Does City Honor Drive Companies to Remove the Mask of Greenwashing? Evidence from the National Civilized City Program in China

Abstract

At present, many enterprises are facing the dilemma of green management and greenwashing behavior is becoming increasingly serious. The honor of a city is an intangible asset that can bring opportunities for city development and enhance the recognition and loyalty of stakeholders within the city. At present, there are few studies on the impact of city reputation on corporate green behavior. This paper collected data on Chinese A-share listed enterprises from 2009 to 2019 and explored the relationship between the two using a double-difference model. The robustness of the hypotheses was verified by using the parallel trend test, placebo test, and PSM-DID. It was finally concluded that city honor inhibits corporate greenwashing behavior through two pathways, strengthening environmental regulation and stimulating corporate social responsibility, and it has a spillover effect between regions. Moreover, this effect is more obvious in regions with a high economic development level and a high degree of marketization, and it also shows a significant role in state-owned enterprises and enterprises with high total assets. This paper provides a theoretical basis for studying the relationship between city honor and corporate greenwashing behavior, and it also acts as a reference for standardizing enterprises’ environmental behavior and improving the quality of environmental information disclosure of enterprises.

1. Introduction

The report of the 20th National Congress of the Communist Party of China pointed out that development should be planned at the level of harmonious coexistence between human beings and nature, and ecological priority, conservation and intensive, green and low-carbon development should be promoted. The Communist Party of China attaches great importance to the construction of ecological civilization and implements the concept of low-carbon environmental protection into urban governance, while enterprises, as the main participants in market activities, are an important force in the construction of urban ecological civilization, and the government’s environmental constraints on enterprises are gradually increasing. The State Environmental Protection Administration issued the Announcement on the Disclosure of Enterprise Environmental Information in 2003, and the Environmental Protection Law clearly stipulated that heavy polluting enterprises must truthfully disclose environmental information in 2015.

Under the guidance of government environmental regulations, many companies have started to disclose environmental information, but the quality of environmental disclosure has not been viewed with optimism while the quantity of disclosure has been increasing [1]. Many companies deliberately greenwash their environmental practices, creating an environmental image by being ambiguous, concealing the truth, lying and deceiving, and avoiding the seriousness of the situation [2] in order to confuse stakeholders. Greenwashing is essentially a pseudo-socially responsible behavior that is inconsistent with words and deeds, aimed at whitewashing the behavior of polluting environment and putting on a green environmental protection cloak [3]. Companies selectively disclose information that is beneficial to themselves and conceal the fact of polluting the environment through greenwashing [4]. Greenwashing reduces environmental costs in the short term, and the good image helps to improve the competitiveness of the company’s products and markets [5]. However, once this hypocritical behavior is exposed, it will affect the stock prices of listed companies, reducing market returns [6] and weakening consumers’ trust in green products. In addition, the greening behavior will be emulated in the industry, and this ensuing isomorphic behavior will seriously undermine the fair and orderly market order, which is also a severe challenge in the process of promoting the construction of ecological civilization in the country, and it will affect the realization of carbon peaking and carbon neutrality goals.

Existing influencing factors for corporate greenwashing problems are relatively limited. From an interest-driven perspective, the gap in performance expectations will induce enterprises’ greenwashing behaviors, and the form of greenwashing is mainly manifested as selective disclosure of environmental behavior. When the actual performance of enterprises does not meet the expected performance, enterprises will adopt risky speculative behavior driven by the concept of maximizing their own interests [7]. From an institution-driven perspective, due to the lack of government regulatory authority as a result of the inadequate supply of the national system for corporate environmental information disclosure, companies take advantage of the loopholes in the system to whitewash their environmental contributions and seek benefits [8]. From a pressure-driven perspective, the changes in the external environment affect the behavior choices of enterprises, and the public expects enterprises to actively assume environmental responsibilities. In this social environment, enterprises respond to the pressure brought by public opinion by greenwashing behavior to meet the value of green and low-carbon environmental protection [3]. No studies have yet explored the influence of urban governance on corporate greenwashing behaviors from the perspective of the city. As an important tool for urban governance, the selection of civilized cities sets requirements for the economic, political, and ecological environment of cities as well as the quality of people, especially for the environmental construction of cities, which includes clear regulations on pollutant emissions. Creating a civilized city will have an impact on the environmental behavior of enterprises.

