• No results found

Master Thesis Greenwashing: the impact on customer satisfaction and the effect of media coverage. Jeroen Mennen S2762579


Academic year: 2021

Share "Master Thesis Greenwashing: the impact on customer satisfaction and the effect of media coverage. Jeroen Mennen S2762579"


Bezig met laden.... (Bekijk nu de volledige tekst)

Hele tekst


Master Thesis

Greenwashing: the impact on customer satisfaction and the effect of media coverage.

Jeroen Mennen S2762579 Trekweg 51 9674GD Winschoten J.mennen@student.rug.nl University of Groningen FEB

MSc Strategic Innovation Management

August 13, 2020



This research aims to contribute to and extend the current literature on greenwashing and media coverage effects by showing how greenwashing affects customer satisfaction and how media coverage affects this relationship. Furthermore, it shows how media coverage affects greenwashing. The results of the regression analyses, using a sample of worldwide publicly traded companies, show a significant positive relationship between greenwashing and customer satisfaction. The results show no significant effect of media coverage on this relationship and a significant negative relationship between media coverage and greenwashing.



Since the Industrial Revolution, the environmental impact of growing industrial activities has been a growing problem. As a result, consumers became more environmentally conscious, are willing to pay a premium for environmentally friendly products and expect firms to perform environmentally well (e.g. Laroche, Bergeron & Barbaro-Forleo, 2001; Wei, Ang & Jancenelle, 2018). Firms respond accordingly and concepts such as green production, green marketing, green products and green management are more popular now than ever (e.g. Chen, 2008; Parguel, Benoît-Moreau & Larceneux, 2011). However, being environmentally friendly comes with costs, which can lead to false environmental claims to satisfy stakeholders (De Vries et al., 2015). Firms disclose (false) favorable environmental performance information and try to mitigate or completely hide negative environmental impacts to aim for more profit (De Vries et al., 2015). In recent literature, these specific environmental information decoupling activities are referred to as 'greenwashing'. Greenwashing activities have dramatically increased in recent years and so has the scientific literature that mentions the term (Delmas & Burbano, 2011; Lyon & Montgomery, 2015). Following the current research, greenwashing can be defined as the intersection between a firm's positive communication about environmental performance to manage the impressions of outsiders, but simultaneously a poor environmental performance, which they often try to hide from stakeholders and the outside public (Delmas & Burbano, 2011). These activities can range from making labels more eco-friendly, hiding negative environmental performance to multimillion costing advertising campaigns to portray a firm as eco-friendly (Joshua, 2001).


4 literature lacks empirical research on the impact of greenwashing on (financial) firm performance and consumers. Moreover, they suggest that more research should test how consumers process and respond to environmental messages.

To extend the current literature, this study combines these two research gaps by researching the effects of greenwashing on customer satisfaction. Following the current positive results of green advertisement (e.g. Chan, 2004; Kong & Zang, 2013), environmental performance (e.g. De Mendoca & Zhou, 2019) and Corporate Social Responsibility (CSR) (e.g. Chung et al., 2015; Luo & Bhattacharya, 2006; Saedi et al., 2015) on customer satisfaction, it is suggested that greenwashing can have positive effects on customer satisfaction and customers' perceptions about a firm's environmental practices. In general, more satisfied customers will result in higher customer retention, loyalty, positive word of mouth and will ultimately result in better financial firm performance (Sing, 2006; Ranaweera & Prabhu, 2003). This makes customers an interesting stakeholder to study the effects of greenwashing on.


5 environmental activities and claims. More media attention to a greenwashing firm leads to a higher risk of getting exposed because customers and other parties will pay closer attention to a firm's environmental claims and activities. Exposure can lead to a damaged reputation, withdrawal of trust and a decline in credibility (Delmas & Burbano, 2011; Lyon & Montgomery, 2015). Moreover, more media attention to a particular topic creates more interest and concern among the public for this topic, according to the media agenda setting theory (Brown & Deegan, 1998). This implies that more media attention to environmental performance and practices of a firm, will lead to more interest, concern and public attention. This creates awareness and higher visibility of a firm and its environmental activities, which causes a decline in greenwashing (Delmas & Burbano, 2011; Kim and Lyon, 2011). Despite the fact that current literature on greenwashing mentions that media attention can have detrimental effects, it has not been studied extensively.

By studying the effects of greenwashing on customer satisfaction and how the media affects this relationship and greenwashing directly, the research question that guides this research is as follows: “How does greenwashing impact customer satisfaction and how does media attention to a firm’s environmental performance and practices affect this relationship and greenwashing activities?”


6 greenwashing and media attention literature and provide practitioners with information on the effects of and on greenwashing.


In this section, I first discuss how greenwashing can be placed in a theoretical framework of institutional theory and how greenwashing can be considered as a response to this theory with elements of the impression management theory. Accordingly, I review the literature on greenwashing, how it affects customers, how media coverage affects greenwashing and formulate three hypotheses accordingly.

2.1 Institutional theory and impression management

According to the Institutional Theory, firms need to meet the demands of external parties to gain a certain degree of legitimacy, because firms can not survive without the support and approval from key stakeholders (DiMaggio and Powell 1983). The institutional field the firm operates in, determines the expectations and demands that firms need to fulfill. This field consists of the pressures within a firm's political-, external-, internal- social- and economic environment (DiMaggio and Powell 1983; Scott, 1995). These mechanisms are stakeholders such as customers, employees, interest groups, suppliers, the outside public, governments and competitors (DiMaggio and Powell 1983; Scott, 1987).


7 practices and performance, they can withdraw legitimacy from the firm by refusing to provide the firm with their benefits and support (Wood, 1991).

Ways of enhancing this legitimacy can be found in the Impression Management theory. This theory explains how individuals or organizations attempt to control the impressions that others form about them (Leary & KoWalski, 1990). In the organizational context, firms use impression management to enhance and sustain positive perceptions of stakeholders, both inside and outside the firm, to remain legitimate (Bolino et al., 2008). The main proactive impression strategies used by firms to protect their legitimacy are organizational promotion, supplication, exemplification, acclaiming and indirect impression management (Rosenfield, Giacalone & Riordan, 1995). Besides proactive strategies, organizations also use defensive strategies such as apologies, reactive social behavior, and disclaimers (Mohamed, Gardner & Paolillo, 1999).


