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Top1. Introduction
Although the idea that “the social responsibility of business is to increase its profits” (Friedman, 2007) persists, it is no longer acceptable for businesses to operate solely on economic terms and to ignore ethical considerations and good deriving from greed (Grant, 1991). Corporate Social Responsibility (CSR) has emerged as an important area of business practice. CSR can be defined as situations where companies go beyond compliance and engage in actions that further some social good beyond the interests of the firm and what is required by law (McWilliams, Siegel, & Wright, 2006). Garriga and Melé (2004) classified CSR theories into four groups: instrumental theories, political theories, integrative theories, and ethical theories. Within ethical theories, sustainable development has become popular. Sustainable development involves the integration of social, environmental, and economic considerations to make balanced judgments for the long term (Watts, 2000).
However, the increasing focus on environmentally friendly practices has led to incentives for companies to appear environmentally friendly without actually being so. The growth in claims about misleading CSR propaganda in recent years has been dramatic (Pope & Wæraas, 2016), with more and more firms misleading consumers about their environmental practices (Delmas & Burbano, 2011). Despite the common perception that consumers are passive, they are highly sophisticated in their interpretations of CSR advertisements (Pope & Wæraas, 2016). Consumers may become skeptical and view green advertising as insincere, opportunistic, and egotistical (Nyilasy, Gangadharbatla, & Paladino, 2014). Nevertheless, consumers desire CSR without being willing to pay high premiums for CSR products (Pope & Wæraas, 2016).
Greenwashing refers to the deceptive practices employed by companies to exaggerate their environmental credentials or to make false or misleading claims about the environmental benefits of their products or services. According to Delmas and Burbano (2011), greenwashing can occur at both the firm and product level. At the firm level, companies may mislead consumers by falsely claiming to have implemented environmentally friendly practices or initiatives, or by exaggerating the impact of such initiatives. At the product level, companies may overstate the environmental benefits of their products or services, for instance by claiming that they are “100% natural” or “eco-friendly” when in fact they are not.
To address the problem of greenwashing, independent sustainability ratings have been proposed as a means of promoting greater transparency and accountability among companies. Third-party certification can help to reduce information asymmetry, providing consumers with more accurate and reliable information about the environmental performance of different firms and products (Parguel, Benoît-Moreau, and Larceneux, 2011). This can help to incentivize companies to invest in genuine corporate social responsibility practices, while also deterring greenwashing by exposing false or misleading claims.
In addition to the problem of greenwashing, there are also more nuanced situations that require attention. One such situation is when a company complies with environmental best practices yet still contributes to significant social problems.