In 2023, the Chinese central government announced the official launch of the National Model Cities of Civilization, building on the previous National Civilized City. The National Civilized Model Cities are advanced and leading cities, with the aim of strengthening urban construction and social governance in China. The title of “Civilized City” is a symbol of city honor, representing the vigorous spiritual outlook of the city, and is a very important strategic resource for the city. The honor of being a “Civilized City” has become an important business card for the city’s external development, and local governments regard it as an important way to improve the quality of the city. For enterprises, the “benchmarking” effect of city honor will also force them to improve their environmental behaviors. City honor is closely related to enterprise development because it brings a good environment for enterprise development. At the same time, in order to pursue city honor, enterprises operate according to the requirements of the civilized city and actively fulfill their responsibilities, which are also the basic steps of building a civilized city.

Therefore, it is particularly important to study the causal relationship and influence mechanism between the honor of being selected as a civilized city and the green bleaching behavior of enterprises. There are fewer studies that have focused on the mechanism of the impact of city honor on environmental governance. Most studies have explored the issue at a macro level, using the tool of civilized city selection to verify that the honor of a city can indeed contribute to the improvement of local environmental quality, and yet few have explored the impact of city honor on the quality of environmental information disclosure by local firms at a micro level. Therefore, this paper creatively studies the impact of city honor on corporate greenwashing behavior.

The marginal contributions of this paper are as follows: (1) From a research perspective, there are few studies that have focused on the relationship between city honor and enterprise greenwashing in the academic field. This paper confirms that the selection of civilized cities can help curb corporate greenwashing and has a spillover effect among regions. This paper broadens the research dimension of government macro policies on corporate behaviors and enriches the study of environmental policy instrument theory. (2) In terms of research depth, this paper firstly investigates the impact of civilized city selection on enterprises’ greenwashing and examines the spillover effect; secondly, it introduces the intermediary effect to explore the influence mechanism of civilized city selection on enterprises’ greenwashing, and it finds two paths of government environmental regulation and corporate social responsibility; finally, it further explores the difference of the impact in different regions and different enterprises to enrich the relevant research results. (3) In terms of research methodology, this paper adopts a multi-period double difference model to test the impact of civilized city selection on the greenwashing behaviors of enterprises, and it uses the parallel trend test, placebo test, PSM-DID, and other robustness tests to make the estimation results more accurate, which can act as useful tools and methods for similar studies. (4) In terms of research significance, the paper helps China and the world to think about maximizing the effectiveness of urban governance tools as well as giving full play to the benchmarking role of exemplary cities. The government should also focus on the orderly proliferation and optimize of the spatial distribution pattern of the target model cities in order to better play the role of expansion and drive. Finally, the concept of green and sustainable development should be adopted as the development goal of cities and enterprises, and a new path of green development should be explored.

2. Theoretical Analysis and Research Hypotheses

2.1. Analysis of the Impact of City Honor on Enterprise Greenwashing

The “Civilized City” title is a symbol of the city’s honor and promotes the positive development of the city and its business. The civilized city measurement system puts forward high requirements for environmental quality, with clear descriptions of urban green area, environmental protection investment, urban sewage, urban air quality, and environmental noise indicators [9]. For the government, the civilized city selection prompts it to incorporate ecological civilization construction into the city development strategy, improve local environmental infrastructure, and enhance environmental public services [10]. In addition, the government issues the task of energy conservation and emission reduction to enterprises through environmental regulation and carries out policy promotion to mobilize enterprises to participate in green city construction. Therefore, national civilized city selection can draw the attention of local governments to the environment and motivate enterprises with enough incentives to reduce greenwashing behavior and participate in environmental management. The logic of policy impact is as follows:

