Greenwashing is usually treated as a problem of corporate deception.  Firms make environmental claims that exaggerate, selectively disclose, or obscure their actual sustainability performance.  Greenwashing leaves investors, consumers, employees, and regulators with an overly favorable impression, thereby stifling true progress.  The literature has consequently focused on identifying greenwashing and designing legal and market mechanisms to deter it.

But greenwashing is not always synonymous with deliberate fraud.  In a new paper, we argue that some forms of greenwashing may be better understood as aspirational signaling.  A company may announce ambitious environmental goals before it has the resources, organizational capacity, or operational plans necessary to achieve them.  The resulting gap between rhetoric and reality is still potentially misleading, but public commitments will likely change expectations over time.  Companies that appear to care about sustainability often attract environmentally-oriented employees.  Once in the organization, sustainability advocates will advocate for change and monitor the progress of its  implementation.  Over time, greenwashing may thus create pressure for the company and its competitors to move toward the standards it has publicly endorsed.

The issue matters as sustainability disclosure policy changes on both sides of the Atlantic.  In May 2026, the SEC proposed rescinding its 2024 climate-disclosure rules, which it had stayed pending litigation.  The European Union has retained a more extensive regulatory architecture, but its 2026 Omnibus I directive substantially narrows the scope of both the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD).  Our argument does not depend on mandatory reporting continuing to expand.  It addresses a problem shared by voluntary and mandatory regimes: Sustainability commitments are easier to announce than to verify and enforce.

These divergent approaches of the U.S. and Europe reflect different traditions of corporate social responsibility (CSR).  Following  Matten and Moon’s (2008) CSR distinction, American CSR has traditionally been more “explicit,” consisting of voluntary corporate initiatives; while European CSR has been more “implicit,” embedded in legal requirements and institutional relationships.  We connect this distinction to corporate governance: Market-oriented systems encourage firms to advertise responsibility as a competitive advantage, while stakeholder-oriented systems institutionalize more sustainability concerns.  Neither model eliminates the possibility that corporate communication will overstate corporate conduct.

From Disclosure to Behavioral Change

Traditional disclosure theory tends to treat information as a window through which outsiders observe the corporation.  Sustainability disclosure can additionally change corporate conduct. The EU’s “double materiality” approach captures this broader ambition: Reporting addresses both how sustainability matters affect the business and how the business affects people and the environment. A public commitment can become a benchmark against which future conduct can be measured.  What begins as a symbolic commitment may, under favorable conditions and over time, lead to substantive change of entire industries or markets.

The Enforcement Gap

Our comparative analysis considers the limits of enforcement in the United States and Europe.  In U.S. securities litigation, materiality requirements, the treatment of vague assurances as “puffery,” and applicable safe harbors for forward-looking statements can limit liability.  Third-party certification is not a complete substitute.  One might expect assurance providers to safeguard the authenticity of sustainability disclosures. However, they arguably face weaker reputational and legal constraints than traditional financial gatekeepers, such as auditors. This is because it is more difficult for outsiders to evaluate environmental claims than the accuracy of financial statements, and because they bear little private cost when those claims are wrong.  Even in a system where extensive disclosures are mandatory, the enforcement gap is likely to persist.  An environmental impact can be socially important without producing an identifiable loss to investors, weakening incentives for private litigation.  Requiring disclosure of those impacts does not, by itself, provide the financial incentives to investigate and sue.  Public enforcement, consumer protection, and investor stewardship remain important, but sustainability commitments can still be easier to announce than to verify and enforce.

Imperfect Commitments May Have an Upside

Our central claim depends on the comparison.  Misleading claims are plainly inferior to accurate disclosures backed by genuine performance.  But in an imperfectly enforced system, aspirational claims may sometimes be preferable to a corporate agenda that pays no attention to sustainability at all.

Consider an organization that announces a net-zero target without yet knowing how it will get there.  On the one hand, the announcement is a problem: Investors, employees, and the media may interpret the statement as evidence of sustainability that has not actually been achieved. On the other hand, sustainability-oriented statements can create a public commitment to which the organization will be held.  If targets have been announced, readers of financial statements can compare performance with those announced goals.  Despite the initial insincerity, management may find it increasingly difficult to abandon commitments without reputational consequences, thus compelling it to work toward accomplishing them.

From Aspiration to Institutional Change

Multiple factors are likely to lead organizations from announcing sustainability goals, even if insincere, to implementing them. First, public commitments can generate internal pressure over time. Sustainability-oriented employees will be attracted to organizations that publicly articulate environmental ambitions.  Those employees can influence corporate culture and decision-making from within. As environmental goals become part of corporate identity, this reshaped workforce will have even stronger incentives to close the gap between promises and performance.  Articulating a goal directs management attention to issues that might otherwise be ignored. Eventually, “green” disclosures may strengthen the alignment between employees’ and organizational values, thus affecting environmental performance and turning initially insincere commitments into action.

Second, corporate commitments can affect competitors.  If consumers, employees, or investors reward environmental positioning, firms have incentives to adopt comparable commitments.  What begins as differentiation can become an industry-wide expectation, lift entire markets up to a more environmentally-conscientious level, and encourage policymakers to raise standards. Disclosures help to develop benchmarks that journalists, activists, and customers will use to assess corporate conduct.  Public commitments make subsequent comparison possible and can facilitate outside scrutiny. This is particularly important when scandals occur, and a company’s environmental claims are exposed as misleading. The resulting attention and the benchmark created by insincere disclosures will likely enhance the reputational impact.

None of these mechanisms makes greenwashing harmless.  It can reward appearances over performance and undermine trust in genuinely sustainable businesses. If investors care about sustainability claims, a legal regime that tolerates knowingly false environmental claims risks undermining the informational foundations of the markets for such investments.  The benefits of punishing greenwashing need to be weighed against their costs: If every discrepancy between aspiration and performance is treated as an issue, companies may become reluctant to announce ambitious goals and avoid discussing environmental performance that carries a significant liability risk.

Greenwashing as a Transitional Phenomenon

Environmental commitments often begin as narratives about corporate values.  Over time, aspirational goals harden into quantifiable targets, fostered by expectations among a transformed workforce and by more attentive outside constituencies.  Our article offers a comparative legal analysis and suggests that at least aspirational greenwashing may carry unexpected economic benefits.  The initial mismatch between aspiration and performance may thus turn out to be transitional rather than permanent.  In that sense, greenwashing may sometimes be an imperfect corporate commitment that helps introduce environmental norms into corporate agendas in the long run and via social dynamics.

Martin Gelter is a professor at Fordham University School of Law, and Julia M. Puaschunder is an assistant professor at the International University of Monaco. This post is based on their recent article, “Greenwashing as Aspirational Signaling: From Burden to Benefit?” forthcoming in the Fordham Journal of Corporate and Financial Law and available here.