Impact of Emission Reduction Targets on CorporateGreenwashing: International Empirical Evidence

Abstract

This study investigates the influence of emission reduction target characteristics on corporate greenwashing propensity. Through the analysis of 4,938 international observations via probit regression, we examine four key dimensions: science-based validation, target compliance, timeframe and organizational coverage. Our results show that companies with established science-based targets and broader organizational coverage exhibit significantly lower greenwashing levels. We also find that higher levels of compliance with established targets align with reduced greenwashing behavior. Conversely, firms that set long-term horizons are more likely to engage in greenwashing, potentially leveraging extended timelines in order to delay accountability without suffering immediate reputational damage. Overall, the credibility of climate commitments appears to depend less on the mere adoption of targets and more on specific target design characteristics, including the abovementioned features. The originality of this research lies in the empirical exploration of specific carbon target characteristics that have not been analyzed in depth in previous literature, such as organizational coverage. By revealing the dynamics at play, the study enhances understanding of corporate signaling and offers critical insights for policymakers and stakeholders seeking to improve the integrity of climate-related disclosures and mitigate deceptive environmental claims.