As climate crisis intensifies, firms are under increasing pressure from stakeholders to disclose their carbon emissions and climate initiatives. This has led to a new type of carbon data-related ESG greenwashing, known as carbonwashing, where companies increasingly exaggerate their decarbonization efforts and present misleading carbon claims to create an illusion of environmental responsibility. This study develops a novel measure of carbonwashing, namely CWSCORE, which captures 21 distinct deceptive carbon signals. Using this measure, we conduct three pivotal empirical analyses: first, we examine the impact of Artificial Intelligence Adoption (AIA) on carbonwashing mitigation within the framework of Ecological Modernization Theory; second, we evaluate the effect of Corporate Sustainability Governance Mechanisms (CSGM) on carbonwashing; and third, we explore the role of AIA in enhancing the effectiveness of CSGMs. Our analysis is based on a comprehensive international sample comprising 188,510 firm–year observations from 13,486 unique firms across 12 countries in six continents, covering the period 2010 to 2023. We observe that AIA significantly mitigates carbonwashing. Additionally, while Emission management teams and ESG committees increase carbonwashing, ESG pay, ESG audit and Climate risk board oversight decrease carbonwashing. Notably, integrating AIA with each CSGM results in significant reduction in carbonwashing. These findings remain robust across numerous alternative specifications, including alternative variables, dynamic panel techniques, difference-in-difference estimation and instrumental variable methods. Additionally, AIA reduces carbon emissions, improves carbon performance, and curtails broader ESG greenwashing. The study offers crucial insights into the potential of AI in driving authentic climate sustainability, with implications for researchers, policymakers, and practitioners.

Authors:
Inah Okpa, University of Kent, United Kingdom

About the Presenter(s)
Inah Bassey Okpa is currently a PhD candidate in Accounting and a Graduate Teaching Assistant (GTA) at the Kent Business School, University of Kent, England, where He teaches seminar at both Undergraduate and Postgraduate level.

Connect on Linkedin
https://www.linkedin.com/in/inah-okpa-3a8723ab/

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