A Framework for Mitigating Greenwashing in Sustainability Reporting

Abstract

Greenwashing in environmental, social, and governance reporting poses a significant threat to corporate accountability and stakeholder trust. This article provides a comprehensive synthesis of existing research to evaluate the role and effectiveness of sustainability assurance as a primary mechanism to combat greenwashing and proposes a framework for it. Based on a systematic literature review, this paper consolidates empirical findings indicating that sustainability assurance has a significant inhibitory effect on corporate greenwashing and is positively valued by capital markets, as evidenced by lower equity capital costs. However, the analysis also reveals that the effectiveness of assurance is not uniform; it is moderated by contextual factors such as the strength of the national legal environment and, in particular, regulatory environments, which can be exploited to legitimize overstated disclosures. This paper proposes a conceptual framework for anti-greenwashing assurance that integrates five interconnected pillars (regulatory, stakeholder engagement, third-party verification, corporate culture and internal controls, and technologies), forming a synergistic ecosystem of deterrents which collectively shape the integrity and credibility of sustainability reporting practices. To enhance the effectiveness of greenwashing mitigation, the proposed framework must be further strengthened by integrating the core principles of transparency, materiality, and verifiability across all its pillars.

1. Introduction

Stakeholder activism is increasing pressure on companies to adopt environmentally responsible behaviors, thereby improving their environmental, social, and governance (ESG) performance and enhancing stakeholder value. Stakeholders have expectations regarding the legitimacy of companies’ ESG behavior and performance relative to financial performance [1]. Furthermore, over the last decade, there has been a growing demand from investors to incorporate ESG factors into their investment process. It is worth noting that addressing ESG issues has become a key focus of risk management for investors, shareholders, governments, and other stakeholders [2]. Moreover, ESG has influenced corporate decision-making, emerged as a new competitive strategy [3], and helped companies maintain a good reputation [4]. ESG not only attracts investors and alleviates financing constraints [5] but also enhances transparency between corporate managers and capital market investors, thereby affecting capital market returns [6]. Although the literature indicates that ESG factors can influence firm valuation, greenwashing threatens the accuracy of ESG information. Greenwashing is more virulent than ever [7] and remains a serious risk for all stakeholders [8].

Currently, the quality and content of ESG reports vary considerably [9,10,11]. It is also challenging for relevant stakeholders to directly assess corporate transparency, performance, and corporate accountability with respect to ESG issues. Stakeholder parties rely heavily on firms’ signals, which do not always accurately convey their actual performance in ESG dimensions [12,13,14]. Scholars have also explored the potential risks and challenges associated with greenwashing’s impact on sustainable finance [15] and the need for standardized metrics to assess non-financial performance [16]. The drive by companies to portray high levels of sustainable performance to their stakeholders and regulatory authorities may facilitate greenwashing through the manipulation of organizational sustainability data, defiance or avoidance responses to conceal externalities, and poor sustainable performance [17].

To support entities in preparing sustainability disclosures, numerous reporting frameworks, models, guidelines, and related initiatives have emerged [18]. Disclosure frameworks provide a format for organizations to report assessed, comparable, and reliable non-financial information required by national and/or international guidelines. As emphasized by [19], in response to the need to regulate the field, various standard-setting agencies, governments, and professional associations have begun developing and adopting ESG disclosure standards and laws for investment products, particularly since 2019. Several sustainability reporting regulations are currently under revision or have just come into force. These revisions aim to prevent and reduce the increasing cases of greenwashing [20,21]. As emphasized by [22], the non-financial disclosure mandated by current policies is suboptimal, and companies will continue to trade off the costs of disclosure against the expenses of non-disclosure, while accounting for the costs of non-compliance with current regulations. Even though a key objective of the sustainability reporting regulations is to enhance the quality of reporting and disclosure [23].

In response to the crisis of credibility, sustainability reporting assurance (the independent, third-party verification of sustainability disclosures) has emerged as a primary market and regulatory solution. It is designed to enhance the reliability of sustainability reports, provide stakeholders with credible information, and mitigate the risk of greenwashing [24]. Moreover, third-party assurance disrupts a company’s ability to engage in symbolic legitimation-seeking by systematically exposing gaps between its public claims and its internal practices [25]. By introducing independent scrutiny, assurance increases the “lie-telling” costs for companies attempting to greenwash, as the risk of exposure and subsequent reputational damage is heightened [26]. This process enhances information transparency and reduces opportunities for managerial opportunism, in which executives might otherwise prioritize personal or short-term gains over long-term, substantive sustainability investments. Beyond its verification function, assurance can also be proactive. The concept of the ‘suggestion effect’ posits that the assurance process itself can drive corporate improvement [27].

Recent scandals have underscored the need for robust assurance mechanisms to restore confidence in sustainability reporting regulatory initiatives, such as the European Union Corporate Sustainability Reporting Directive (CSRD), ISSB standards, and GRI guidelines, which emphasize transparency and comparability. The global regulatory landscape is rapidly evolving to mandate assurance practices, signaling their perceived importance as governance tools. This move is creating a regulated market for sustainability assurance services and setting a global precedent [28,29]. The impact of sustainability assurance can be understood through its dual nature. On the one hand, it provides an opinion that verifies the accuracy of a report. On the other hand, it functions as a process of suggestion acquisition, in which the engagement itself drives improvements in a company’s substantive actions within internal processes [27].

