Uncovering Greenwashing: A Review of Large Public Companies

Abstract

With the growing societal pressure on corporations to reduce their negative impact on the world around them, many corporations are making public statements about their stance and impact on the environment. Although this might seem like progress, it’s important to question whether this rhetoric leads to any measurable change. Do changes in environmental corporate sentiment lead to changes in GHG levels? To start addressing this question, we are analyzing a small sample of six companies in the chemicals sector for the last ten years. We gathered data from the EPA’s FLIGHT database, which reports GHG for every facility in the U.S. Next, we gathered annual reports for each company over ten years from the SEC’s EDGAR database, which consolidates information submitted by publicly traded firms. Afterwards, we processed the annual reports through a natural language processing algorithm named ESGBERT. ESGBERT classifies each sentence in a report into one of three categories: environmental, environmental action, and none. We can then compare the ratios of each category to the respective companies' GHG levels over ten years. While a conclusion using ESGBERT has not yet been reached, when using a less sophisticated sentiment analysis approach, our preliminary results were inconclusive and showed a weak correlation between GHG and environmental sentiment. However, this research question is important to policymakers, shareholders, and the general public because the answer would inform them which companies deserve praise for their efforts in lowering their negative impacts and which companies are capitalizing on the movement without doing anything.