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ISSN:2325-6192 (print)
ISSN:2325-6206 (online)
Journal of Environmental Accounting and Management
António Mendes Lopes (editor), Jiazhong Zhang(editor)
António Mendes Lopes (editor)

University of Porto, Portugal

Email: aml@fe.up.pt

Jiazhong Zhang (editor)

School of Energy and Power Engineering, Xi'an Jiaotong University, Xi'an, Shaanxi Province 710049, China

Fax: +86 29 82668723 Email: jzzhang@mail.xjtu.edu.cn

ESG score, ESG controversies, Greenwashing, and Profitability

Journal of Environmental Accounting and Management 14(3) (2026) 473--490 | DOI:10.5890/JEAM.2026.09.007

Jia-Fan Sun$^{1}$, Aye Aye Khin$^1$, Siew Peng Lee$^{1}$, Li Li Qiao$^{2}$

$^1$ Faculty of Accountancy and Management (FAM), Universiti Tunku Abdul Rahman (UTAR), Sungai Long Campus, Jalan Sungai Long, Bandar Sungai Long, 43000 Kajang, Selangor, Malaysia

$^{2}$ Development Institute, Fudan University, Think Tank Building, 220 Handan Road, Shanghai, China

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Abstract

This study investigates links among ESG scores, controversies, greenwashing, and profitability using panel data from 80 Fortune Global 500 firms (2014--2022). A Greenwashing Index---defined as the gap between ESG and controversies scores---captures deceptive practices using available ratings. Regression, Hausman, and Granger causality tests show ESG scores and the Greenwashing Index positively affect ROA and EQ, while controversies have negative effects; ESG becomes insignificant in combined models, with causality running from ESG factors to profitability. Paradoxical findings reflect low-cost greenwashing boosting ESG scores, freeing resources for profit-enhancing activities that may trigger controversies yet increase efficiency. This framework reconciles stakeholder and shareholder theories by showing firms pursue profit while maintaining ESG appearances. Policy implications include mandatory third-party ESG audits, subsidies for genuine practices, and incorporating controversies and greenwashing into investment decisions. Limitations involve geographic concentration (U.S./China), small sample size, reliance on a single data provider (Refinitiv), relative cost measures, omission of leverage/market metrics, and theoretical rather than empirical cost assessments. Future studies should expand samples, data sources, variables, and collect primary ESG expenditure data.

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