Transparency in corporate sustainability performance: Discrepancy between self-portrayal, actual performance and stakeholder perception in sustainability reporting

Contact person: Simon Heininger

Motivation

The motivation for the research project stems from three key problem areas, each of which forms the basis for at least one independent scientific publication. The first main problem is that companies tend to embellish their sustainability reports and thus their sustainability performance by using greenwashing methods (Neureiter et al., 2024). The embellished presentation of sustainability performance influences consumers in their assessment, among other things (Gupta and Singh, 2024).

The second key problem is the lack of transparency regarding the difference between the company's presented and actual sustainability performance (Hu et al., 2024). The challenge is to identify a possible correlation between the number of linguistic greenwashing methods used and a company's actual sustainability performance.

The third key problem concerns the discrepancy between companies' self-portrayal in sustainability reports and consumers' perception of their performance. Of particular interest here is whether and how linguistic greenwashing techniques influence consumers' perceptions and decision-making processes.

Methodology

The first problem area draws on the information systems theory of impression management and the social science theory of narrative inquiry. These theoretical perspectives are used to examine how companies design their sustainability reports in order to create the most positive impression possible among readers. The aim is to conduct a systematic literature review that takes into account scientific work in which natural language processing (NLP) methods are used to identify linguistic greenwashing strategies in corporate reports. The analysis should provide insight into which linguistic greenwashing methods have already been identified and described in existing studies using NLP.

In the second problem area mentioned, the information systems theories of impression management and information asymmetry (Lemon Market) are used. Publicly available sustainability reports, sustainability indicators and sustainability ratings serve as the data basis. The analysis aims to contribute to reducing information asymmetries between companies and consumers with the goal of creating greater transparency. This transparency can help consumers make more informed decisions and strengthen their trust in sustainability reports.

In the third problem area mentioned, the information systems theories of information asymmetry (lemon market) and cognitive dissonance are used to examine the discrepancy between corporate representation and consumer perception in the context of sustainability. The theory of cognitive dissonance serves as the basis for analysing consumers' perceptions of sustainability performance. An experiment is conducted to investigate confirmation bias, a central aspect of cognitive dissonance. The aim of the experiment is to analyse the extent to which linguistic greenwashing influences consumer perception and evaluation and whether this creates information asymmetry between companies and consumers.

Scientific basis of the research project

Scientific publications already exist for the first part of the research project, which can serve as a basis for systematic literature analysis. One example of this is a study analysing greenwashing in corporate sustainability reports using natural language processing (e.g. Gupta et al., 2024; Gutierrez-Bustamante and Espinosa-Leal, 2022). The first part of the project aims to systematically examine and classify these existing works with regard to the methods used.

The second publication of the research project deals with the connection between companies' sustainability performance and the use of linguistic greenwashing methods. Existing studies focus on the evaluation of corporate sustainability performance (e.g. Gutierrez-Bustamante and Espinosa-Leal, 2022). The work of Huang et al. (2024) also examines textual characteristics in sustainability reports, in particular their length, readability and completeness, and analyses their influence on sustainability ratings. The special feature of the planned second publication lies in the targeted analysis of a possible connection between actual sustainability performance and the number of greenwashing techniques used in corporate reports.

The third publication covers an experiment that examines the influence of linguistic greenwashing methods in sustainability reports on consumers. The aim is to examine whether and to what extent such linguistic strategies influence the perception and assessment of participants. In addition, the study analyses which greenwashing techniques are particularly effective. The study by Ioannou et al. (2023) deals with the perception of greenwashing practices in sustainability reports, but focuses on the analysis of customer satisfaction.

Four preliminary research objectives can be derived, which will be addressed using various research methods in accordance with the mixed-methods approach:

1. Literature review to analyse the current state of research on the influence of social contacts on the acceptance of digital health technologies among older people
2. Qualitative assessment of the dyadic process of acceptance and use of health technologies by older people and social contacts
3. Derivation and creation of various profiles of potential user groups with individual needs and preferences that should be addressed with different strategies
4. Investigation of the factors that lead to effective use of the ePA by older people (e.g. through a comparative, cross-country study)

Gupta, A., Chadha, A., & Tewari, V. (2024). A Natural Language Processing Model on BERT and YAKE Technique for Keyword Extraction on Sustainability Reports. IEEE Access, 12, 7942–7951. https://doi.org/10.1109/ACCESS.2024.3352742

Gupta, K., & Singh, N. (2024). Greenwashing perception and attitude-intention relationship towards green products purchase: a mediating model. Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable, 1–24. https://doi.org/10.1007/s10668-024-05486-5

Gutierrez-Bustamante, M., & Espinosa-Leal, L. (2022). Natural Language Processing Methods for Scoring Sustainability Reports—A Study of Nordic Listed Companies. Sustainability, 14(15), 9165. https://doi.org/10.3390/su14159165

Hu, P., Li, X., Li, N., Wang, Y., & Wang, D. D. (2024). Peeking into Corporate Greenwashing through the Readability of ESG Disclosures. Sustainability (Switzerland), 16(6). https://doi.org/10.3390/su16062571

Huang, J., Wang, D. D., & Wang, Y. (2024). Textual Attributes of Corporate Sustainability Reports and ESG Ratings. In MDPI, Sustainability (Bd. 16, Nummer 21, S. 1–20).

Ioannou, I., Kassinis, G., & Papagiannakis, G. (2023). The Impact of Perceived Greenwashing on Customer Satisfaction and the Contingent Role of Capability Reputation. Journal of Business Ethics, 185(2), 333–347. https://doi.org/10.1007/s10551-022-05151-9

Neureiter, A., Stubenvoll, M., & Matthes, J. (2024). Is It Greenwashing? Environmental Compensation Claims in Advertising, Perceived Greenwashing, Political Consumerism, and Brand Outcomes. Journal of Advertising, 53(4), 511–529. https://doi.org/10.1080/00913367.2023.2268718

This research project is a collaborative doctoral project with the Technical University of Cologne.