In terms of economic incentives, participating in the selection of civilized cities encourages enterprises to reduce greenwashing behavior in order to obtain economic incentives. The civilized city selection imposes mandatory requirements on the per capita GDP of the selected cities, prompting the government to introduce a series of preferential policies for enterprises and increase financial subsidies [11]. The Chinese Civilization Commission awards medals and certificates and provides appropriate financial incentives to cities that receive the honorary title of civilized city. Regions also set up special funds to reward enterprises that have made exemplary efforts in the process of creating civilized cities [12]. In this institutional environment, in order to gain more economic benefits, enterprises tend to establish a friendly relationship with the government, implement the concept of environmental protection, strengthen internal environmental improvement, and reduce greenwashing behaviors.

In terms of reverse incentives, participation in the civilized city selection leads enterprises to reduce their greenwashing behavior under the pressure of environmental regulations. In the process of creating a civilized city, the government enacts some environmental laws and regulations, establishes environmental goals and emission standards, requires enterprises to disclose environmental information, and compels enterprises to strictly follow local environmental guidelines through administrative means such as environmental penalties [13]. Environmental penalties bring property and reputational losses to firms, generate significantly negative rates of return, and also negatively affect firms’ loan level and consumer responses [14]. Deterred by environmental penalties, firms have an incentive to improve their green governance and disclose environmental information in accordance the law.

In terms of social responsibility incentives, participation in the creation of a civilized city can stimulate the environmental responsibility of enterprises and reduce greenwashing behavior. The development of civilized cities can cultivate the concept of righteousness and profit of enterprises and improve the moral cultivation of entrepreneurs and the ethical culture within enterprises [15]. The selection of civilized cities is important for encouraging enterprises to develop intrinsic green value and social responsibility. Moreover, the creation of a civilized city can strengthen enterprises’ emotions and commitment to the city, inspire their environmental responsibility from the bottom of their hearts, enhance their green identity, and make them voluntarily abandon their greenwashing behaviors.

From a re-evaluation mechanism perspective, the civilized city review system forces enterprises to reduce greenwashing behavior in order to continue to maintain the honor of the city. The competent department of the National Civilization Commission conducts a review of the areas that have been awarded the honorary title of “Civilized City” once a year. In addition, the department provides criticism and warnings and orders rectification in areas with outstanding problems. Areas with major problems will be stripped of the honorary title. In order to continue to enjoy the benefits brought by the honor of the city, enterprises must fulfill the targets set by the government in compliance with the law [16], rely on green innovation to promote energy saving and emission reduction, and consciously disclose environmental information.

In summary, this paper predicts the following:

Hypothesis 1:

The honor of a city helps to curb corporate greenwashing in the city where it is located.

2.2. Analysis of the Spillover Effect of City Honor on Enterprise Greenwashing

From the perspective of the city, there is spatial interdependence and correlation between urban units. Local government subjects not only engage in competitive behavior in economic development, but they also can refer to learning situations in urban governance and work innovation [17]. Yang pointed out that there is a spatial spillover effect of urban environmental quality improvement. In order to avoid being in a disadvantageous position in urban competition, neighboring cities will learn from each other and follow each other’s behavior [18]. As a new urban governance tool, the selection of civilized cities will undoubtedly stimulate the participation of local governments, which will emulate the excellent results already achieved by neighboring cities. On the one hand, being selected as a civilized city will have a “benchmark learning” effect on neighboring cities, which will motivate them to learn from each other [19]. The benchmarking effect will strengthen the environmental governance of neighboring areas, and enterprises, as the main creators of cities, will regulate their own environmental behavior accordingly. On the other hand, cities that have become civilized cities tend to continue to strengthen their internal environmental governance in order to continue to retain this honorary title. Given the spatial correlation of environmental pollutants, neighboring cities will strengthen environmental governance and cooperation among each other to reduce the spread of pollutants between regions through cooperative governance [20]. This will reduce their environmental pollution and lead to the implementation environmentally friendly strategies for firms, and this increase in environmental contributions will drive their greenwashing behavior down.

