Mind the Gap: How Performance Above Historical and Social Aspirations Relates to ESG Greenwashing

Performance above aspirations can support favorable stakeholder evaluations, but it may also create pressure to sustain them. Drawing on temporal comparison theory and social comparison theory, this study examines how performance above historical and social aspirations relates to the likelihood of ESG greenwashing. We propose that performance above historical aspirations can raise subsequent historical aspirations, creating pressure to sustain favorable stakeholder evaluations through ESG greenwashing. Performance above social aspirations, by contrast, can reassure managers about the firm’s competitive position and reduce their perceived need for ESG greenwashing. Based on panel data on Chinese A-share listed firms from 2009 to 2023, we find that performance above historical aspirations is positively associated with the likelihood of ESG greenwashing, whereas performance above social aspirations is negatively associated with it. Institutional ownership strengthens the negative association between performance above social aspirations and ESG greenwashing. Evidence that listing age strengthens the positive association with performance above historical aspirations is limited and sensitive to measurement choices. This study connects performance comparisons with ESG greenwashing by explaining how historical and social aspirations have different implications for managers’ efforts to sustain favorable stakeholder evaluations.