8 2.2 Greenwashing

The definition of greenwashing is well established in current literature: misleading customers and other stakeholders by communicating positively about environmental practices and performance, while the actual performance does not meet this (e.g. Delmas & Burbano, 2011; Laufer, 2003; Lyon & Montgomery, 2015). It is also referred to as green consumer confusion caused by incorrect information regarding a firm's products or performance (Chen & Chang, 2012). In other terms, it is the inconsistency between a firm's substantive actions and symbolic actions. Substantive actions are actual environmental initiatives that lead to environmental performance and symbolic actions are positive communications about the intended initiatives and performance. These symbolic actions are often not followed by substantive actions, which is greenwashing (Hawn & Ioannou, 2016; Walker & Wan, 2012).

According to Lyon and Montgomery (2015), before the term greenwashing was well established, it was mainly referred to as 'decoupling'; firms decouple their internal activities with what external parties can see, or they do not fully disclose information on these activities. This is primarily a defensive response to regulatory pressures placed on the late adopters of socially expected operations and practices. As CSR became more important, decoupling is now seen as a strategy used by firms to communicate certain values and strategies proactively, while hiding negative information. This is done to remain legitimate and reduce the effects of reputational damage (Boxembaum & Jonsson, 2008).


9 dubious labels, misleading visual imagery and selective disclosure, which is the most studied variety as of today (Lyon & Montgomery, 2015).

Delmas and Burbano (2011) mention that greenwashing, with these underlying drivers, is mainly targeted at the following three stakeholders: firms, governments and customers. According to them, customers are one of the most important, as they are the primary source of financial income for a firm. Furthermore, they make a distinction between greenwashing firms and three other types of firms. Silent green firms perform well, but do not communicate about it. Vocal green firms perform well and communicate positively about it. Silent brown firms try to stay under the radar by performing poorly and not communicating (Delmas & Burbano, 2011). This suggests that not all firms performing environmentally bad have the intention to lie about it. Also, not all firms that perform environmentally well have the intention to communicate it.

Greenwashing can repair or maintain a firm’s reputation (Laufer, 2003), but is considered as unethical firm behavior. This is an action that falls outside of what is considered morally right by stakeholders and it can have harmful effects on them (Delmas & Burbano, 2011). Therefore, when stakeholders find out about greenwashing, it can harm the firm’s reputation, and this can explain why, for example, brown firms do not choose to greenwash.

Even though greenwashing is a relatively new concept, there seems to be no consensus on what greenwashing is, how to define it and what the drivers are. Firms are seemingly inclined to greenwash to influence stakeholders, while it comes with certain risks (Lyon & Maxwell, 2011). However, the impacts and effects of greenwashing on stakeholders remain open for discussion and have not been extensively studied in the current literature.

2.3 Effects of greenwashing on customer satisfaction


10 First, customers are more likely to feel perceived value and quality from a firm that adheres to environmental sustainability, which tends to lead to more satisfied customers (Mithas, Krishnan & Fornell, 2005). Second, environmental management is reflected by the success of environmental performance. By improving environmental performance, firms will be able to maintain and enhance customers' confidence in their environmental management practices, which can create customer satisfaction (De Mendoca & Zhou, 2019). Furthermore, CSR is also associated with higher customer satisfaction. Luo and Bhattacharya (2006) argue that CSR has a positive effect on customer satisfaction. Customers are generally more satisfied with products made by a socially responsible company. Moreover, they claim that strong compliance with CSR creates a favorable context that enhances consumer's attitudes towards the firm. Greenwashing, with the intention of creating the impression of adhering to those practices, can potentially have these same positive effects on customer satisfaction. Lastly, firms need to meet the expectations, values and norms of customers to remain legitimate (Boxembaum & Jonsson, 2008). By greenwashing, firms can enhance or protect this, which is associated with higher customer satisfaction (Scott, 1987).

Despite the fact that the literature on greenwashing effects is relatively small, few studies found positive effects for greenwashing.

Parguel, Benoit-Moreau and Russell (2013) found positive results of greenwashing on customer perceptions of firm greenness. They defined executional greenwashing as ‘’using nature-evoking elements in advertisements to artificially enhance a brand’s ecological image’' (p. 1). They found that non-expert customers are affected by nature-evoking cues on a webpage. They also found the same result for expert customers, but to a lesser degree. A webpage with green cues in comparison to a webpage without, generates higher positive perceptions towards the ecological image of a brand, which leads to a more positive brand attitude and customers' values being met.


11 recognized by customers, no matter how environmentally involved they are. These claims can benefit consumers' attitudes toward a brand when these claims are combined with pleasing nature images. These positive effects override the negative effects of perceived greenwashing by customers, which suggests that greenwashing in advertisements effectively shapes customers' perceptions.

The current literature on the positive effects of environmental management, CSR and sustainability show that these practices have positive effects on customer satisfaction. The aim of greenwashing is to reap all these benefits (Lyon & Montgomery, 2015). The small amount of literature on the effects of greenwashing on customers shows similar results; it can be useful in making customers believe that a firm is environmentally sustainable. Moreover, by greenwashing, firms can manage the impressions of customers by making them believe they are meeting their expectations, norms and values, which leads to a higher legitimacy which is associated with a higher customer satisfaction (Luo & Bhattacharya, 2006; Scott, 1987). Taking this all together, I hypothesize:

H1: Greenwashing has a positive impact on customer satisfaction

2.5 The effects of media coverage on greenwashing


12 1998). When a firm is greenwashing, more public attention and examination can lead to customers and other stakeholders (e.g. NGOs) questioning claims or finding out about greenwashing. This damages the reputation and credibility of the firm and stakeholders can withdraw their trust from the firm (Delmas & Burbano, 2011). In general, when customers find out that a firm is not meeting their values and norms or when a firm is lying, this results in a decline of the legitimacy and customer satisfaction of the firm (Scott, 1987).