From the perspective of the firm, a firm’s behavioral decisions inevitably have an impact on other firms in the economically connected network. Moreover, firms tend to imitate the behavior of firms with which they are connected [21]. By constructing the average degree of digitization of peer firms, Ma Hui finally concluded that the hidden improvement effect of a firm’s digital transformation on its own bad news has a spatial spillover effect and will reduce the risk of share price collapse of peer firms [22]. There is a clear imitation behavior in environmental information disclosure among Chinese listed companies in heavy pollution industries, and firms will habitually imitate the average level of other firms [23]. Led by the policy of civilized city selection, enterprises in the cities will improve their own environmental behaviors and reduce green floating behaviors. Moreover, enterprises in the same industry or in the same space with the herd mentality will also reduce the greenwashing behavior in order to reap the economic and non-economic benefits that pro-environmental behavior may bring to themselves [5].

In summary, this paper proposes research Hypothesis 2.

Hypothesis 2:

The honor of a city has a spillover effect on enterprise greenwashing.

2.3. Analysis of the Impact Mechanism of City Honor on Enterprise Greenwashing

In this paper, we analyze the inhibiting effect of city honor on corporate greenwashing from the perspectives of government environmental regulation and corporate social responsibility.

2.3.1. Government Environmental Regulation

The high requirements for ecological environment quality in the process of building civilized cities prompt the government to improve the environmental governance system and strengthen environmental supervision, while the tightening of environmental supervision policy causes enterprises’ greenwashing behavior to decrease. On the one hand, the selection of civilized cities prompts the government to tilt a large number of resources into environmental governance. The strengthening of government control is a way to optimize resource allocation. Specifically, environmental regulatory instruments include environmental inspections, environmental rectification, environmental incentives, environmental penalties, environmental interviews, and mass petition reporting systems. The civilized city pilots have significantly improved the quality of urban environment through government environmental policies [20]. In order to reap the benefits of urban ecological civilization brought by the government’s strengthened environmental supervision, the government has strengthened environmental supervision in the process of creating civilized cities. On the other hand, the best way to manage corporate greenwashing is for the government to participate in regulation [24]. Firms have a natural environmental inertia and need the government to play the role of institutional pressure to urge them to carry out environmental management. If the government’s environmental regulation is not strong enough, it is difficult to meet the institutional requirements of corporate ethical constraints and environmental responsibility, providing the conditions for corporate greenwashing [25]. The Ministry of Environmental Protection not only requires environmental information disclosure by heavily polluting enterprises, but also stipulates that local governments must strictly supervise the environmental disclosure behavior of enterprises and regularly disclose environmental information. In the event of regulatory misconduct leading to deterioration of urban environmental quality or failure to meet the annual energy conservation and emission reduction targets, local governments will be held accountable by higher-level governments and ordered to rectify the situation [26]. After the enactment and implementation of laws and regulations on environmental information disclosure, enterprises are more willing to increase environmental information disclosure [27]. The local government’s environmental constraints can create an atmosphere conducive to enterprises’ active disclosure of environmental information and in this way improve their environmental performance [1].