A significant advancement in corporate responsibility is the implementation of mandatory assurance for sustainability reporting. In the European Union, CSRD mandates that listed companies and large corporations prepare sustainability reports in compliance with the European Sustainability Reporting Standards (ESRS) and subject them to limited assurance by independent assurance providers or statutory auditors. The assurance market is growing rapidly. However, it remains mostly voluntary worldwide. Moreover, assurance procedures and practices are evolving rapidly. Although assurance is commonly seen as a way to improve credibility and lower the possibility of false disclosures, empirical data indicate that its effect depends on governance quality, scope, and independence [24,30]. Assurance adequacy and appropriateness are significant issues in the current discussion. According to recent research, assurance quality varies widely across providers, with non-audit companies occasionally producing engagements that are more focused on stakeholders than those of typical auditors [29]. The regulatory environment, stakeholder pressure, and assurance supplier skill are factors that determine the quality of assurance [31,32]. The planned shift from limited to reasonable assurance under CSRD is expected to improve adequacy, but it requires substantial upgrades in data systems, auditors’ competencies, and internal controls [31]. Research on assurance effectiveness to mitigate greenwashing remains country-specific; for example, studies by [26,27] indicate that assurance effectively mitigates greenwashing in the Chinese context. Meanwhile, as highlighted by [33], the effectiveness of the assurance mechanism is not universal. Factors such as weak assurance standards, lax enforcement, or permissive client relationships allow companies to treat assurance as a legitimizing stamp rather than a catalyst for improvement. Yet, assurance practices remain fragmented, often limited to verifying financial data rather than making holistic sustainability claims.

In the academic literature, the term ‘greenwashing’ remains highly ambiguous, thereby compromising both theoretical consistency and practical interventions. A recent concept study [34] of 79 definitions highlighted significant variation, with definitions ranging from outcome-based (focused on deceptive results) to process-based (emphasizing misleading disclosure perspectives). This lack of agreement on the term was confirmed by a more recent scoping review [35] that examined 646 definitions across 332 papers. Without a standardized operational definition, studies cannot reliably compare results, integrate across domains, or create cumulative knowledge. Furthermore, it is challenging for legislators and assurance bodies to accurately identify and regulate greenwashing. Developing a precise, comprehensive definition that includes intent, substance, and communication would strengthen the sustainability framework’s applicability in integrating governance, assurance, and regulatory aspects and add rigor to subsequent empirical research.

Despite the growing body of research on greenwashing, it remains fragmented and focuses on discrete aspects, such as consumer perceptions, governance, and regulatory enforcement. While legal literature emphasizes liability risks [36,37], empirical research looks at board characteristics [38], stakeholder oversight [39], and sustainability committees [40,41]. Few studies, meanwhile, provide a comprehensive theoretical framework that links assurance procedures, governance systems, technical instruments, and regulatory pressures. This gap limits both academic understanding and practical solutions. This paper addresses this gap by systematically analyzing existing research to evaluate the role and effectiveness of sustainability assurance as a primary mechanism for combating greenwashing and by proposing a framework for mitigating greenwashing in sustainability reporting. This study addresses the central research question: What framework is needed to effectively mitigate greenwashing in sustainability reporting?

This study makes several significant contributions to the literature on greenwashing and sustainability reporting. First, it addresses the persistent conceptual ambiguity surrounding greenwashing by clarifying its definition and operational dimensions. Second, it integrates fragmented research streams—governance, assurance, technology, and regulation—into a unified theoretical framework. Third, the proposed framework offers a holistic approach, which previous research has not systematically combined.

The article is organized as follows: In Section 2, the literature is reviewed, the complex topic of greenwashing is discussed, and the theoretical foundations of assurance’s deterrent effect are examined. The research methodology used in our study is described in Section 3. Section 4 presents the latest empirical evidence on the relationship between assurance and greenwashing. Based on a systematic literature review, a conceptual framework for anti-greenwashing assurance is proposed. In Section 5, this framework is discussed, and future research areas are presented. The paper ends with conclusions.

2. Theoretical Background

2.1. Conceptualizing Greenwashing

According to stakeholder theory, companies operate within a network of relationships in which transparent sustainability reporting fosters trust, whereas greenwashing undermines credibility and provokes criticism [42]. Meanwhile, according to legitimacy theory, companies use disclosure and symbolic gestures to gain social acceptance, particularly in the face of sustainability uncertainty arising from uneven ESG ratings, which can increase the risk of greenwashing [43]. Greenwashing has emerged as a central concept in sustainability research, attracting growing scholarly and practical attention over the past decades. While the volume of research on the topic has expanded rapidly, consensus on what greenwashing fundamentally entails has not followed at the same pace.

Multiple trends evolved during this time, and various forms and shades were proposed [28]. As noted by [44], ‘greenwashers’ are companies that appear highly transparent and publish large amounts of ESG data but actually perform poorly on ESG dimensions. As described by [45,46], greenwashing is a deliberate disclosure strategy that benefits companies but harms society. It is often seen as a misleading practice that portrays financial market participants as sustainable when they are not [47] or as inauthentic in their corporate sustainability efforts [48].

Some researchers [13,49,50] define greenwashing as the practice of selective reporting, where positive environmental actions are highlighted while negative ones are concealed. Companies use eco-credentials as a form of ‘green camouflage’ and self-promotion, deflecting attention away from less environmentally friendly or non-environmentally friendly aspects of their operations [51]. This misrepresentation also distorts the link between capital flows and sustainability goals, undermining efforts to fund a genuine low-carbon transition [52]. Greenwashing thrives in environments with weak regulation [47], underscoring the importance of regulatory intervention. Clear standards defining what qualifies as “green” are essential to curb this practice [52,53].