Following the current literature, media coverage of a firm in combination with its environmental performance and practices, can create more awareness and concern for it. This increase leads to a closer examination of the firm’s environmental claims and actual performance, by more customers or other stakeholders. This can lead to doubt and exposure, resulting in withdrawal of legitimacy, a damage in trust, loss of credibility and a decrease in customer satisfaction. Therefore, I hypothesize:

H2a): The positive effects of greenwashing on customer satisfaction are negatively moderated by more media coverage of a firm’s environmental performance and environmental practices.

Besides a moderation effect, the current literature also suggests that creating awareness of a firm’s environmental practices can reduce greenwashing activities. The media can play an important role in creating this awareness, as mentioned before.


13 This examining role of the media is referred to as the 'watchdog' function by Campbell (2007). He claims that firms under closer examination of the media, will act in more socially responsible ways and pay more attention to substantive CSR practices than firms that do not feel the pressure of media attention.

This is in line with the literature on how the media affects environmental disclosure and environmental performance. For example, Patten (2002) found that firms disclose more environmental performance information when they get more media attention and experience pressure from the media and the public. Also, Rupley, Brown & Marshall (2012) found that media coverage of environmental topics around a firm, results in a higher quality of voluntary environmental disclosures and more environmental disclosures overall. Regarding the environmental performance and media attention, Maistriau and Bonardi (2014) found that negative public exposure of environmental issues by the media, leads to increased environmental performance by investing in environmental CSR.

Concluding, media coverage on environmental topics in combination with a firm, results in higher public awareness of the firm and its environmental activities, which leads to a decrease in greenwashing motives as it increases the risk of exposure and more people are examining the firm's environmental practices. Also, it leads to higher environmental performance, firms investing in environmental CSR and voluntary environmental information disclosure. More environmental substantive actions (e.g. CSR investments) compared to symbolic actions, decrease the degree of greenwashing (Hawn & Ioannou, 2016). Therefore, I hypothesize:

H2b): More media coverage of a firm’s environmental performance and environmental practices, leads to a decline in greenwashing activities.




In this section I first elaborate on how the data for the variables was obtained. Second, the results of the regression analyses are presented, followed by a discussion and conclusion.

3.1 Data collection


15 3.2 Sample

The sample was obtained from 8000+ firms, of which data was available through the Eikon data stream by selecting all the firms. In order to have a large enough sample based on the Greenwashing and Customer Satisfaction variables, it was necessary to use all the firms that were available. Data points for customer satisfaction scores appeared to be very limited within Eikon; it had only contained points for roughly 300 firms in the whole dataset. After combining firms with data for the customer satisfaction score, which also had enough data points for internal and external actions to create the greenwashing variable and financial data for the control variables, this resulted in a sample of roughly 150 firms. After collecting data for the control variables and using SPSS IBM statistics software to check for outliers, there was a remaining sample of 141 worldwide firms across 35 different countries, with enough data points to create all the variables to carry out the analysis. The majority of the firms are from Great-Britain (n=17), Japan (n=14), Korea (n=15) and Germany (n=8). The obtained data is cross-sectional from 2016 for customer satisfaction and 2015 for the greenwashing and control variables. This time lag of one year for customer satisfaction was taken into account to address potential endogeneity issues. Moreover, firm performance is expected to have a time lag on customer satisfaction (Guo, Kumar & Jiraporn, 2004). Data on media coverage of environmental topics from 2000 until 2014 for h2b was used to address potential endogeneity problems. For h2a, data from 2000 until 2015 was used.

3.3 Greenwashing


16 CSR actions. After using definitions from the current literature, they came up with 21 components of internally orientated CSR performance indices and 24 components for externally oriented CSR communications, provided by them in the appendix. The internal actions include quantitative indicators of CSR implementation and corporate policy questions, which cover the firm's substantive (internal) actions. The external actions focus on disclosures of actions and claims firms make and cover the symbolic (external) actions. These actions can be further separated into Environmental, Social and Governance (ESG) and were internally validated in their paper. Since this study focuses on greenwashing, the Environmental focused indices from this index will be used. Following Hawn and Ioannou (2016), the ESG data provided by Thomson Reuters Eikon data stream will be used to obtain data for these environmental actions: 6 for internal and 6 for external. Because not all the actions provided by Hawn & Ioannou (2016) were still available through Eikon after their recent update from ASSET4, for both internal and external actions one had to be dropped. The environmental actions obtained from their appendix can be found in appendix B. Following Hawn & Ioannou (2016), the internal scores were gathered from a year earlier than the external scores, because it is expected that external actions have a lag on internal actions. Furthermore, this deals with potential endogeneity issues. Next, an index score for both internal (I) and external performance (E) was calculated by taking the average of both after summing up the binary scores for internal and external actions (SCORES: TRUE (action was reported as taken) = 1; FALSE (action was reported as not taken) = 0) and multiplying this by 100 to get a percentage. The firms with a missing data point for a certain internal or external action (neither TRUE nor FALSE), were assumed as not implemented because if they were implemented, I expect them to be reported as TRUE. Therefore, these missing values were coded as a FALSE = 0.


17 performance score from the external performance score from the previous year (Degree of greenwashing = Eit – Iit – 1,) and dividing this by the log of total assets from the same year t as internal actions (see formula 1). A negative score on this CSR gap means that the firm takes more internal actions relative to external actions and '0' indicates exactly as many internal as external actions were taken by that firm. A positive value means more emphasis on external actions relative to internal actions, thus greenwashing. Data for the internal and external actions was obtained from Eikon and the financial information for assets from Compustat.

Formula 1: CSR gap


= (E


– I

it – 1

)/logged Total Assets


3.4 Customer satisfaction

For this dependent variable, the customer satisfaction index provided by Eikon's data stream was used. This is a company score based on the self-reported and verifiable data by a company in the public domain and represents the percentage of satisfied customers of a firm. This variable is covered in the Social pillar in the ESG measures Eikon provides (Refinitiv, 2020).