2.3.2. Corporate Social Responsibility

The pursuit of spiritual civilization in the process of creating a civilized city motivates enterprises to actively assume social responsibility, and this intrinsic moral quality drives enterprises to reduce their greenwashing behavior. On the one hand, the selection of civilized cities can revolutionize the government’s view of governance and reinforce the institutional supply of corporate social responsibility by governments at all levels [15]. The scientific and standardized external government system implicitly shapes the internal organizational culture and organizational practices of enterprises, promoting them towards social value sharing [28]. City civilization can cultivate the values of enterprises, stimulate the sense of responsibility and dedication under the guidance of moral values such as integrity, friendliness, and civilization, and drive entrepreneurs to fulfill their social responsibilities [29]. City civilization enables entrepreneurs to pursue self-improvement in spirituality, find the source of living water from Confucian culture, draw the essence of traditional Chinese culture, and use it as their own guide for action. In addition, the selection of civilized cities raises the expectations of the government and the public on the behavior of enterprises, which are expected to contribute to the social economy and the environment in a responsible manner. As subjects of the market economy, enterprises need to think about their own relationship with society and have to respond to these social demands and actively assume their own social responsibilities [30]. On the other hand, environmental responsibility is a manifestation of corporate social responsibility, which means accomplishing things that are good for the environment; that is, reducing greenwashing behavior. Social responsibility is a better corporate behavior aimed at maximizing social welfare [30]. From the perspective of long-term benefit theory, although social responsibility increases the cost budget of enterprises in the short term, it helps enterprises to gain good social reputation, promote the quality of urban environment, and achieve long-term sustainable development [31]. Under the influence of this theory, enterprises have sufficient intrinsic motivation to improve their environmental governance and disclose environmental information truthfully and comprehensively. Zhang N. et al. explored the influence on employees’ green behavior from the perspective of business ethics, and the study proved that positive corporate social responsibility performance can stimulate employees’ voluntary green behavior [32]. Xiao X. J. et al. found that corporate social responsibility performance is conducive to the improvement of internal green technology innovation [33]. However, Ilyich et al. pointed out that some companies use social responsibility as a self-interest tool with the goal of maximizing shareholder interest and disguise the lack of environmental performance by improving social responsibility performance [34]. This paper tends to argue that companies fulfill their social responsibility out of sincerity and are committed to the long-term benefits of the company and the society as a whole.

Therefore, this paper predicts the following:

Hypothesis 3:

The honor of a city inhibits corporate greenwashing by strengthening environmental regulation by the government.

Hypothesis 4:

The honor of a city inhibits corporate greenwashing by strengthening corporate social responsibility.

The research framework of this paper is shown in Figure 1.

3. Research Design

3.1. Sample Selection and Data Sources

This paper selected the data of Chinese A-share listed companies from 2009 to 2019 and matches them with the data of the list of civilized cities. At present, the greenwashing behavior of companies does not only occur in the heavily polluting industries: various industries are present. Therefore, this paper does not limit the study to the heavily polluting industries but selects companies that have continuously published social responsibility reports and disclosed environmental matters in their reports during the observation period. The reason why this study chose 2009–2019 as the observation period is mainly because most companies started publishing CSR reports after 2009. The Central Civilization Commission announced six batches of national civilized cities in 2005, 2009, 2011, 2015, 2017, and 2020, respectively. Since most companies did not publish social responsibility reports in 2005, and the missing data in 2020 are more serious, this paper uses listed companies in cities where the second, third, fourth, and fifth batches are located as the experimental group. In order to make the sample selection more objective, companies with ST in the observation period, financial companies, and companies with missing data were excluded from this paper. Finally, 955 panel data were obtained.

The list of civilized cities was obtained from the China Civilization Network. The data for the corporate greenwashing index was collected manually from each company’s website through the environmental section of the social responsibility report or environmental report. Company data were obtained from the China Stock Market Accounting Research database (CSMAR) and city data were obtained from the City Statistical Yearbook. The data processing was performed using STATA17.0 and Excel spreadsheets.

3.2. Model

During the sample observation period, there were four batches of “the civilized city” awards; namely, 2009, 2011, 2015, and 2017. Since the policies occurred at different times, this paper adopted a multi-time double difference model to study the mechanism of “the civilized city” title on the greenwashing of enterprises and used a fixed effects model with fixed industry, province, and year effects. The model is shown Model (1).

$$GW{L}_{i,j,t}={\alpha }_0+{\alpha }_{1}DI{D}_{j,t}+{\alpha }_2\sum Contro{l}_{i,t}+\sum Industry+\sum Province+\sum Year+{\epsilon }_{i,t}$$

(1)

In Model (1), $GW{L}_{i,\mathrm{j},t}$ is an explained variable that represents corporate greenwashing; $DI{D}_{j,t}$ is an explanatory variable, which means that if the city j where enterprise i is located is selected as a civilized city in year t, it is set to 1 after year t and year t, and the rest is set to 0; $\sum Contro{l}_{i,t}$ are control variables, including enterprise level and city level; $\sum Industry$ is the industry dummy variable; $\sum Province$ is the regional dummy variable; $\sum Year$ is the year dummy variable; ${\epsilon }_{i,t}$ is the random perturbation term.

