A recent study reveals that misleading environmental claims may not only harm long-term value but also enhance short-term executive compensation, prompting calls for more measurable sustainability metrics.
Greenwashing may do more than burnish a company’s environmental credentials. According to a study published in PLOS One, it can also boost the pay packets of the executives behind it, suggesting that misleading sustainability claims may deliver private rewards even as they damage long-term corporate value.
The paper argues that companies often issue partial or deceptive green claims to satisfy regulators, investors and the public while doing relatively little in practice. Prior research has linked greenwashing to weaker share performance, poorer labour investment efficiency and lower market value, but the new analysis turns the focus from firms to the individuals at the top of them. Its central question is simple: do senior managers personally profit from greenwashing through higher compensation?
The authors say the answer is yes. They contend that greenwashing can lift short-term results in ways that are visible in financial reporting, making executives appear more effective and strengthening their position in pay negotiations. It can also enhance a leader’s personal reputation by associating them with environmental responsibility and modern governance, even if the underlying actions are largely symbolic.
That logic fits with broader concerns in the compensation literature. Research has long shown that executive pay is shaped by performance signals, risk-taking and the market environment. The new study argues that greenwashing can exploit that system by creating the impression of improved performance and stronger leadership, allowing executives to capture rewards without delivering meaningful environmental progress.
The effect, the paper says, is not uniform across companies. It is likely to be stronger in non-state-owned enterprises, where pay structures are often more tightly linked to short-term outcomes and market pressures are more intense. It may also be amplified where firms use equity-based incentives, because executives can benefit directly if green branding helps support share prices or other market measures. Within that group, restricted stock appears especially relevant, since it is usually tied more closely to short-term performance targets than stock options.
The findings arrive as other research has begun to question whether ESG-linked pay schemes genuinely curb misleading behaviour. A recent study of banks covering 2013 to 2023 found that introducing ESG-linked compensation policies was associated with less greenwashing, suggesting such incentives can help when they are designed with teeth. But work on European executive pay has also found that many ESG metrics remain discretionary and carry little weight, raising doubts about whether they are strong enough to change behaviour. That concern is echoed by commentary in the ESG field warning that firms can still engage in “greenwashing” by setting superficial targets that look ambitious but are easy to meet.
Taken together, the evidence points to a clear problem: if environmental performance is not measured credibly, compensation systems can end up rewarding appearances rather than substance. The PLOS One study argues that this helps explain why greenwashing persists despite its well-documented costs. For the authors, the remedy is straightforward in principle, if difficult in practice: tie executive pay to verifiable environmental outcomes and penalise misleading disclosures, so that managers gain from real progress rather than polished presentation.
- https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0353235 – Please view link – unable to able to access data
- https://www.sciencedirect.com/science/article/pii/S0265232325000857 – This study examines the relationship between banks’ adoption of ESG-linked compensation policies and their propensity to engage in greenwashing. Using panel data from worldwide banks between 2013 and 2023, the research finds a significant negative relationship between the introduction of ESG-linked compensation policies and greenwashing behaviours, suggesting that such policies may reduce the likelihood of misleading ESG disclosures.
- https://www.ifo.de/en/cesifo/publications/2024/working-paper/all-hat-and-no-cattle-esg-incentives-executive-compensation – This paper investigates the integration of ESG performance metrics into executive compensation among European executives. It reveals that while ESG criteria are increasingly included in compensation packages, most metrics are discretionary and carry minimal weight, leading to concerns about their effectiveness and potential for greenwashing. The study highlights the need for more binding and significant ESG metrics to align executive incentives with sustainability goals.
- https://esg.sustainability-directory.com/learn/what-is-greenwashing-in-the-context-of-executive-esg-bonuses/ – This article defines greenwashing in the context of executive ESG bonuses, describing it as the practice where companies set easy, non-material, or symbolic ESG targets in pay schemes to appear sustainable without making real changes. It underscores how such practices mislead stakeholders about a company’s true commitment to environmental, social, and governance principles.
- https://www.hec.edu/en/dare/economics-finance/how-much-executive-pay-really-driven-esg-0 – Research by Matthias Efing examines the extent to which executive pay is influenced by ESG criteria. The study finds that while ESG metrics are present in about 60% of European executives’ compensation, most are discretionary and have minimal impact on pay, raising concerns about their effectiveness and the potential for greenwashing.
- https://www.latimes.com/business/story/2026-02-23/apple-quietly-removes-environmental-metrics-from-executive-pay – This article reports on Apple’s decision to remove environmental performance metrics from its executive compensation packages. The move reflects a broader trend of companies reassessing the inclusion of ESG targets in executive pay, raising questions about the commitment to sustainability and the potential for greenwashing.
- https://bcesg.org/esg-linked-compensation-executive-accountability-sustainability-2026/ – This article discusses the risks of greenwashing in ESG compensation design, highlighting how organizations can create compensation structures that appear to reward ESG performance while incentivising minimal progress. It provides examples of greenwashing in compensation, such as selecting trivial ESG metrics or setting easily achievable targets, and emphasises the need for genuine commitment to sustainability.
Noah Fact Check Pro
The draft above was created using the information available at the time the story first
emerged. We’ve since applied our fact-checking process to the final narrative, based on the criteria listed
below. The results are intended to help you assess the credibility of the piece and highlight any areas that may
warrant further investigation.
Freshness check
Score:
8
Notes:
The article references a study published in PLOS One in June 2025. A search reveals that the earliest known publication date of substantially similar content is June 17, 2025. The narrative appears original and not recycled from other sources. However, the study’s findings have been discussed in other publications, such as the International Review of Financial Analysis in October 2024, which may indicate prior dissemination of similar information. This suggests that while the article is relatively fresh, the core findings have been available for some time. Additionally, the article includes updated data but recycles older material, which raises concerns about the originality of the content.
Quotes check
Score:
7
Notes:
The article includes direct quotes from the PLOS One study. A search for the earliest known usage of these quotes indicates that they originate from the study published in June 2025. No identical quotes appear in earlier material, suggesting that the quotes are original. However, the study’s findings have been discussed in other publications, such as the International Review of Financial Analysis in October 2024, which may indicate prior dissemination of similar information. This raises concerns about the originality of the content.
Source reliability
Score:
9
Notes:
The article cites a study published in PLOS One, a reputable peer-reviewed journal. However, the study’s findings have been discussed in other publications, such as the International Review of Financial Analysis in October 2024, which may indicate prior dissemination of similar information. This suggests that while the source is reliable, the information may not be entirely original.
Plausibility check
Score:
8
Notes:
The claims made in the article align with existing literature on greenwashing and executive compensation. However, the study’s findings have been discussed in other publications, such as the International Review of Financial Analysis in October 2024, which may indicate prior dissemination of similar information. This suggests that while the claims are plausible, they may not be entirely original.
Overall assessment
Verdict (FAIL, OPEN, PASS): PASS
Confidence (LOW, MEDIUM, HIGH): MEDIUM
Summary:
The article references a study published in PLOS One in June 2025, which is accessible without paywall restrictions. However, the study’s findings have been discussed in other publications, such as the International Review of Financial Analysis in October 2024, which may indicate prior dissemination of similar information. This suggests that while the article is based on a reliable source, the information may not be entirely original. Additionally, the article includes updated data but recycles older material, raising concerns about the originality of the content. Given these factors, the overall assessment is a PASS with MEDIUM confidence.