**3. Understanding and reducing the greenwashing behavior**

#### **3.1 Definition**

To distinguish between the sustainable companies and the "greenwashers," we delimit the concept of greenwashing. In fact, the Coronavirus pandemic has had an enormous impact on employees and companies around the world. Despite the relevance of some responsible business practices, many companies manifested irresponsible behaviors during the crisis. For instance, Amazon signed in September 2019 a climate pledge fund and hired 175,000 new workers in the United States, to overcome the absence of many workers, during the pandemic without doing much to decrease the risks related to the COVID exposure. This example of bad employment conditions and practices of Amazon during the pandemic emphasized the irresponsible business practices of some companies that diffuse a positive communication and good corporate image to the stakeholders. In fact, in order to acquire social legitimacy, build better relationship with stakeholders, and create a green brand image, the problem of greenwashing has significantly emerged even during the pandemic.

The Concise Oxford English Dictionary (2018) defines greenwashing as: "Disinformation disseminated by an organization so as to present an environmentally responsible public image; a public image of environmental responsibility promulgated by or for an organization, etc., but perceived as being unfounded or intentionally misleading." Besides, Yu et al. consider the "greenwashers" as companies that reveal a transparent public image and disclose a big quantity of ESG information; however, it has a poor ESG performance [94].

#### **3.2 Types of greenwashing**

According to Siano et al., the greenwashing can be classified into two classes: decoupling or "symbolic management" [95]. The decoupling or "sin of fibbing" is determined by TerraChoice as the false disclosure of the companies regarding their sustainable actions. The symbolic management is based on an attention deflection: it refers to obscuring irresponsible business practices or selecting the data disclosed or diffusing an ambiguous communication [96].

Yu et al. identified three types of greenwashing [94]:

• The first type of greenwashing consists of manipulating disclosure to promote the company and overestimate its real environmental performance [97]. Indeed, companies adopting "greenwashing" try to hide their poor environmental performance by disclosing large amounts of environmental data to mislead their stakeholders. According to Radu and Francoeur, environmental performance is positively associated with its environmental disclosure [98]. On the other hand, by studying US electricity distribution companies, Kim and Lyon found that companies can choose to less communication about their environmental achievements, which is called a strategy of "brownwashing" [99].

*Perspective Chapter: Rethinking CSR Strategies in the Era of COVID-19 DOI: http://dx.doi.org/10.5772/intechopen.106248*


Generally, the greening strategies can be classified into substantive strategies and symbolic strategies; the former is explained as the implementation of the sustainable practices, the latter refers to discrepancy between the positive communication and the application of responsible actions [102]. The substantial greening strategies have a positive impact on the environmental and economic performance of new firms and reflect the attempt of new firms to acquire sustainable business models to establish positive stakeholders' relationships. The symbolic strategies can destroy the companies' reputation and harm its profitability [102].

Hence, to reduce the greenwashing behavior, Yu and Chen [94] studied the key elements that can eliminate this concern. Their findings demonstrate the importance of the responsible ownership (intuitional investors) to avoid the problem of greenwashing among corporations. In fact, ownership structure influences CSR issues and responsible investment globally [94]. Hence, studying it from different angles such as the diversity in the ownership structure can lead to a better CSR disclosure by identifying the owners' categories who are concerned about CSR. Also, whenever the number of owners increases, the controlling actions are more valuable and contribute to the corporate performance. This could explain the positive effect of the total ownership concentration on the firm performance.

Previous studies show that investors are more and more aware of their important impact on the social community, nowadays. However, it depends on the investor category: governmental investors are more concerned about the stakeholders' interest and act in the favor of the reputation of the company, generally.