In further analysis, to test spillover effects, based on Model (1), the policy diffusion variables of civilized cities are added and Model (2) is constructed:

$$GW{L}_{i,j,t}={\theta }_0+{\theta }_{1}DI{D}_{j,t}+{\theta }_{2}P{D}_{p,t}+{\theta }_{3}DI{D}_{j,t}\times P{D}_{p,t}+\sum Contro{l}_{i,t}+\sum Industry+\sum Province+\sum Year+{\epsilon }_{i,t}$$

(2)

$P{D}_{p,t}$ is dynamically assigned according to the cities selected in each batch of civilized cities, including both quantity and quality. Quantity refers to the proportion of the number of civilized cities in the province to the total number of cities in the province during the sample period; Quality refers to the average value of the corporate greenwashing index of civilized cities in the province during the sample period. $DI{D}_{j,t}\times P{D}_{p,t}$ is the interaction term between $DI{D}_{j,t}$ and $P{D}_{p,t}$. Other variables are defined as above.

In further analysis, in order to test the mechanism of mediation effect, Model (3) and (4) are constructed:

$$M_{i,j,t}={\gamma }_0+{\gamma }_{1}DI{D}_{j,t}+\sum {\gamma }_{2}Contro{l}_{i,t}+\sum Industry+\sum Province+\sum Year+{\epsilon }_{i,t}$$

(3)

$$Gw{l}_{i,j,t}={\delta }_0+{\delta }_{1}DI{D}_{j,t}+{\delta }_2{M}_{i,j,t}+\sum {\delta }_{3}Contro{l}_{i,t}+\sum Industry+\sum Province+\sum Year+{\epsilon }_{i,t}$$

(4)

In Model (3) and Model (4), M is a mediating effect, including government environmental regulation and corporate social responsibility. The other variables are selected in line with those in Model (1).

3.3. Variable Specification

3.3.1. Explained Variables: Greenwashing Level (GWL)

Greenwashing occurs when a company intentionally exaggerates its environmental performance and makes misleading statements when disclosing environmental information to the public. The degree of greenwashing reflects the extent of corporate environmental responsibility falsification. There are two main approaches in academia to measuring the level of greenwashing, both of which use the content analysis method to score corporate environmental disclosure matters. Huang constructed a greenwash index system from four aspects: governance and structure, process and control, input and output, and legal compliance and compliance, and specifically listed 20 environmental matters [35]. Wu Yu defined 11 environmental disclosure matters [36]. In this paper, we adopt Huang’s method to score the 20 items with a score of 1 if “yes” and 0 if “no”, and obtain the values of symbolic disclosure and substantive disclosure respectively. Selective disclosure is a company’s selective disclosure of environmental contributions and only partial disclosure of environmental matters. Expressive disclosure is a company’s glorification of corporate environmental behavior through qualitative descriptions, which are only expressed textually without mentioning quantitative presentations such as specific quantities and amounts. After determining the scores of symbolic disclosure and substantive disclosure, the scores of Selective disclosure and Expressive manipulation are calculated by the following Formulas (5) and (6). The specific calculation formula is as follows:

$$Selective disclosure\left(GWLS\right)=100\times \left(1-\frac{Number of disclosed matters}{Number of disclosable matters}\right)$$

(5)

$$Expressive disclosure\left(GWLE\right)=100\times \frac{Symbolic disclosure number}{Number of disclosed events}$$

(6)

Finally, the geometric mean is used to calculate the GWL of each company, as is shown in Formula (7):

$$GWL=\sqrt{GWLS\times GWLE}$$

(7)

The larger the GWL score of a company, the higher the degree of greenwashing.

