(The) halo effect

Abstract

While prior work on greenwashing has generally noted the gap between what a firm openly claims to be and what it actually does with respect to environmental sustainability, little is known about the gap between what a firm actually did (past environmental performance) and how it is perceived by immediate audiences like consumers (environmental reputation). This study suggests that audience perception is by nature a socially constructed process in which social factors, such as organizational prestige and social visibility, significantly shape audiences’ assessments regarding a firm’s endeavors to promote environmental sustainability, over and above the effects of past environmental performance. We test our arguments using a sample of 238 global companies. Our findings show that a firm’s general prestige and visibility through media exposure, while not directly related to actual environmental performance, significantly influence consumers’ evaluation regarding environmental reputation even after controlling for the effects of the firm’s past environmental performance. Interestingly, all measures that capture environmental performance are not significantly relevant to environmental reputation. Implications for research on greenwashing, reputation, and communication are discussed.