The truth behind sustainability claims: Examining carbon risk, ESG disclosures, and greenwashing

As stakeholders demand greater transparency, understanding the link between carbon risk, ESG disclosure, and greenwashing has become essential for investors, regulators, and policymakers. Using a dataset of U.S. firms from 2013 to 2022 and multiple methods including pooled OLS, System GMM, sub-sample analysis, logistic regression, and Difference-in-Differences (DiD), this study shows that high-emission firms are significantly more likely to disclose ESG information, often driven by regulatory and reputational pressures. However, evidence of greenwashing emerges among firms with high carbon risk, as disclosure does not always reflect substantive performance. The DiD analysis also highlights that regulatory changes improve ESG disclosure but do not fully eliminate symbolic reporting. These findings underscore the dual role of ESG disclosure, both a tool for transparency and a mechanism for impression management, and offer insights for enhancing reporting credibility and accountability. • We examined links between carbon emissions, ESG disclosure, and greenwashing. • We employed robust evidence from OLS, GMM, logistic regression, and DiD methods. • The study found high emitters disclose more ESG but risk engaging in greenwashing. • DiD results show regulation boosts ESG disclosure but not credibility.