Greenfraud as a New Governance Challenge: Unraveling Deviance in Sustainability Reporting

Septarina Prita Dania Sofianti

doi:10.59890/ijatss.v3i12.154

Authors

Septarina Prita Dania Sofianti Universitas Jember

DOI:

https://doi.org/10.59890/ijatss.v3i12.154

Keywords:

Green Fraud, ESG, Corporate Governance, Transparency, Data Manipulation, Green Economy

Abstract

The phenomenon of green fraud is increasingly gaining attention in the discourse on modern corporate governance, especially when sustainability practices become one of the main indicators for assessing organizational performance. Green fraud refers to corporate actions that deliberately manipulate, obscure, or present inaccurate sustainability information in order to create an environmentally friendly image that does not actually align with operational realities. This phenomenon arises as a consequence of growing stakeholder demands for environmental transparency, market pressures to adopt Environmental, Social, and Governance (ESG) principles, and the intensification of regulations requiring companies to present sustainability performance more openly. This study aims to unravel various forms of deviations in sustainability reporting, ranging from exaggerated green claims, emission data discrepancies, social indicator manipulation, to the concealment of material environmental impacts, and to analyze how these practices pose serious challenges to an ideal governance system. Through a comprehensive literature review, this study shows that green fraud often stems from weak verification standards, inconsistencies in global reporting frameworks, and economic incentives that encourage companies to portray sustainability as a reputational strategy rather than a substantial commitment. The impact not only undermines the integrity of ESG information, but also hampers the effectiveness of sustainable investments, reduces investor confidence, distorts risk assessments, and potentially slows down the transition toward a green economy. These findings underscore the need to strengthen sustainability governance through improving the quality of independent audits, harmonizing reporting standards, and enforcing stricter regulatory oversight

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