3.5 Media coverage


18 "air pollution'', "environment* pollution", "ecosystem" in combination with the firm's name (written as "and" in the search bar). This time range was taken to intercept the cumulation and duration effects of media coverage (Koch & Arendt, 2017). In the search, I did not filter on a specific newspaper, because the data sample is covering firms worldwide with multinational companies. For example, filtering on American newspapers will lead to biased results for the coverage of a Japanese company. This allows for more coverage for a firm, which results in more reach and can, therefore, have more effects on the firm (Kölbe, Busch & Jänsko, 2017). I also included hits in the other news sources provided by LexisUni (e.g. blogs and newswires). This was done because of the increasing importance of internet media arguments mentioned (Du et al., 2016). Furthermore, for the news article to be relevant, I set the same condition as Fang and Peress (2009), that the firm's name needs to be in the headline ("headl'' condition in LexisUni) of the article.

3.6 Control variables

To control for effects on the dependent variables customer satisfaction (H1) and greenwashing

(H2b), I included control variables accordingly. For the control variables, it was necessary to



a one year lag was introduced because Guo, Kumar and Jiraporn (2004) argue that the financial performance of a firm in a certain period is not related to customer satisfaction. However, the financial performance of a previous period is.

Product responsibility. Polonsky, Daub and Ergenzinger (2005) argue that customers do not only care about the consumption experience, but they also include various stakeholder groups companies should care about in their consideration. They denote this group as 'generalized customers'. This group will be more satisfied with the products and services that are produced in a socially responsible way, which will affect customer satisfaction. The product responsibility category from Eikon will be used for this variable. This gives a z-score from 0-100 and reflects a company's capacity to integrate customer's health and safety, data privacy and integrity into the production of their goods. A higher score on this variable means a higher product responsibility (Thomson Reuters, 2017). This datapoint from Eikon is used in other studies which used product responsibility as an explanatory variable for customer satisfaction (e.g. Papagiannakis et al., 2019).

Firm size. According to Luo and Bhattacharya (2006) it is necessary to control for the influence

of firm size because larger firms can have more resources and therefore economies of scale, which can lead to more resources to create customer satisfaction. However, smaller firms may have more strategic flexibility to achieve customer satisfaction (Luo & Bhattacharya, 2006). Moreover, firm size also influences how firms convert external pressures into substantive internal actions in contrast with symbolic actions to satisfy stakeholders (Shevchenko, Lévesque and Paggel, 2016). Firm size is calculated by the log of the number of employees (Luo & Bhattacharya, 2006). Data for this variable was obtained from Compustat.

Annual sales. According to Malshe and Aragawal (2015), firms with higher cash flows generally



which can lead to higher customer satisfaction. Moreover, higher cash flows can mean more investments in CSR practices (Withisuphakorn & Jiraporn, 2016). For cash flows I included annual sales data which was obtained from Compustat.

Firm profitability. To control for the profitability of a firm, return on assets (ROA) was included

as a control variable (Carlos & Lewis, 2018). This variable was included because, according to Guo, Kumar and Jiraporn (2004), the profitability of a firm can positively affect customer satisfaction. Moreover, CSR initiatives represent investments that are indirectly related to firms' aims for profit (Margolis & Walsch, 2003). Data for this variable was obtained from Compustat and calculated as net income divided by total assets.

Industry dummies. To prevent covariations with industry affiliation, industry dummy variables

based on the two-digit SIC code were included. Industries might affect firms' tendency to engage in CSR initiatives (McDonnell & King, 2013) and customer satisfaction differs across industries (Johnson, Herrmann & Gustafsson, 2002) The SIC codes were obtained from Compustat. Table 1 shows the frequency statistics of the industries.

Table 1 - Frequencies on industries

Industry SIC Frequency

Mining 1000-1499 4

Construction 1500-1799 11

Manufacturing 2000-3999 55


Communications,Electric, Gas and Sanitary service

4000-4999 49

Wholesale Trade 5000-5199 0

Retail Trade 5200-5999 4

Finance, Insurance and Real Estate



Services 7000-8999 17

Total 141

3.7 Data analysis

To test for the positive effect stated in the first hypothesis, an Ordinary Least Squares (OLS) multiple linear regression was carried out, as both variables were continuous. To test hypothesis 2a, the same OLS multiple regression was carried out with the inclusion of media coverage as a moderator. To test hypothesis 2b, an OLS multiple lineair regression was carried out to test the effects of media coverage on greenwashing. The regression formulae are as follows, with time t and firm i:

[1] Customer Satisfaction


= α+








Customer satisfaction



+ ∑𝛽


Industry Dummies





[2a] Customer Satisfaction


= α+









satisfaction controls





Media Coverage







* Media






Industry Dummies





[2b] Greenwashing


= α+



Media Coverage





Greenwashing controls





Industry Dummies







(Baltagi, 2008). A second assumption is that it should meet the assumption of homoscedasticity. When this assumption is not met, it means that the data is exposed to heteroskedasticity, meaning that regression coefficients are skewed away towards the right or left end of the regression line (Wilson, 2004). Through plotting scatter plots, it becomes visible whether variables are skewed to either side. For both the dependent and independent variables, a scatter plot was plotted. However, to be sure the data was not exposed to heteroskedasticity, Breusch and Pagan (1979) tests were performed and for all three models the results were non-significant (p>0,05). Therefore, heteroskedasticity is not supported, which means the data meets the assumption of homoscedasticity.