Besides, the institutional investors notably, the hedge funds and the private equity, always owning a major part on the firm's capital make them prudent in the decisionmaking and attentive about the corporate responsibility issues. For example, Brickley et al. [103] argue that institutional stockholders having large power and asymmetric information advantages tend to be more actively involved in firms' decisions than other stockholders. By exercising substantial voting power, institutional investors have the ability to influence a firm's operational decisions [104]. In fact, empirical research also provides evidence that institutional ownership may be positively related to voluntary disclosure of CSR. For example, El-Gazzar [105] argues that firms with high level of institutional ownership are related to a high level of voluntary disclosure. Boone and White [106] find that a higher proportion of institutional ownership helps to increase the firm's information disclosure and enhance the transparency of the firm.

Their prior objective is to obtain better profits by decreasing the financial risk. Moreover, the presence of the foreign investors among the ownership structure can be a reason for adopting new approaches that take into consideration the longterm advantages, which explains the approval of the CSR approaches. Besides, Abrahamson and Park reveal that companies supervised by their investors and boards are disclosing more extra-financial data [107]. Furthermore, the Ben-Amar et al.

drawn on Canadian companies show that the board effectiveness has a positive impact on the carbon disclosure quality [108]. More recently, Nofsinger et al. have shown that the presence of institutional investors' holdings promotes the two potential drivers of investment decisions, which can be considered complementary: the social standards and the economic motivations [109].

### **3.3 CSR disclosure and firm performance**

The CSR disclosure is the communication of the firm's practices about the consequences of their activities on their workforce, community, and the environment [110]. Besides, according to Bowman [111], Laskar and Maji [112], Platonova et al. [113], Pham and Hiên [114], it reflects the firm behavior regarding CSR, firms can act pro ̀ actively by exceeding the mandatory requirements and the stakeholders' predictions concerning the CSR disclosure or just acting reactively by complying with the stakeholders' demands [115]. They have illustrated the link between CSR disclosure and firm performance by considering the moderation effect of corporate reputation and "CEO integrity." As the CSR disclosure can reveal approximately the level of CSR initiatives adopted, the authors have founded a positive association between these two variables, explained by two theoretical bases, stakeholder theory and legitimacy theory [115]. Besides, prior studies show that firms with good performance are more likely to engage in more CSR activities and disclose their CSR activities to avoid regulation [116].

Generally, taking into consideration the stakeholder theory makes the company avoid making decisions damaging the stakeholders' well-being and directing the company toward the main corporate goals. Besides from the legitimacy perspective, behaving ethically makes the company gain its legitimacy in the eyes of local communities, the investors, and the other stakeholders.

First, based on previous studies, corporate reputation is an immaterial asset that creates competitive advantage and financial outcomes, this concept is guaranteed by adopting CSR practices and ESG disclosure, which, in turn, affect the firm performance positively. Hence, the corporate reputation can contribute to reduce the greenwashing.

Besides, the companies that are cross-listed are less submitted to greenwashing, cross-listed firms are scrutinized more closely when their shares are listed on external stock exchanges. As cross-listing means that a company has its shares listed on at least one international stock exchange in addition to its home country. Cross-listed firms may have less incentive to greenwash in ESG issues and try to avoid irritating external stakeholders. The presence of independent directors, for example, Cuadrado-Ballesteros et al. claimed that a higher percentage of independent directors impact the level of CSR positively [117]. However, Chintrakarn et al. [118] showed that higher percentage of independent directors induce a significant reduction in CSR investment. Moreover, during the pandemic, the CSR engagements has decreased due to the presence of the independent directors [118].

The convenient environment with less corruption and more civil and political rights more scrutiny and pressure from the public can also lead to more reliable corporate disclosure in ESG issues. All these aspects can have an impact on the level of corporate social responsibility (CSR) information disclosure [94].

Hence, previous studies confirm that stakeholder theory makes company disclose more CSR information to provide positive signal on their CSR performance. We believe that corporate reputation can contribute positively to CSR performance. However, the presence of independent directors may impact the CSR disclosure negatively especially during crises.

Despite the amount of studies on greenwashing channels and effects even during sudden events, very few studies have focused on the elements decreasing the misleading disclosure holistically. More studies should be conducted to analyze these issues and to identify the appropriate policies to handle them.
