UNAIR NEWS – Aiming to foster sustainable communities, Universitas Airlangga’s Faculty of Economics and Business (FEB) has recently hosted an international conference. The 8th International Conference and PhD Colloquium for Economics and Business (8th ICEB) was held from Thursday to Friday (October 30-31, 2024).

This year, ICEB was conducted in a hybrid format, held in the K R T Fadjar Notonagoro Hall on FEB’s Dharmawangsa-B campus at UNAIR and virtually via Zoom. The conference theme, “Sustainability in Social and Economic Community,” attracted global experts and academics to discuss the latest sustainability insights.

One of the speakers, Prof. Dr. Johnny Jermias from Simon Fraser University, contributed to the first day’s plenary session with his research on corporate greenwashing practices.

Understanding greenwashing

With growing global awareness of sustainability, investors and consumers increasingly prefer products and services from companies with eco-friendly labels.

This trend has encouraged some companies to practice “greenwashing” – falsely portraying their operations, products, or services as more environmentally beneficial than they truly are.

Prof. Jermias pointed out that young consumers are often particularly affected by greenwashing tactics. “We know that younger generations care more deeply about the environment and are willing to pay premium prices for green products,” explained the Manado native.

Compensation and greenwashing

Prof. Jermias’ study, titled “Greenwashing or Sustainable Investment,” examines the links between greenhouse gas emissions, managerial compensation, and the tendency to greenwash. The research stems from the competitive pressure on companies to cut emissions in order to appeal to eco-conscious investors.

“In 2017, around 75 percent of companies set goals to reduce emissions, yet by 2021, only 11 percent had reached those targets,” he reported.

This gap has prompted companies to offer generous incentives to those who can achieve environmental milestones. However, the high pressure to demonstrate short-term results often leads managers to choose greenwashing over authentic sustainability practices.

“As a result, managers with performance-based pay are generally more inclined toward greenwashing than those with fixed pay tied to sustainable activities,” Prof. Jermias explained. This tendency is especially pronounced in companies with high greenhouse gas emissions.

Author: Zahwa Sabiila Ilman Ramadhani

Editor: Yulia Rohmawati