Abstract
The disclosure of fake corporate green claims, commonly termed corporate greenwashing, coupled with the rapid rise of numerous Environmental, Social, and Governance (ESG) rating providers (ERPs), has led to inconsistent or contradictory ratings, resulting in uncertainty and ambiguity over corporate ESG performance and, finally, a biased investment. Therefore, to address the divergent methodologies, we examine the intensity of ESG, greenwashing, and rating inconsistencies using a triangulation approach, considering both theoretical and qualitative methods. We perform sentiment analysis, a qualitative method, on the tweet data on “ESG” and “greenwashing” using MAXQDA software. The results suggest a linear relationship between the sentiments towards ESG and greenwashing, i.e., greenwashing is significantly growing at the rate of ESG. This paper also examines the divergent methodologies and biased ratings that encompass actions that exaggerate and misrepresent ‘green’ credentials and the factors leading to them. The results of our sentiment analysis find that the movement between ESG and greenwashing has been positively correlated, which means people are still doubtful regarding the ESG disclosures of corporations. With the insights derived from the theoretical analysis, this paper suggests a framework of potential regulations to build a realistic ESG market in India, which has a nascent ESG market with plenty of scope for adaptation.
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Acknowledgements
The authors acknowledge the services of the Indian Council of Social Science Research (ICSSR) for funding the project “The Effect of Investors’ Sentiments on Sustainability and ESG Ratings on the Performance of Indian Companies.” The project aims to examine investor and stakeholder sentiments on sustainability across India and the effect of ESG scores on the performance of Indian companies. This paper is an early outcome of the project.
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The first author receives funding from the Indian Council of Social Science Research (ICSSR) File No: F.No.02/6/2022–23/ICSSR/RP/MJ/GEN.
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Biju, A.V.N., Kodiyatt, S.J., Krishna, P.P.N. et al. ESG sentiments and divergent ESG scores: suggesting a framework for ESG rating. SN Bus Econ 3, 209 (2023). https://doi.org/10.1007/s43546-023-00592-4
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DOI: https://doi.org/10.1007/s43546-023-00592-4