4.1 Summary statistics



Table 2 - Descriptive statistics including control variables

N Min Max Mean Std. deviation

Greenwashing 141 -9,18 4,60 -2,9887 2,27158 Customer Satisfaction 141 60,00 100,00 82,2834 9,52173 MediaCoverag e2014 141 1,00 2534,00 235,6700 385,54500 MediaCovLog 2014 141 0,00 7,84 4,2778 1,79690 MediaCoverag e2015 141 1,00 2630,00 284,3617 444,50003 MediaCovLog 2015 141 0,00 7,87 4,5133 1,78534 RoA 141 0,15 2,58 0,7456 0,41687 Annual Sales 141 767,32 200653482 5786771,87 20977650,5 Product Responsibility score 141 1,14 99,60 66,3761 26,85807

RoA Return on assets; MediaCovLog Media Coverage Log



Table 3 - Pearson correlations

(1) (2) (3) (4) (5) (6) (7) (8) Greenwashing (1) 1 Customer satisfaction (2) 0,235** 1 MediaCovLog2014 (3) -0,116 -0,039 1 MediaCovLog2015 (4) -0,102 -0,042 - 1 RoA (5) 0,010 0,121 -0,034 -0,019 1 Annual Sales (6) 0,209* 0,072 0,144 0,140 0,009 1 Firm Size (7) 0,029 -0,119 0,328** 0,320** 0,018 0,106 1 Product responsibility score (8) -0,039 0,055 0,076 0,067 0,020 0,097 0,137 1 **p<0,01,*p<0,05

RoA Return on assets; MediaCovLog Media Coverage Log 4.2 Regression results

Greenwashing and customer satisfaction



Table 4 - Regression results of greenwashing on customer satisfaction Model 1 p-value Greenwashing 0,736 0,046

RoA 1,466 0,465

Annual Sales -2,101E-9 0,956

Firm Size -0,999 0,117

Product resp. score 0,020 0,513 Industry dummies Yes


F 2,603

n 140

p-value 0,012

RoA Return on Assets; Product resp. Score Product Responsibility Score

The variable greenwashing is also significantly positive (𝛽=0,736 and p<0,05). This indicates that greenwashing activities increase customer satisfaction. Therefore, hypothesis 1 is supported based on this model.

Media Coverage moderator and Greenwashing



Table 5 - Regression results of customer satisfaction of greenwashing with moderating effect of media coverage Model 2 p-value Gw*MediaCov 0,074 0,637 Greenwashing 0,745 0,049 MediaCovLog2015 -0,105 0,834 RoA 1,597 0,434

Annual Sales -3,303E-9 0,933

Firm Size -1,023 0,136

Product resp. score 0,021 0,487 Industry dummies Yes


F 1,966

n 140

p-value 0,029

Gw Greenwashing; MediaCov Media Coverage; MediaCovLog Media Coverage Log RoA Return on assets; Product resp. Score Product Responsibility Score.


27 Media Coverage and Greenwashing

To test the second sub-hypothesis (H2b), a multiple regression analysis was performed to test the effect of the amount of media coverage on greenwashing activities. The results are presented in table 5 in model 3 (F=2,908, p<0,01; R²= 0,222).

Table 5 - Regression results of media coverage on greenwashing

Model 3 p-value

MediaCovLog2014 -0,232 0,043

RoA 0,181 0,704

Annual Sales 2,103E-8 0,021

Firm Size 0,108 0,496

Industry dummies Yes


F 2,908

n 140

p-value 0,003

MediaCovLog Media Coverage Log RoA Return on Assets

The analysis shows there is a significant negative effect of media coverage on greenwashing activities (𝛽=-0,232, p<0,05). As expected, it shows a negative relation. This means that the amount of media coverage on environmental topics does significantly decrease greenwashing activities. Therefore, the final hypothesis (H2b) is supported based on this result.

4.3 Robustness tests



and three-year (t+3) lag, which can be found in models 4 and 5 in table 1 in appendix C. The models become insignificant for the two-year (F=1,320, p>0,1; R²=-,101) and three-year lag (F=0,980, p>0,1; R²=0,077), but greenwashing stays significantly positive (𝛽=0,512, p<0,05) for the two-year lag. This means that there is no significant positive relationship between greenwashing and customer satisfaction with a two-year and three-year time lag. To substantiate the results from the moderating effect of media coverage, I introduced the moderator media coverage in the same regression with time lags t+2 and t+3 for customer satisfaction, which can be found in models 6 and 7 in table 2 in appendix C. For the t+2 in model 6 becomes insignificant (F=1,134, p>0,1; R²=0,104) with an insignificant negative effect of the moderator media coverage (𝛽=-0,086, p>0,1). For t+3 in model 7, the model also becomes insignificant (F=0,906, p>0,1;R²=0,085) with an insignificant negative effect of the moderator media coverage (𝛽=-0,039, p>0,1). This means that there is no significant moderating effect of media coverage on the relationship between greenwashing and customer satisfaction in the following years.


This paper combines insights from the institutional theory, impression management theory and literature on effects of media attention to expand our knowledge about the effects of greenwashing on customers, the influence of media attention on this relationship and the influence of media attention on greenwashing. The research question to be answered in this paper is “How does


29 investigate whether greenwashing increases customer satisfaction, (2) whether environmental media coverage decreases the suggested positive relationship between greenwashing and customer satisfaction and (3) whether environmental media coverage decreases greenwashing activities. The initial results show a positive relationship between greenwashing and customer satisfaction with a one-year lag for customer satisfaction (H1), but these results do not withstand a time lag of respectively two and three years. Second, no significant negative moderation effect of media coverage on the relationship between the greenwashing and customer satisfaction could be found (H2a). Furthermore, the results show a significant negative relationship between media coverage and greenwashing activities (H2b).


30 The results show that hypothesis 2a, could not be supported. This suggests that the amount of media coverage does not negatively affect the positive relationship found from hypothesis 1. A possible explanation for these non-significant results could be found in the media agenda setting theory. According to Zucker (1978), people that have less direct experience regarding a certain media covered issue are more likely to rely on the information provided by the media to form an opinion and interpretation of the issue (Zucker, 1978). When a firm successfully greenwashes, gets more positive media attention and acceptation of this information by the customers, the firm is less likely to be exposed for greenwashing and therefore, there will be no negative effects of media coverage. However, this implies that most customers do not have significant direct experience regarding environmental issues. Another explanation are the findings from Wartick (1992). He found that more media attention, despite the tone (negative or positive), results in a larger absolute change in corporate reputation. This implies that total media coverage, both positive and negative, leads to a better corporate reputation instead of customers examining a firm's practices.