Four forms of greenwashing are summarized by [54]: disclosure (“talking”) versus action (performance or “walking”); active (manipulation by means) versus passive (complete or selective omission) greenwashing; claim (usage of misleading information in advertisements) versus execution (usage of exterior signals evoking nature in advertising) greenwashing; and negative (incomplete information that deceives consumers) versus positive (incomplete information that incentivizes investments in social causes) greenwashing. Meanwhile, Ref. [55] combines the type of deception (active versus passive) with its level (action versus communication) and distinguish forms, such as falsification, deceptive manipulation, information selection, and attention diversion, all of which are considered forms of greenwashing. Seven specific varieties are listed by [56]. Corporate strategies and managerial choices shape these forms, producing different impacts and responses. The adaptability and polymorphic nature of greenwashing make it challenging to define with a single, clear set of characteristics [57].

In the scientific literature [54,57,58,59,60], various levels of greenwashing have been identified. As stated by [61], greenwashing activities can be classified into two main types: product/service greenwashing and organizational policies/practices greenwashing. Depending on the type, various greenwashing instruments are employed, including misleading/deceptive communication and incomplete or selective disclosure.

Although existing literature suggests that ESG factors influence company valuation, greenwashing undermines the credibility of ESG information. The growing number of environmental, social, and governance commitments, including net-zero commitments, is increasingly accompanied by questionable and misleading claims. Once greenwashing is detected, it compromises the reliability of disclosures, discourages companies from investing in the development of green products, reduces consumer willingness to purchase sustainable products, misleads stakeholders in their decision-making, and perpetuates a cycle of poor environmental performance.

Furthermore, such practices often spread within corporate networks, creating a ‘ripple effect’ that encourages imitation, distorts industry ethical standards, erodes trust in corporate social responsibility, and ultimately weakens collective awareness of sustainability [62]. Companies are less likely to engage in selective disclosure when they are more exposed to global norms and scrutiny [13]. These dynamics underscore the need for robust regulatory frameworks and clear standards to prevent greenwashing, particularly in sustainability reporting.

2.2. Enhancing Reliability in Sustainability Reporting

Sustainability reporting enhances corporate accountability and transparency [21,63]. It communicates a company’s ESG practices to stakeholders, reflecting its commitment to sustainable development [17]. However, such reports often legitimize business-as-usual practices rather than critically addressing them, framing sustainability as a “journey” rather than a transformative process [64]. Empirical studies highlight multiple benefits of sustainability reporting, including strengthening brand loyalty, enhancing corporate reputation, signaling positive intentions to stakeholders, and reducing capital costs [60,65,66,67,68]. Furthermore, it legitimizes corporate concern for social and environmental issues [69], mitigates market mispricing [70], and promotes integration of financial and non-financial information under stakeholder pressure [71]. The credibility of these reports, however, depends on the accuracy of the data and adherence to high reporting standards [72].

Despite these advantages, sustainability disclosure faces several significant challenges. The absence of a globally standardized mandatory non-financial reporting creates information asymmetry and inconsistent quality across jurisdictions [22,73]. Disclosure may expose strategic information, and mandatory reporting does not necessarily alter corporate behavior. Sector-specific factors further complicate reporting practices, underscoring the need for tailored standards [17]. Moreover, sustainability reports vary widely in quality, allowing managerial discretion and increasing the risk of greenwashing [70,74]. Unaudited sustainability reports may mislead investors [75], emphasizing the need for assurance mechanisms to prevent significant errors or fraud [76]. Greenwashing often manifests through optimistic narratives and selective disclosure, undermining stakeholder trust and limiting the ability to evaluate actual performance outcomes [77,78,79].

Standardization of disclosure is essential for enabling peer comparison [80], improving governance, and supporting the development of ESG taxonomies [44,70,81,82]. Current variability across countries and companies fosters greenwashing, necessitating legislative measures to enhance reliability [62]. In sustainable finance, unreliable ESG data amplifies greenwashing risks, as companies often disclose positive achievements while concealing information that could harm their image [19]. Manual reporting processes and reliance on company-supplied data further compromise authenticity, making reports vulnerable to manipulation [83,84].

To mitigate these risks, transitioning from voluntary to mandatory reporting is considered essential. Mandatory disclosure should rely on standardized metrics that enable external comparison and make sustainability signals credible and costly to imitate [85,86]. However, uniform standards must account for sectoral differences to ensure relevance and effectiveness [87] as industry characteristics influence disclosure strategies [88].

Government and policymakers play a pivotal role in mitigating greenwashing through regulatory interventions, market oversight, and enforcement mechanisms [89,90]. Key measures include implementing clear standards, monitoring abnormal market capitalization changes [91], removing barriers to competition, strengthening corporate supervision, and establishing independent third-party verification systems [70,92]. Sanctions and penalties for detected greenwashing practices [93] must act as effective deterrents that influence consumer and financial markets [94]. Local environmental regulation and negative media coverage can further reduce sustainability information asymmetry, making greenwashing easier to detect [95]. Additionally, policymakers should promote consumer awareness and reduce the costs of corporate environmental practices to diminish incentives for greenwashing [96].

Although regulatory taxonomies have imperfections, they help reduce ambiguity and clarify definitions, as companies may engage in greenwashing without violating any laws [86,94]. Scholars advocate for mandatory sustainability reporting supported by universal guidelines and procedures to address the regulatory vacuum [17,77]. However, the effectiveness of mandatory disclosure depends critically on the presence of robust and credible assurance mechanisms. Non-financial disclosures often lack supporting assurance, and methodologies for real-time sustainability audits are still under development. Increased disclosure alone does not resolve market participants’ difficulties in assessing ESG quality, and mandatory reporting has not yet delivered significant improvements in disclosure quality [97,98,99]. As a result, reported sustainability information frequently remains difficult to verify, limiting its reliability and decision usefulness.

