Greenwashing practices in the fashion industry

The growing importance of the environmental, social, and governance (ESG) framework and commitment to sustainability development goals has led to the development from voluntary to mandatory sustainability-related disclosure requirements. Increasing pressure for sustainability disclosure resulted in many companies misrepresenting or outright lying about their ESG performance, raising concerns about greenwashing. From an economic perspective, greenwashing can be defined as misleading disclosure that represents a credibility failure of ESG disclosure and results in sustained information asymmetry between the companies and their stakeholders. This thesis discusses greenwashing as a result of credibility failure of the companies’ ESG disclosures, it studies these practices through the lens of legislation enforcement mechanisms in the European Union, with a focus on the fashion industry. It highlights that disclosure-based regulation is not enough to prevent greenwashing and to provide the stakeholders with credible information. The key role belongs to the national legislative mechanism and national enforcement authorities. The thesis analyses the EU greenwashing legislation and the decentralized system of national authorities that adopt their own enforcement mechanisms, combining institutional analysis with a comparative assessment of selected EU countries. Using the theoretical framework and the analysis of the EU greenwashing regulatory framework, the thesis examines empirical evidence of greenwashing in the fashion industry, particularly the SHEIN case, identifying patterns and trends in greenwashing enforcement. It concludes by discussing implications for the companies and regulators and outlining directions for future policy and research.