The Truth behind ESG Disclosures: Detecting Greenwashing through Text Readability
DOI:
https://doi.org/10.54097/hks0kp94Keywords:
ESG Disclosures, Greenwashing, Text Readability, non-financial A-share listed firms.Abstract
As the concept of sustainable development advances, ESG disclosure has become a key component of corporate non-financial reporting. However, some firms engage in strategic obfuscation by complicating the language of ESG reports to exaggerate their actual performance, resulting in greenwashing. This study examines 1133 non-financial A-share listed firms in China from 2019 to 2023, extracting ESG sections from annual reports to construct a text readability indicator. Empirical findings suggest that lower readability is significantly associated with a higher degree of greenwashing. This effect is mitigated in larger firms, where reputation and regulatory pressure impose constraints. Further heterogeneity analysis reveals that such textual manipulation is more prevalent in high-pollution sectors. The study sheds light on the “soft manipulation” path of ESG disclosures, enriching the literature on greenwashing and offering language-based warning indicators for regulators.
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