Unmasking Greenwashing: The Impact on Financial Performance and the Mediating Role of Green Reputation

Abstract

Greenwashing, defined as the misleading and unsubstantiated claims made by companies to appear environmentally responsible, can have multiple effects on companies. This study examines the influence of greenwashing perceptions on financial performance, with a particular focus on the mediating role of green reputation. Data were collected through a survey of 218 employees of companies listed on the Borsa Istanbul Sustainability Index. The results show that companies that engage in less greenwashing not only experience better financial performance, but also that green reputation plays a crucial mediating role in this dynamic. Companies with stronger green reputations mitigate the negative effects of greenwashing, thereby strengthening their financial performance. The study underlines that greenwashing can undermine perceptions of corporate sustainability, weaken trust and damage financial outcomes. By prioritizing authentic sustainability efforts, companies can improve their long-term financial performance and protect their green reputation, which is essential for sustainable success.