Social Washing or Credible Communication?

Investor demand for information about firms’ environmental, social, and governance (ESG) commitments has prompted substantial corporate disclosure of their ESG activities. However, these disclosures often raise questions of “social washing,” where firms make unsubstantiated claims or misrepresent their company as more socially responsible than it is.

In a recent study, we consider social washing related to diversity, equity, and inclusion (DEI). Beginning in 2020, the Securities and Exchange Commission (SEC) required publicly-traded firms to include under Item 1 “Business” of their 10-K filings a description of the registrant’s human capital resources, including the number of persons employed by the registrant … Read more