3.3.2. Explanatory Variable: The Honor of a city (DID)

This paper relies on the quasi-natural experiment of civilized city selection as a proxy variable for city honor. This paper draws on Yang’s study by querying the list of civilized cities published by the China Civilization Network [9]. If the city where the enterprise is located is rated as a civilized city in a year, the variable is set to 1 for that year and the following years; otherwise, it is set to 0. In addition, since some cities such as Qingdao were removed from the list of civilized cities in some years, to avoid overestimating the policy effect, the variable is set to 0 for those years and subsequent years in this paper.

3.3.3. Mediating Variables

Government environmental regulation (Gover): Drawing on the study of Qin Ying et al. (2020), the urban pollution source regulation information disclosure index (PITI) was chosen [37]. The PITI was used to examine the environmental information disclosure of environmental protection departments in each region, including nine examination items such as online monitoring information disclosure, daily exceedance violation record release, and letters and complaints. The more comprehensive the information disclosure in the region, the higher the PITI value, indicating stronger government environmental regulation.

Corporate social responsibility (CSR): Measured by the social contribution value per share, drawing on the study by Jia and Yi Liu [38]. The social contribution value per share is the ratio of the total social contribution created by the company to the company’s equity. It is the value created by the company in terms of earnings per share for shareholders, taxes generated for the government, wages paid to employees, interest paid to creditors, and the amount of public benefit donated to the public, and deducting the costs incurred by environmental pollution. The higher the value, the greater the social contribution made by the enterprise and the greater the social responsibility assumed by the enterprise.

3.3.4. Control Variables

In this paper, two levels of firms and cities were selected. At the firm level, Size, ROE, Growth, Balance and Independence are selected as covariates to control the degree of greenwashing. The specific description of each indicator is as follows:

Enterprise size (Size): Measured by the natural logarithm of total assets at the end of the period. In general, the size of an enterprise reflects its financial strength and resource capacity. The development opportunities and business risks faced by companies of different sizes are different, and the environmental decisions made in dealing with government policies are also different accordingly. Larger enterprises tend to implement more aggressive environmental strategies in order to pursue their long-term development.

Return on equity (ROE): Measured as the ratio of net income divided by average shareholders’ equity, it reflects the level of return on shareholders’ equity. It is an important indicator of the profitability of listed companies. A higher ratio indicates higher earnings and more efficient use of shareholders’ funds.

Business revenue growth rate (Growth): Calculated by dividing the growth of business revenue by the total business revenue of the previous year. It is an important indicator used to measure the growth rate of the company. The higher the growth rate of revenue, the larger the market size of the company and the better the business status. Companies in different growth stages make different production and management decisions.

Corporate equity checks and balances (Balance): Measured by the degree of checks and balances among the top shareholders of a company. It refers to the sharing of control between the top shareholders within the company, making it difficult for a single large shareholder to control the decision making of the company through internal checks and balances, and achieving the purpose of mutual supervision. The higher the degree of equity checks and balances, the more efficient the corporate governance.

Corporate sole director ratio (Independ): Calculated by dividing the number of sole directors by the total number of board members. The higher the ratio, the more effective the internal oversight of the company and the more efficient the corporate governance.

At the city level, GDP, Environment and PFE were selected as covariates to control the degree of corporate greenwashing. Each specific indicator is presented as follows:

The level of economic development of the city (GDP): Measured by the gross regional product. This value sums up the final results of the productive activities of the region in a certain period of time. It is an important indicator of the economic situation and the level of development of the region. A higher regional GDP means a higher level of local economic development.

Urban environmental quality (Environment): Measured by urban green area. It is an important indicator reflecting the ecological and environmental protection status of a region. The larger the green area of a city, the more importance the local area attaches to environmental construction and the better the quality of the urban environment.

Urban construction expenditures (PFE): Measured by government public budget expenditures. The government budget is mainly used for the construction of urban infrastructure, education, culture, ecological civilization, etc. The amount of government public budget expenditure reflects the amount of urban construction expenditure to some extent. The more urban construction expenditure, the more attention the government pays to the planning and development of the city.