31 increases the risk of exposure, which reduces the attractiveness of greenwashing. Also, more media attention decreases the greenwashing gap by motivating firms to invest in substantive actions.


6.1 Theoretical contributions

This study has several theoretical contributions. Firstly, it shows that greenwashing can have positive effects on a firm’s customer satisfaction. To the best of my knowledge, this is one of the first papers to empirically test the greenwashing effects. It also shows that greenwashing will not have significant effects on future customer satisfaction scores, which indicates a time fra me wherein greenwashing can be effective.

Secondly, this paper focuses on both external (symbolic) and internal (substantive) firm actions as both are included in the greenwashing variable, whereas most studies exclusively focus on how external firm actions affect stakeholders within impression management theory (Berrone, Gelabert & Fosfuri, 2009). By paying attention to both internal and external actions, this study adds a new insight to the impression management literature. Furthermore, the results also add to the institutional theory by elaborating on the effects of internal and external actions simultaneously to create legitimacy, which has not been studied extensively yet. Thirdly, this study sheds light on whether and how media coverage impact greenwashing firms and greenwashing activities. The results show that media coverage does have a negative impact on greenwashing. This adds new insights to the literature on the effects of media attention by incorporating

greenwashing, which is relatively new in this literature.


32 is in line with Hawn and Ioannou (2016) their findings, who also found that firms take more internal (substantive) actions compared to external (symbolic) actions. This contrasts with the statements in current greenwashing literature, which suggests that a growing number of firms is greenwashing by focusing on symbolic actions (e.g. Delmas and Burbano, 2011; Furlow, 2010; Walker & Wan, 2012).

6.2 Practical contributions

This study shows that, as mentioned before, firms are taking more substantive actions compared to symbolic actions. This is in line with the findings of Hawn and Ioannou (2016) and this shows that in the current situation, taking relatively more internal actions is the norm across industries. This implies that most firms act in accordance with the norms and values society lies upon a firm.

Secondly, a practical implication for the media is that it can be effective in reducing greenwashing activities. To protect society, the media can choose to publish more environmental related news in relation to a firm to make greenwashing less attractive for a firm. More media attention is effective in creating visibility for a firm, which decreases the motivation to greenwash (Kim & Lyon, 2011).


This research has certain limits. Firstly, the data points to construct the variable for greenwashing were obtained from Eikon's data stream following Hawn and Ioannou (2016) their method, which has been validated in their study. However, these data points represent a wide variety of environmental focused internal and external actions that might not meet certain criteria demanded from customers. Future research might construct the variable Greenwashing in another way by taking customer expectations about a firm’s environmental performance into consideration, which can lead to a higher positive effect of greenwashing.


33 Customer satisfaction can lead to firms trying to manage impressions of the customers, specifically when the customer satisfaction is low, firms can choose to increase greenwashing activities to satisfy customers and with higher customer satisfaction, firms can choose not to.

A third limitation is the fact that the 141 firms in the sample are not evenly distributed over the industries and countries. Most of the firms are operating in the Manufacturing and Transportation, Communications, Electric, Gas and Sanitary service industries while there are no firms from the Wholesale Trade industry included. Future research can use a more evenly distributed sample across the industries and countries, to capture the potential greenwashing activities and customer satisfaction scores from other industries.

A fourth limitation is that the media coverage variable, despite most filter words being negatively toned, does not specifically distinguish between positive and negative media coverage. Previous research found that negative and positive media coverage can both have different effects for the firm and stakeholders (e.g. Brown & Deegan, 1998) which leaves an interesting opportunity to research how negative media coverage on environmental topics affects the found positive effect of greenwashing on customer satisfaction and whether positive media coverage can strengthen the positive greenwashing effects.




Ader, C. R. (1995). A longitudinal study of agenda setting for the issue of environmental pollution. Journalism & Mass Communication Quarterly, 72(2), 300-311.

Alin, A. (2010). Multicollinearity. Wiley Interdisciplinary Reviews: Computational Statistics, 2(3), 370-374.

Baltagi, B. (2008). Econometric analysis of panel data. John Wiley & Sons.

Berrone, P., Gelabert, L., & Fosfuri, A. (2009). The impact of symbolic and substantive actions on environmental legitimacy.

Bolino, M. C., Kacmar, K. M., Turnley, W. H., & Gilstrap, J. B. (2008). A multi-level review of impression management motives and behaviors. Journal of Management, 34(6), 1080-1109. Breusch, T. S., & Pagan, A. R. (1979). A simple test for heteroscedasticity and random coefficient

variation. Econometrica: Journal of the Econometric Society, 1287-1294.

Brown, N., & Deegan, C. (1998). The public disclosure of environmental performance information—a dual test of media agenda setting theory and legitimacy theory. Accounting and business research, 29(1), 21-41.

Campbell, J. L. (2007). Why would corporations behave in socially responsible ways? An institutional theory of corporate social responsibility. Academy of management Review, 32(3), 946-967.

Carlos, W. C., & Lewis, B. W. (2018). Strategic silence: Withholding certification status as a hypocrisy avoidance tactic. Administrative Science Quarterly, 63(1), 130-169.

Carroll, C. E., & McCombs, M. (2003). Agenda-setting Effects of Business News on the Public's Images and Opinions about Major Corporations. Corporate Reputation Review, 6(1), 36. Chan, R. Y. (2004). Consumer responses to environmental advertising in China. Marketing



Chen, Y. S. (2008). The driver of green innovation and green image–green core competence. Journal of business ethics, 81(3), 531-543.

Chen, Y. S., Lin, C. L., & Chang, C. H. (2014). The influence of greenwash on green word-of-mouth (green WOM): The mediation effects of green perceived quality and green satisfaction. Quality & Quantity, 48, 2411–2425.

