Multi‐Criteria Comparability for Ethical and Reliable Measurement of Corporate Environmental Decoupling

ABSTRACT

Comparable peers provide a critical benchmark for distinguishing genuinely responsible firms from those engaging in symbolic compliance, thereby reinforcing ethical accountability and the legitimacy of sustainability governance. Existing measures of environmental decoupling—the gap between firms' environmental claims and actions—typically standardize disclosure and outcome indicators along a single dimension, such as industry or firm size, while neglecting multi‐level heterogeneity in corporate behavior. To address this limitation, we define firm comparability by integrating location, industry, size, and ownership into a multidimensional framework that jointly captures institutional similarity in regulatory environments, normative expectations, and resource capacities. Using a recursive partitioning regression tree model based on 6348 Chinese firm‐year observations, we identify six distinct claim‐action patterns that produce a more consistent and reliable measure of environmental decoupling. Results reveal a structural shift from brownwashing to greenwashing, with a one standard deviation increase in disclosure corresponding to an improvement of less than 43% in actual performance. Greenwashing is most prevalent among newly disclosing and small firms in East and Northwest China, largely driven by short‐term profit motives. Overall, our approach advances the understanding of environmental decoupling and provides a practical tool for classifying firms as greenwashing or brownwashing and for selecting comparable firm peers.