A uniform reporting system that ensures openness is crucial since greenwashing compromises the quality of disclosure [65]. Third-party verification [60], independent assurance systems [62], external certification standards, stringent enforcement, defined indicators, and publicly assessable targets [100] are examples of effective tactics. Without external verification and monitoring, distinguishing genuine sustainability efforts from rhetorical claims remains challenging [101]. Third-party verification must be supported by robust laws and regulations [102]. However, the regulatory environment and the market for sustainability reporting assurance are at an early stage of development, as the shift from voluntary to mandatory regulation introduces new challenges and opportunities for firms, regulators, assurance providers, and researchers [19]. As discussed by [19], unresolved issues persist regarding the standardization of assurance practices, the certification of assurance providers, and the supervision and quality control of assurance engagements. This reinforces the need for a dedicated framework for mitigating greenwashing in sustainability reporting, as mandatory disclosure alone, without credible assurance, is insufficient to build transparency and trust.

Overall, the persistence of greenwashing risks highlights the need for credible assurance in sustainability reporting. Non-financial disclosures often lack substantiation, and mandatory reporting alone does not guarantee quality. Independent third-party verification and robust assurance mechanisms can enhance reliability, reduce information asymmetry, and strengthen stakeholder trust. Adequate assurance enhances corporate accountability, mitigates greenwashing, and fosters sustainability throughout the supply chain. Nevertheless, challenges remain, including high costs, limited audit depth, and the need for specialized methodologies to ensure timely and accurate sustainability audits. Developing a comprehensive framework for mitigating greenwashing in sustainability reporting is therefore imperative. The methodology for such a framework is presented in the following chapter.

3. Research Methodology

A systematic literature review was conducted to develop a framework for mitigating greenwashing in sustainability reporting, enabling analysis of a broad range of scientific sources and reducing biases associated with selective sampling. The steps for conducting a systematic literature review analysis are outlined in Figure 1. Complementing this, a comparative legal analysis examines how different jurisdictions define and regulate misleading environmental claims and how they structure assurance obligations for sustainability information.

The bibliographic data for the analysis of mitigating greenwashing in sustainability reporting or preventing anti-greenwashing were taken from the Web of Science and Scopus databases, as these are the most widely used in this type of research. The research has encompassed all scientific studies containing the following keyword combinations: anti-greenwashing and assurance, anti-greenwashing and assurance and methodology, greenwash* and assurance, and greenwash* and assurance and methodology.

The screening was conducted in accordance with the PRISMA protocol [103]. It included the following inclusion criteria: full-text, peer-reviewed papers, and papers relevant to the topic, all written in English. Criteria for exclusion: papers written in other languages to avoid misinterpretation; books or book chapters; and papers that are not accessible from library databases.

The initial research phases have yielded a sample of 102 papers; duplicates (21 papers) have been removed, and exclusion criteria have been applied. 27 papers were not accessible via library databases and have therefore been excluded. Another 5 papers were rejected because they were of a different type of publication (books or book chapters). 49 papers have been selected for in-depth content analysis. A systematic review of papers allows scientists to delve deeper into the content of each stream arising from network analysis, fill scientific gaps in investigating questions, and develop a future research agenda.

4. Results

A systematic literature review examining the relationship between sustainability assurance and corporate greenwashing supports the role of assurance as an effective governance tool, while also revealing essential contextual nuances and limitations that shape its effectiveness.

The primary empirical finding across multiple studies [26,27] establishes that sustainability assurance has a significant inhibitory and suppressive effect on corporate greenwashing behavior, effectively enhancing credibility and reducing greenwashing by making disclosures more accurate [24,28,76,104]. We suggest that this inhibitory effect operates through:

• Enhancing substantive action: companies that obtain sustainability assurance tend to increase their substantive green actions. This is observable through higher levels of environmental investment and greater output of green innovations following the assurance engagement [27]. The inhibitory effect of assurance is significantly more pronounced in non-state-owned enterprises [26].
• Reducing symbolic expression: the presence of assurance is linked to a measurable reduction in purely symbolic environmental expressions, vague slogans, and other forms of green talk in corporate reports [27].
• Improving sustainability performance: the assurance process governs greenwashing by serving as a catalyst for improving a company’s overall sustainability performance. This improved performance acts as a mediating factor, directly reducing the gap between claims and actions [26].

We also found that the efficacy of assurance depends on the provider, and that the effect is more substantial if an audit company provides assurance compared to a certificate consultant [27]. Companies with independent sustainability assurance exhibit a reduced likelihood of greenwashing [26]. Moreover, as stated by [105], the concern is that third-party verification or assurance of sustainability information is more difficult and more prone to user confusion than traditional audits of financial information.

Although assurance is widely viewed as a mechanism for constraining greenwashing, conceptual disagreement persists, with some studies warning that assurance may function more as a legitimizing tool than as a substantive deterrent. There is skepticism that sustainability assurance may be used for symbolic disclosure or greenwashing [27,106]. Concerns are raised that assurance could reinforce greenwashing by giving investment products a green, rational, and reassuring appearance that they lack [19]. Companies engaging in greenwashing may utilize environmental information assurance to magnify the degree of their environmental disclosure and performance gap, potentially misleading stakeholders [31]. As emphasized by [107], a noninnovative company is incentivized to mimic the innovator by choosing a certified or uncertified claim to conceal its actual type, at the risk of being caught engaging in greenwashing and facing future penalties. Moreover, as suggested by [108], assurance has more of an informational or advisory influence than a supervisory effect.

Based on systematic literature analysis, five key thematic trends related to greenwashing mitigation were identified: regulatory deterrence, stakeholder pressure, assurance quality, corporate governance mechanisms, and technological innovation. These trends are explored more deeply in the following sub-chapters. Based on that, a framework for mitigating greenwashing in sustainability reports is developed and presented in Section 4.6.