Christensen, L. T., Morsing, M., & Thyssen, O. (2013). CSR as aspirational talk. Organization, 2 0(3), 372-393.

Chung, K. H., Yu, J. E., Choi, M. G., & Shin, J. I. (2015). The effects of CSR on customer satisfaction and loyalty in China: the moderating role of corporate image. Journal of Economics, Business and Management, 3(5), 542-547.

Cormier, D., & Magnan, M. (2003). Environmental reporting management: a continental European perspective. Journal of Accounting and public Policy, 22(1), 43-62.

De Jong, M. D., Harkink, K. M., & Barth, S. (2018). Making green stuff? Effects of corporate greenwashing on consumers. Journal of business and technical communication, 32(1), 77-112.

De Mendonca, T. R., & Zhou, Y. (2019). Environmental performance, customer satisfaction, and profitability: A study among large US companies. Sustainability, 11(19), 1-15.

De Vries, G., Terwel, B. W., Ellemers, N., & Daamen, D. D. (2015). Sustainability or profitability? How communicated motives for environmental policy affect public perceptions of corporate greenwashing. Corporate Social Responsibility and Environmental Management, 22(3), 142-154.

Delmas, M. A., & Burbano, V. C. (2011). The drivers of greenwashing. California management review, 54(1), 64-87.



Du, X., Chang, Y., Zeng, Q., Du, Y., & Pei, H. (2016). Corporate environmental responsibility (CER) weakness, media coverage, and corporate philanthropy: Evidence from China. Asia Pacific Journal of Management, 33(2), 551-581.

Furlow, N. E. (2010). Greenwashing in the new millennium. The Journal of Applied Business and Economics, 10(6), 22.

Guo, C., Kumar, A., & Jiraporn, P. (2004). Customer satisfaction and profitability: is there a lagged effect? Journal of strategic marketing, 12(3), 129-144.

Hawn, O., & Ioannou, I. (2016). Mind the gap: The interplay between external and internal actions in the case of corporate social responsibility. Strategic Management Journal, 37(13), 2569-2588.

Joshua, K. (2001, March 22). A brief history of greenwash. CorpWatch

Johnson, M. D., Herrmann, A., & Gustafsson, A. (2002). Comparing customer satisfaction across industries and countries. Journal of Economic Psychology, 23(6), 749-769.

Koch, T., & Arendt, F. (2017). Media effects: cumulation and duration. The International Encyclopedia of Media Effects, 1-11.

Kong, Y., & Zhang, A. (2013). Consumer response to green advertising: the influence of product involvement. Asian journal of communication, 23(4), 428-447.

Laroche, M., Bergeron, J., & Barbaro‐Forleo, G. (2001). Targeting consumers who are willing to pay more for environmentally friendly products. Journal of consumer marketing 18(6), 503-520.

Lim, W. M., Ting, D. H., Bonaventure, V. S., Sendiawan, A. P., & Tanusina, P. P. (2013). What happens when consumers realise about green washing? A qualitative investigation. International journal of global environmental issues, 13(1), 14-24.



Lyon, T. P., & Maxwell, J. W. (2011). Greenwash: Corporate environmental disclosure under threat of audit. Journal of Economics & Management Strategy, 20(1), 3-41.

Lyon, T. P., & Montgomery, A. W. (2015). The means and end of greenwash. Organization & Environment, 28(2), 223-249.

Malshe, A., & Agarwal, M. K. (2015). From finance to marketing: The impact of financial leverage on customer satisfaction. Journal of Marketing, 79(5), 21-38.

Margolis, J. D., & Walsh, J. P. (2003). Misery loves companies: Rethinking social initiatives by business. Administrative science quarterly, 48(2), 268-305.

McCombs, M. and Shaw, D. (1972) ‘The agenda setting function of mass media’, Public Opinion Quarterly, 36, 176–187.

McDonnell, M. H., & King, B. (2013). Keeping up appearances: Reputational threat and impression management after social movement boycotts. Administrative Science Quarterly, 58(3), 387-419.

Merkl-Davies, D. M., N. M. Brennan, and S. J. McLeay. 2011. Impression management and retrospective sensemaking in corporate narratives: A social psychology perspective. Accounting, Auditing and Accountability Journal, 24(3): 315–344.

Mithas, S., Krishnan, M. S., & Fornell, C. (2005). Why do customer relationship management applications affect customer satisfaction? Journal of Marketing, 69(4), 201-209.

Mohamed, A. A., Gardner, W. L., & Paolillo, J. G. P. (1999). A taxonomy of organizational impression management tactics. Advances in Competitiveness Research, 7(1), 108–130.

Ogden, S., & Clarke, J. (2005). Customer disclosures, impression management and the construction of legitimacy. Accounting, Auditing & Accountability Journal, 18(3), 313-345. Oliver, C. (1991). Strategic responses to institutional processes. Academy of Management Review,



Parguel, B., Benoît-Moreau, F., & Larceneux, F. (2011). How sustainability ratings might deter ‘greenwashing’: A closer look at ethical corporate communication. Journal of business ethics, 102(1), 15.

Parguel, B., Benoît-Moreau, F., & Russell, C. A. (2015). Can evoking nature in advertising mislead consumers? The power of ‘executional greenwashing'. International Journal of Advertising, 34(1), 107-134.

Papagiannakis, G., Voudouris, I., Lioukas, S., & Kassinis, G. (2019). Environmental management systems and environmental product innovation: The role of stakeholder engagement. Business Strategy and the Environment, 28(6), 939-950.

Patten, D. M. (2002). Media exposure, public policy pressure, and environmental disclosure: An examination of the impact of tri data availability. Accounting forum 26(2) 152-171.

Payne, G., Cruz-Suarez, A., & Prado-Román, A. (2018). Legitimacy as competitive advantage: A US airline case study. In Organizational legitimacy, 121-140.

Polonsky, M. J., Daub, C. H., & Ergenzinger, R. (2005). Enabling sustainable management through a new multi‐disciplinary concept of customer satisfaction. European Journal of Marketing, 39(10), 998-1012.

