86, p < 0.05) but identified off a small group of non-supporting firms, so it is read as directional, not a precise magnitude. Renewable energy use ($β$ = -0.31, p < 0.01) and environmental capital expenditure ($β$ = -0.22, p < 0.05) significantly narrow the gap, consistent with signalling theory, while governance and monitoring variables carry no explanatory power. Results are robust to influence trimming, rank-based recoding of the disclosure score, and removal of the TCFD variable. Replacing the CDP Climate Score with the LSEG Environmental Pillar Score eliminates the index-membership effect while the renewable-energy effect survives, showing that detected greenwashing is conditional on the rating lens applied.

Problem

• greenwashing
• ESG ratings
• Disclosure-Performance Gap
• environmental disclosure
• emissions performance

Innovation

• Disclosure-Performance Gap
• greenwashing measurement
• ESG rating divergence
• model specification robustness
• rating lens dependency