4.1. Regulatory Deterrents for Greenwashing Elimination

Through our systematic analysis, we identify regulatory aspects as a dominant theme in the literature, primarily centered on the pervasive difficulty of defining greenwashing in a single, unambiguous manner [28,60,109]. The lack of an international agreement challenges policymakers and domestic agreements regarding the definition of what constitutes green or sustainable practices [110]. The imprecise, futuristic, and technical features of green claims make it difficult for prosecutors and researchers to determine whether they are misleading and deceptive [28]. Moreover, as emphasized by [111], factors such as protocols and conventions, media role, and the strength of environmental policies have a considerable and positive impact on the occurrence of greenwashing.

Regulators identify greenwashing as a significant problem that requires enforcement and regulatory responses [109,110]. Regulatory measures to address greenwashing, deception, and fraud are evolving rapidly [28,112]. The regulation of greenwashing raises thorny doctrinal questions [110,113]. Regulatory efforts must target untruthful environmental claims [113]. Comprehensive policy packages may be more effective than isolated interventions targeting single parameters [114].

4.2. Stakeholder Influence on Greenwashing Prevention

Based on our systematic analysis, stakeholders play a crucial role in deterrence, driving market-driven mechanisms such as vigilance, due diligence, and activism, which exert pressure on companies to increase transparency in their disclosures [25]. Stakeholders’ activism, through shareholder resolutions, divestment, and public campaigns, drives tangible change [25]. External supervisors, including the media, the public, and NGOs, play a significant role in mitigating information asymmetry. Companies with high media attention face more substantial incentives to avoid greenwashing, whereas stringent scrutiny by financial analysts compels them to improve the quality of their disclosures [28,112]. However, extensive analyst coverage may inadvertently contribute to sustainability greenwashing in some contexts [112]. Loyal customers can mitigate the adverse effects of greenwashing [115].

The stakeholders’ engagement is a central part of the double materiality assessment process. The company-stakeholders engagement process must be conceived as a core aspect of a broader effects management framework and led by a good legal approach [116]. However, stakeholders have various informational needs. Capital providers focus on financial materiality, whereas other stakeholders (NGOs, citizens) may be more concerned with the outward negative impacts of corporate activity [91,106]. Moreover, the success of stakeholders’ involvement depends on stakeholder attentiveness and cognition [7]. When stakeholders are readily diverted or trusting, greenwashing may be successful [7]. Stakeholder salience, determined by attributes such as power, legitimacy, and urgency, affects which groups receive attention and influences the communication approach [7,114].

4.3. Third-Party Verification and Assurance Quality-Related Issues for Greenwashing Mitigation

Researchers have consistently highlighted the lack of clarity and rigor in sustainability assurance methods. The vagueness of assurance methodologies is a significant criticism [19]. This vagueness relates not only to uncertainties about new standards but also to the assurance process itself, specifically its scope, methods, and timing [19]. Assurance procedures lack consistent methodologies for measuring ESG performance [109], resulting in significant variability in assurance quality [24]. Current widely adopted standards, such as ISAE 3000, are generally criticized for being overly general and for providing little guidance to auditors on addressing specific sustainability issues effectively [24,76].

The audit’s lack of depth and uncertainties about the verified data quality are reflected in the predominance of audit results that provide only a limited level of assurance [19]. This limited assurance appears out of step with the importance of ESG issues and stakeholders’ expectations [19]. Moreover, assurance providers face significant gaps in the necessary skills and training for adequate ESG verification. The main criticisms concern the lack of expertise to conduct rigorous, recognized assurance on sustainability disclosures for sustainable finance [19,76,117]. The mismatch between needs and available expertise risks reinforcing unscrupulous and unprofessional behavior among some auditors [19]. The assurance process is generally seen as technical, sophisticated, and complex [19].

Studies have criticized auditors’ professionalism, specifically their lack of training and their tendency to apply accounting procedures to very different ESG issues [19]. The qualitative and multidimensional nature of sustainability data does not align well with financial auditors’ habitual focus on objective, verifiable numbers [24]. Moreover, the high demand for specialized knowledge means that finding assurance providers capable of verifying sustainability disclosures may represent a significant challenge for investors [19], and fundamental questions concerning who will be the service providers and if and how they will be qualified to provide services are raised [117]. Sustainability assurance teams should ideally include subject-matter experts such as engineers and environmental scientists [24]. Interesting results have been identified by [118], who found that the positive relationship between board gender diversity and the use of a broader range of sustainability assurance procedures is stronger when assurers are accountants.

Assurance may not only fail to deter greenwashing but can also be actively exploited to mislead stakeholders. Assurance practices tend to be instrumentalized to serve companies’ interests rather than those of stakeholders [19]. There is a risk that assurance services may be exploited to repair the company’s legitimacy following media coverage of sustainability misconduct [31]. This aligns with the understanding that greenwashing is often a strategy intended to create an overly optimistic corporate image [54]. Companies suspected of engaging in greenwashing have been found to use environmental information assurance to exaggerate the extent of their environmental disclosure and performance gaps, potentially misleading stakeholders [31].

The imposition of assurance standards worldwide is likely to reinforce greenwashing by giving investment products a green, rational, and reassuring appearance that masks their lack of real sustainability [19]. Assurance practices may make greenwashing problems more invisible and abstract [19]. Doubts about independence arise from the managerial capture of audits, business issues underlying the assurance process, and potential conflicts of interest among auditors [19,24]. Assurance providers still rely on the company’s management to provide evidence of environmental claims, increasing the risk of misleading statements [31].

