Do Sustainability Assurance Practices Address the Greenwashing Concerns of Regulators

ABSTRACT Greenwashing has emerged as a matter of concern, prompting increased enforcement actions and calls for mechanisms, such as sustainability assurance, to address the issue. Accordingly, our study examines the extent to which current sustainability assurance practices address the greenwashing concerns of regulators. Using a sample of Australian and New Zealand listed companies using sustainability assurance in 2023, we assess the alignment between assurance and greenwashing‐related subject matters identified by regulatory guidance and sanction cases. Our findings reveal that while 49.5% of assurance engagements directly address at least one greenwashing‐related subject matter – primarily historical and quantitative disclosures such as greenhouse gas (GHG) emissions – significant gaps persist with respect to forward‐looking sustainability commitments such as net zero, end‐of‐life treatment of sold products and potential sustainability‐related fraud. Regression results further indicate that companies engaging in assurance at a reasonable level, using assurance providers with a high market share, using externally generated and not internally developed reporting criteria, and operating in industries more exposed to greenwashing risk are more likely to assure greenwashing‐related subject matters. Our study contributes to the literature on sustainability assurance and greenwashing by introducing a new dimension of sustainability assurance (i.e., the relevance of assured sustainability matters) and offering practical insights for companies, assurance providers and regulators to better address greenwashing concerns.