Companies that adopt aggressive strategies of tax planning and reducing the tax burden also tend to exaggerate their environmental commitment through practices of greenwashing. The conclusion comes from a study led by Murdoch University in Australia, which analyzed nearly 400 companies listed on the Australian stock exchange.
The investigation, published in the scientific journal Business Strategy and Development, evaluated 391 companies on the Australian Securities Exchange (ASX) index between 2019 and 2022, including the period marked by the economic instability caused by the COVID-19 pandemic.
The researchers cross-referenced tax, environmental data and ESG indicators (environmental, social and governance) to understand whether there was a relationship between corporate tax evasion and the tendency to present a more positive environmental image than the reality.
The results indicate a clear correlation: the more aggressive the tax minimization strategies, the higher the likelihood that companies would resort to greenwashing to manage their public reputation.
Financial pressure can incentivize facade practices
According to Augustine Donkor, a researcher at Murdoch Business School and the study’s lead author, companies currently face increasing pressure to simultaneously deliver strong financial results and high sustainability standards.
“The aim of our investigation was to determine whether these pressures lead some companies to prioritise image over concrete actions to improve their environmental performance,” he explains.
According to the researcher, periods of economic uncertainty can encourage some organizations to cut costs while seeking to preserve a positive image among investors, consumers and regulators.
“As information about sustainability takes on an increasingly important role in decision-making, ensuring its credibility becomes essential,” he adds.
Conservative companies showed greater tendency
One of the results that surprised the team most was the fact that the relationship between tax evasion and greenwashing is particularly strong in companies that follow a business strategy classified as “defender.”
This model is characterized by a more conservative approach, focused on operational efficiency, cost control, stability and maintenance of market position, rather than the aggressive pursuit of growth or innovation.
“We expected that companies with more aggressive expansion strategies would be more prone to these behaviors,” Donkor admits. “However, the results suggest that some more conservative organizations may view greenwashing as a relatively cheap way to protect their reputation, while resorting to aggressive tax strategies during periods of financial pressure.”
Greater transparency and oversight
The authors argue that the conclusions reinforce the need to increase transparency both in sustainability reporting and in companies’ tax practices.
For policymakers, the study suggests the importance of more stringent reporting standards and independent verification mechanisms of the environmental claims disclosed by organizations.
For investors, the researchers warn of the need to examine more closely whether a company’s actions actually align with the environmental promises it promotes.
Consumers are also urged to play a more active role, questioning to what extent sustainability claims are supported by concrete and measurable results, and not solely by communication and marketing strategies.
In a context where sustainability has become a decisive factor for corporate reputation, the study suggests that some companies may be using environmental discourse as a way to compensate for less transparent practices in other areas of their activity, making independent verification of their green credentials increasingly relevant.