4.4. Corporate Governance Mechanisms for Greenwashing Mitigation

This thematic trend of research explores the influence of corporate governance mechanisms, particularly board characteristics [28,60], emphasizing that assurance is a primary governance tool used to prevent greenwashing [119]. Findings show that board characteristics like the proportion of women on the board and board independence are positively associated with the degree of greenwashing in some studies [28,60]. Effective governance, such as enhancing oversight by independent directors, is typically expected to reduce agency problems and mitigate greenwashing [31,120]. Moreover, as emphasized by [121], perceived greenwashing influences managerial decisions. Female senior managers in family firms are less likely to engage in greenwashing [122].

Greenwashing is often viewed as a principal-agent problem arising from misaligned incentives [25]. High internal control quality is highlighted as a potential way to reduce greenwashing, as it enhances reporting reliability. Management shareholding, an internal governance tool, has a substitutive effect on external sustainability assurance in inhibiting greenwashing [26]. When management shareholding is low, sustainability assurance is more effective at suppressing greenwashing [26]. This is because management ownership fosters incentives and supervisory effects that can efficiently mitigate agency problems, acting as a crucial substitute role when mandatory external assurance is absent [26].

Governance mechanisms, including dedicated committees and assurance, are crucial for oversight, helping reduce the risk of greenwashing stemming from poor control environments or intentional manipulation [123,124].

Governance bodies face increasing legal risks: increased director liability may inadvertently encourage greenwashing [125], tort doctrines such as ‘assumption of responsibility’ in the UK extend liability to sustainability report content [41], and an increase in consumer litigation and ESG-related securities confirms greenwashing as a legal compliance issue [42].

4.5. Technology Impact on Greenwashing Mitigation

Our systematic literature review also highlights a growing body of recent studies that emphasize the role of emerging technologies in combating deception, underscoring this area as a prominent research trend. Advanced tools, such as artificial intelligence, blockchain, and IoT, are advocated for enhancing transparency [26,120,126,127,128]. The application of technology in sustainability assurance enables continuous, real-time data collection and verification of physical environmental impacts. For example, satellite imagery can be used to independently estimate and verify corporate greenhouse gas emissions, while IoT sensors can directly monitor water usage or waste output at the source [71]. The use of blockchain can create secure, tamper-proof data chains to store data, making information validated and instantly available [26,126]; thus preventing fraud in carbon credit markets [25,129].

4.6. A Framework for Anti-Greenwashing Assurance in Sustainability Reporting

Following the identification of five key thematic trends related to greenwashing mitigation, we developed a comprehensive framework for mitigating greenwashing in sustainability reporting. This framework integrates mandatory regulatory structures, stakeholder engagement, technical standards, internal controls, robust third-party verification, and advanced technological mechanisms to effectively bridge the gap between corporate communication and substantive organizational action. Given that greenwashing constitutes a complex and multidimensional phenomenon, manifested across diverse forms, shapes, and levels, its effective detection and prevention remain challenging [28].

The proposed framework for mitigating greenwashing in sustainability reporting is built upon five interconnected pillars, forming a synergistic ecosystem of deterrents (see Figure 2).

The proposed framework for mitigating greenwashing in sustainability reporting emerges from the synergistic interaction and interlocking pressures of five primary categories of deterrents: regulatory mandates, stakeholder engagement, independent verification (including assurance and standardization), corporate culture and internal controls, and advanced technology. Rather than relying on isolated instruments, this integrated system generates stronger institutional pressure, enhances corporate accountability, and increases the perceived risk and costs of engaging in greenwashing, thereby reducing its attractiveness. The individual pillars of this framework and their interconnection are elaborated in greater detail as follows:

1.

Regulatory and legal enforcement. Regulations establish the essential baseline for accountability, creating coercive pressure that forces companies to internalize externalities and comply with sustainability expectations. Regulatory frameworks, often grounded in the government’s legitimate power and coercive authority, are binding on companies and serve as potent deterrents to greenwashing. Regulatory sanctions and penalties, when substantial and compelling, serve as deterrents that transform corporate behavior and market outcomes. Regulatory bodies must balance the need for strict enforcement with the risk of unintended consequences, such as greenhushing. Regulators often operationalize interventions by aligning greenwashing cases with existing laws, transforming the vaguely defined concept into something actionable. To ensure anti-greenwashing practices, mandatory assurance systems should be created. Policymakers must expedite the establishment of a mandatory assurance system for sustainability reports and propose reasonable assurance regulations. Mandatory disclosure should be based on a standardized metric to allow for comparison and external verification, making the signal credible.

2.

Stakeholder engagement. Stakeholder engagement leverages market pressures and external scrutiny to enforce compliance. Stakeholder engagement acts as a critical deterrent by leveraging competitive and reputational pressures. Investors, media, and NGOs serve as watchdogs, inspecting corporate conduct and demanding accountability. Standardization makes sustainability reports more user-friendly, thereby amplifying stakeholder participation and scrutiny, and directly linking standardization efforts to market enforcement. Policymakers should leverage stakeholder engagement to curb greenwashing. Encouraging shareholders and stakeholders to demand evidence for environmental claims and advocate for stricter regulations strengthens accountability.

3.

Assurance and standardization. Standardization and third-party verification (assurance) provide a common language and independent oversight, enabling regulators and stakeholders to effectively scrutinize corporate claims. Standardization promotes uniformity in metrics and reporting formats, which reduces the likelihood of greenwashing by making symbolic compliance more challenging. Mandatory assurance is designed to enhance credibility and reduce greenwashing by ensuring disclosures are more accurate. Assurance, through its supervisory and information-transmission functions, reduces opportunities for greenwashing driven by information asymmetry and regulatory deficiencies. Moreover, assurance providers must employ more rigorous verification procedures and maintain professional skepticism, especially for companies with poor environmental performance. Assurance must encourage substantial actions and discourage symbolic expressions. Assurance procedures should adopt new approaches, such as mandatory linguistic reviews to detect manipulative language patterns. Verify the gap between self-reported ex-ante intentions and ex-post environmental controversies and sanctions.

