Ways to take action

Tackling greenwashing in the classroom and beyond

Gianfranco Gianfrate , Professor

Gianfranco Gianfrate, EDHEC Professor and EDHEC-Risk Climate Impact Institute Research Director, wants to help establish a definition of greenwashing, a necessary step to win the fight against these practices.

Reading time :
11 Jan 2024


While he was studying for his PhD in Business and Managerial Economics at Milan’s Università Bocconi, Gianfranco Gianfrate took an interest in corporate governance – and more specifically the ways in which controlling shareholders abuse their positions in companies to deplete the wealth of stakeholders in order to promote their own interests (1).

These stakeholders can be communities, countries and indeed the whole environment. If you emit a lot of carbon dioxide without paying for it, you’re stealing from the planet – climate issues like these are a major cause of injustices around the world.”


Incentives could be the key

The focus of Professor Gianfrate’s current work is corporate governance. “We know when executives own shares in their companies, financial performance tends to improve but environmental performance tends to go down. Decision-makers who stand to benefit from improved financial performance will privilege it over sustainability.”

One solution is legislation which links compensation to environmental performance. This quantification of incentives and environmental costs is a recurring theme in Gianfranco’s work (2) – and he believes it is key to both defining and preventing greenwashing.

Greenwashing is something we think we all understand. But we don’t really have a definition. Sometimes it’s simply pretending a company is greener than it is, but it can also involve hiding numbers or facts, or allowing narratives to disguise activities. Sometimes it can simply be a case of “faking it ’til you make it” – promoting the green agenda while you work out how to make it happen.”


Towards a definition of greenwashing

One obstacle to defining greenwashing is that most environmental performance reporting is voluntary and unaudited (3). Professor Gianfrate expects it may take two decades or more of resistance, lobbying and compromise before a proper system of reporting with sanctions and punishments can be properly implemented.

Interestingly, financial markets seem to see through greenwashing (4). Companies overstating environmental credentials tend to have lower valuations, as investors pay more attention to fines paid for breaching regulations than claims on a website. “I think the key to defining greenwashing is comparing what’s on the surface with what’s happening on the ground. If a company claiming to be green is paying lots of emissions fines, that’s greenwashing.”

Professor Gianfrate believes the move towards quantifying environmental impact over the next decade will lead to a fundamental change. “Once those numbers can simply be added to a company’s cash flow and reporting, the need for sustainable finance – and greenwashing – disappears. When companies have to pay for all their resources and externalities, everyone can see it. It will be much more difficult for companies to lie.”



(1) What Do Shareholders’ Coalitions Really Want? Evidence from Italian voting trusts (2007); Shareholders’ coalitions and control contestability: The case of Italian voting trust agreements (2007); Partnership versus corporation: Untangling the governance dilemma of corporate venture capital (2008)

(2) Carbon Risks and Corporate Valuation (2016); Cost of capital and sustainability: a literature review (2018); Market-pull policies to promote renewable energy: A quantitative assessment of tendering implementation (2020)

(3) The Agency of Greenwashing (2020)

(4) The green advantage: Exploring the convenience of issuing green bonds (2018); Do the Shades of Green Matter? The Pricing and Ownership of 'Darkgreen' Bonds (2021); What’s in a shade? The market relevance of green bonds’ external reviews (2023)


Picture: malerapaso - istockphoto.com

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