Ranaweera, C., & Prabhu, J. (2003). On the relative importance of customer satisfaction and trust as determinants of customer retention and positive word of mouth. Journal of Targeting, Measurement and Analysis for marketing, 12(1), 82-90.

Refinitiv (2020).

https://www.refinitiv.com/content/dam/marketing/en_us/documents/methodology/esg-scores-methodology.pdfaccessed 2nd July, 2020.



Saeidi, S. P., Sofian, S., Saeidi, P., Saeidi, S. P., & Saaeidi, S. A. (2015). How does corporate social responsibility contribute to firm financial performance? The mediating role of competitive advantage, reputation, and customer satisfaction. Journal of business research, 68(2), 341-350.

Schmuck, D., Matthes, J., & Naderer, B. (2018). Misleading consumers with green advertising? An affect–reason–involvement account of greenwashing effects in environmental advertising. Journal of Advertising, 47(2), 127-145.

Scott, W.R. (1987). Organizations: Rational, Nature and Open Systems. 2. Aufl. New York: Englewood Cliff.

Scott, W. R. (1995). Institutions and organizations. Foundations for organizational science. London: A Sage Publication Series.

Shevchenko, A., Lévesque, M., & Pagell, M. (2016). Why firms delay reaching true sustainability. Journal of Management Studies, 53(5), 911-935.

Shin, Y., Van Thai, V., Grewal, D., & Kim, Y. (2017). Do corporate sustainable management activities improve customer satisfaction, word of mouth intention and repurchase intention? Empirical evidence from the shipping industry. The International Journal of Logistics Management, 28(2), 555-570.

Sing, H. (2006). The importance of customer satisfaction in relation to customer loyalty and retention. Academy of Marketing Science, 60(46), 193-225.

Skinner, D. J. (1994). Why firms voluntarily disclose bad news. Journal of accounting research, 32(1), 38-60.



Walker, K., & Wan, F. (2012). The harm of symbolic actions and green-washing: Corporate actions and communications on environmental performance and their financial implications. Journal of business ethics, 109(2), 227-242.

Wartick, S. L. (1992). The relationship between intense media exposure and change in corporate reputation. Business & Society, 31(1), 33-49.

Wei, S., Ang, T., & Jancenelle, V. E. (2018). Willingness to pay more for green products: The interplay of consumer characteristics and customer participation. Journal of Retailing and Consumer Services, 45, 230-238.

Wilson, J. (2014). Essentials of business research: A guide to doing your research project. Sage. Withisuphakorn, P., & Jiraporn, P. (2016). The effect of firm maturity on corporate social

responsibility (CSR): do older firms invest more in CSR?. Applied Economics Letters, 23(4), 298-301.

Wood, D. J. (1991). Social issues in management: Theory and research in corporate social performance. Journal of Management, 17(2), 383-406.

Woolridge, J. M. (2013). Introductory Econometrics: A Modern Approach. Mason, OH: South-Western.

Zavyalova, A., Pfarrer, M. D., Reger, R. K., & Shapiro, D. L. (2012). Managing the message: The effects of firm actions and industry spillovers on media coverage following wrongdoing. Academy of Management Journal, 55(5), 1079-1101.



Appendix A Conceptual Model

Appendix B

Internal and External environmental actions (Hawn and Ioannou, 2016)

Internal (substantive)

1. Environmental Supply Chain Management 2. Renewable Energy Use

3. Policy Energy Efficiency 4. Policy Water Efficiency 5. Water Technologies 6. Policy Emissions

External (symbolic)

1. Green Buildings

2. Toxic Chemicals Reduction

3. Staff Transportation Impact Reduction 4. Waste Reduction Initiatives



6. NOx and SOx Emissions Reduction

Appendix C

Table 1 - two year and three-year lag on Customer Satisfaction

Model 4 (t+2) p-value Model 5 (t+3) p-value Greenwashing 0,396 0,140 0,512 0,026

RoA 1,334 0,442 0,602 0,683

Annual Sales 1,062E-8 0,746 -5,052E-9 0,857 Firm Size -0,256 0,641 -0,070 0,881 Product resp. score -0,007 0,770 0,002 0,921 Industry dummies Yes Yes 0,101 0,077 F 1,320 0,980 n 140 140 p-value 0,220 0,468



Table 2 - two year and three-year lag on Customer Satisfaction with moderator Model 6 (t+2) p-value Model 7 (t+3) p-value Greenwashing* MediaCov -0,086 0,140 -0,039 0,738 Greenwashing 0,390 0,150 0,530 0,022 MediaCovLog 0,102 0,430 0,377 0,304 RoA 1,197 0,496 0,591 0,683

Annual Sales 1,196E-8 0,722 -8,642E-9 0,762 Firm Size -0,227 0,701 -0,070 0,674 Product resp. score 0,001 0,770 0,001 0,972 Industry dummies Yes Yes 0,101 0,085 F 1,320 0,906 n 140 140 p-value 0,220 0,549




According to the sustainable report of Volkswagen Group (2019), the main purpose of sustainability is giving equal priority to the economic, social and environmental

Their study tested the strategic dependable effects of service quality on firm performance and concluded that the effect of service failure on performance is

In addition, in the first part of the questionnaire, respondents were asked to provide the name of a specific retailer they had a personal omni-channel experience with (using both an

“What is the impact of a global crisis on the relationship between individual customer perceptions of Corporate Social Responsibility in firms and customer

• Provides insights into the effect of customer satisfaction, measured through online product reviews, on repurchase behavior!. • Adresses the question whether the reasons for

This section will discuss the result of H2 and H3 that have been put forward, thereby whether customer satisfaction has a negative effect on cost under monopoly

If results point out that variability in service performance is influencing customer satisfaction and product usage more in comparison to service performance on average,

Moderating Variables Hypotheses CSR Support (Significant Effect) Hypotheses Satisfaction Support (Significant Effect) H11 Product type H/U Stronger for