4.

Corporate culture and internal controls. The mitigation of greenwashing relies significantly on developing internal corporate systems, including the formation of an ethical, continuous-learning corporate culture with robust internal controls and governance structures. These international mechanisms are required since greenwashing often arises from pressures and incentives deeply embedded within the company. An internal accountability mechanism is necessary to foster scrutiny that increases the likelihood and cost of exposure, countering the assumption that greenwashing pays. The need to reform corporate governance structures, establish environmental committees with veto power over greenwashing risks, and link the quality of sustainability reports to executive long-term incentives should be expressed.

5.

Technology deterrents. Technology provides the means for objective data collection and real-time verification. Tools such as blockchain, AI, and IoT/sensors improve supply chain transparency and product lifecycle tracking. Blockchain ensures that environmental records are accurately recorded and not double-counted. AI tools can support regulators by providing relevant data, increasing the volume of reports, and enhancing the quality of disclosures. Emerging technologies provide powerful new tools to enhance the rigor of sustainability assurance and combat increasingly sophisticated forms of greenwashing. By moving beyond traditional document reviews and interviews, technology can enable more direct and continuous verification of corporate claims. Combining regulation with technology can yield powerful deterrents. Additionally, technology can establish a dynamic monitoring system that enables governments and financial institutions to monitor company sustainability data in real time and act quickly when irregularities are found. Moreover, the possibility of using artificial intelligence and machine learning techniques to detect greenwashing presence at the reporting level should be explored. For greenwashing detection, blockchains are necessary to store data, ensuring that data is digitally authenticated and instantly accessible to investors and regulators, and that full-process tracking of environmental actions and their financial impacts is enabled.

Our analysis suggests that the alignment of diverse and interlocking pressures, such as regulatory requirements, stakeholder engagement, independent verification, corporate culture, internal controls, and technological transparency, can generate a stronger and more coherent institutional force that enhances accountability and counteracts the systemic nature of greenwashing.

In addition, the framework for mitigating greenwashing in sustainability reports must be enhanced through the systematic integration of core principles of transparency, materiality, and verifiability across its regulatory, assurance, and technological pillars to combat greenwashing effectively.

Transparency is fundamental, as it enables stakeholders to accurately assess corporate commitments and performance, thereby reducing the information asymmetry that often facilitates greenwashing. Sustainability disclosure is intended to serve as a supplementary tool to enhance companies’ accountability and transparency. To enhance transparency, disclosure should be uniform and consistent, clearly defining goals and using public reports. Advanced technologies are crucial for increasing transparency. Companies must disclose all relevant information, including negative impacts. Standardization, by specifying requirements, curtails the chances of greenwashing by promoting greater transparency. Regulatory bodies should enforce clear standards for environmental communication in reports and marketing materials, thereby reducing vagueness and ambiguity. Transparent and honest communication builds consumer trust.

Materiality determines which information must be disclosed and assured, ensuring that reporting efforts are focused on the most significant issues, rather than irrelevant or trivial claims. Assurance requirements could be limited to specific topics deemed critical. Standard-setting organizations’ requirements for materiality assessment ensure that assurance and disclosure efforts address areas genuinely relevant to stakeholders’ decisions. Assurance practices must verify that the reporting company has duly evaluated materiality. This verification process is crucial to ensure that the disclosed information aligns with the objective.

Verifiability is the quality that enables independent parties (auditors, regulators, or technology) to substantiate green claims, which is essential for gaining credibility and countering unsubstantiated statements. Independent verification of sustainability reports enhances users‘ confidence and is crucial to ensure credibility and accuracy. Assurance aims to obtain reasonable assurance that reports are free from material misstatement. It is considered necessary to enhance the credibility of sustainability products. Strengthening the measurability, traceability, and verifiability of sustainability information disclosure is crucial. This includes using quantifiable indicators where possible and providing clear calculation methods for indicators that are difficult to quantify, ensuring data comparability. Technologies such as sensors and IoT can be integrated into the certification process to enable real-time monitoring of environmental conditions, providing up-to-date, verifiable information linked to certification standards. Independent verification is a strong signal of transparency in disclosure. However, assurance must be robust and not degenerate into a tick-the-box process, as the reliability of disclosure depends fundamentally on the quality of the corporate sustainability performance data at the source.

5. Discussion

The synthesis of theoretical and empirical research demonstrates that sustainability assurance is a powerful but not infallible tool in the fight against corporate greenwashing. While it generally enhances transparency and accountability, its effectiveness is contingent on a range of factors.

The rapid evolution of the sustainability landscape, particularly in ESG, opens up several critical avenues for future research. Based on the findings of systematic literature reviews, the following research areas are proposed. The sustainability reporting market is emerging and rapidly developing [29]. As mandatory assurance regimes, such as those mandated under the CSRD, are implemented in the EU and globally, research is needed to investigate their real-world impact. Studies should examine how these regulations influence corporate reporting behavior, affect competition and pricing in the assurance market, and alter the nature and sophistication of greenwashing. A deeper understanding of greenwashing requires moving beyond a purely economic or accounting lens. Future research should integrate insights from behavioral psychology, policy science, and leadership studies to explore the cognitive biases that make stakeholders susceptible to greenwashing and to understand how different corporate leadership styles interact with policy interventions to either enable or prevent deceptive practices, as also indicated by [25].

The rise of generative AI presents both threats and opportunities. Research should investigate how AI text generation will impact sustainability reporting, including its potential to amplify sophisticated greenwashing if trained on biased or symbolic corporate data. Conversely, studies should also explore how AI-powered data analysis can enhance assurance processes, enabling auditors to detect anomalies and patterns indicative of greenwashing more effectively. This suggestion is supported by [85] work.

Heightened regulatory scrutiny, coupled with uncertainty around enforcement, created a risk of unintended consequences such as greenhushing. This phenomenon occurs when companies strategically withhold or underreport their genuine sustainability efforts, fearing that their claims will be misinterpreted, challenged by activists, or targeted by regulators, thus stifling the very transparency the regulations are meant to encourage. Beyond the high-level policy debates, companies face immense practical difficulties. These include complying with a growing array of diverse and sometimes conflicting regulatory obligations, establishing trustworthy data management systems across complex global supply chains, selecting credible assurance providers, and navigating the evolving taxonomy of greenwashing itself. Closing this gap between regulatory intent and corporate capability will be critical to the success of any anti-greenwashing regime. These challenges should also be addressed in future research to deepen the understanding of and combat greenwashing by expanding the greenwashing taxonomy. Research should be expanded to include new and emerging forms of misrepresentation, such as greenhushing, greenbleaching, and machine-washing. Another future research trend is related to the need to develop more reliable, objective, and quantitative methods for measuring greenwashing. This includes validating technology-based verification methods and refining textual analysis techniques as provided by [130]. Frameworks for detecting greenwashing need to incorporate methodologies that focus on linguistic features (e.g., tone, clout, analytical thinking, authenticity) to identify subtle rhetorical tactics and impression management gaps that may not be visible solely through performance metrics.

Policy implications. Regulators worldwide have identified greenwashing as a significant issue that requires intervention. However, they need to tackle a concept that is inherently fluid, opaque, and malleable, and lacks an internationally agreed-upon definition. They must contend with various typologies, forms, and shades of deception that are becoming more covert. Discussion should address the shift in regulatory focus from requiring proof of intent to regulating the accuracy and misleading nature of claims, regardless of their purpose. This shift is expanding regulatory scope to encompass all ESG dimensions.

Policy discussions must address the unintended consequences of aggressive anti-greenwashing regulation, including greenhushing and other typologies. This risks impeding transparency and innovation, rendering regulatory interventions as mere stopgap measures with limited long-term impact. Thus, strategies should be debated to balance the costs and reliability of sustainability assurance and to provide more straightforward disclosure guidelines to alleviate the fear of scrutiny and potential sanctions.

Regulatory interventions tend to focus on the most obvious cases and are constrained by budget limitations. The need for significant resource allocation to investigate complex green claims should be addressed.

Theoretical implications. Despite extensive literature, greenwashing remains conceptually ambiguous, with inconsistent definitions and operationalizations. Future studies should develop standardized definitions and measurement scales that capture both process-oriented and outcome-oriented dimensions. Governance studies show mixed effects of board size and independence/independence and sustainability committees, on greenwashing; therefore, interaction effects between board attributes and assurance design warrant further research. Investigation into emerging technologies and regulatory frameworks, focusing on how digital tools and evolving global standards interact with stakeholder pressures to reduce sustainability uncertainty, should be developed in the future. Together, these directions will strengthen conceptual clarity, refine theoretical models, and provide actionable insights for governance, assurance, and policy design.

Practical implications. The increasing complexity of greenwashing necessitates that researchers continually refine their tools and concepts. Companies should strengthen their internal control quality to mitigate greenwashing. Due to the evolving regulatory landscape, the multifaceted phenomenon of corporate greenwashing necessitates adaptation of their corporate governance systems. Since greenwashing often arises in response to stakeholder pressures, an anti-greenwashing strategy should reinforce stakeholders’ role.

6. Conclusions

This article set out to conduct a systematic analysis of the existing literature to evaluate the role and effectiveness of sustainability assurance as a primary mechanism for combating greenwashing and to propose a comprehensive framework for mitigating greenwashing in sustainability reporting. The study demonstrates that greenwashing in ESG reporting represents a persistent threat to corporate accountability and stakeholder trust, particularly amid rising regulatory and societal expectations for credible sustainability performance. Drawing on a comprehensive systematic literature review, the findings confirm that sustainability assurance functions as a central institutional safeguard against greenwashing, playing a critical preventive role by strengthening substantive corporate action, reducing symbolic disclosure, and improving overall sustainability performance. The analysis further identifies five interdependent thematic drivers of effective greenwashing mitigation—regulatory deterrence, stakeholder pressure, assurance quality, corporate governance mechanisms, and technological innovation—which collectively shape the integrity and credibility of sustainability reporting practices.

Building on these insights, this study proposes a five-pillar conceptual framework, emphasizing that no single mechanism is sufficient to combat greenwashing in isolation. Rather, the coherent and synergistic alignment of regulatory mandates, stakeholder engagement, independent verification, robust corporate culture and internal controls, and advanced technological tools is required to generate a durable institutional force against deceptive practices. To strengthen its effectiveness, the proposed framework must also systematically embed the principles of transparency, materiality, and verifiability across its regulatory, assurance, and technological dimensions. Finally, the study highlights that future research must critically examine how evolving regulatory regimes, leadership dynamics, and generative AI are simultaneously reshaping both the detection and sophistication of greenwashing, thereby requiring interdisciplinary, data-driven, and linguistically sensitive approaches to sustain the long-term credibility of sustainability reporting.

Ultimately, policymakers and standard-setters have a critical role to play in shaping a future in which sustainability assurance effectively fosters genuine corporate sustainability.