See

Table 1. Variable definitions.

Variable	Definition
GWL	Greenwashing Level
DID	Whether the city is a civilized city
Gover	Government environmental regulation
CSR	Corporate social responsibility
Roe	Net income divided by average equity
Size	The natural logarithm of total assets
Independ	The percentage of independent directors
Balance	The degree of checks and balances of the top shareholders
Growth	Revenue growth rate
GDP	GDP per capita in city
PFE	The government public budget expenditure
Environment	The urban green area

for detailed definitions of all the variables.

4. Empirical Analysis

4.1. Analysis of Descriptive Statistical Results

Table 2. Description statistical analysis.

Variable	N	Mean	SD	Max	Median	Min
GWL	955	35.710	24.251	97.471	34.160	0.000
DID	955	0.378	0.485	1.000	0.000	0.000
Gover	955	53.807	16.323	81.000	47.200	13.410
CSR	955	3.975	3.960	16.091	4.283	−5.190
Roe	955	0.089	0.118	0.573	0.077	−0.759
Size	955	23.645	1.537	28.636	23.677	19.928
Independ	955	37.160	5.490	71.432	35.711	25.000
Balance	955	0.536	0.541	3.695	0.350	0.078
Growth	955	0.048	0.063	0.339	0.034	−0.279
GDP	955	79,506.000	35,097.000	205,918.000	77,559.000	9145.000
PFE	955	5204.859	2711.000	17,297.850	4664.100	432.364
Environment	955	26,919.756	38,963.000	157,785.072	8113.732	62.000

reports the mean, median, standard deviation, maximum value, and minimum value for the variables. The mean value of GWL is 35.71 and the median value is 34.16. The mean value is slightly higher than the median value, which means that the overall level of greenwashing of the sample enterprises is higher. The mean value of Gover is 53.807, which means that the government attaches great importance to the environment and has a high level of environmental regulation for companies. The mean value of CSR is 3.975, which is not much different from the median value of 4.283, showing that the distribution of social responsibility among the sample companies is more balanced. As for the corporate control variables: the difference between the maximum and minimum values of Roe is large, which suggests that there is a large gap between the income levels of the sample companies; the mean value of Size is 23.645, which is close to the median value of 23.677, indicating that the selected companies are more reasonable; the mean value of Independ is 37.16, indicating that the proportion of independent directors in the sample companies is relatively reasonable, accounting for more than 1/3 of the proportion; the mean value of Balance is 0.536, which indicates that the checks and balances among shareholders’ power in the sample companies are good. The differences between the maximum and minimum values of the control variables at the city level are large, which reflects the uneven development level among cities in China and the great differences in the degree of importance attached to the ecological environment by different cities. The specific statistical results are presented in Table 2.

4.2. Baseline Regression

In this paper, a double difference model was used to test Hypothesis 1, and the regression results are shown in

Table 3. The relationship between city honor and enterprise greenwashing.

Variables	(1) Gwl	(2) Gwl	(3) Gwl
DID	−0.647 ***	−0.509 ***	−0.488 ***
	(0.069)	(0.065)	(0.065)
Size		−0.387 ***	−0.402 ***
		(0.041)	(0.042)
Growth		0.142 ***	0.139 ***
		(0.053)	(0.052)
Balance		−0.178 ***	−0.176 ***
		(0.033)	(0.032)
Independ		0.001	0.001
		(0.045)	(0.045)
ROE		−0.531 *	−0.557 *
		(0.318)	(0.315)
PFE			0.138 **
			(0.055)
Environment			−0.044
			(0.075)
GDP			−0.100 ***
			(0.035)
_cons	0.018	−0.077	−0.185
	(0.134)	(0.130)	(0.134)
Industry	YES	YES	YES
Year	YES	YES	YES
Province	YES	YES	YES
N	955	955	955
R2	0.356	0.450	0.467

Standard errors in parentheses. * p < 0.1, ** p < 0.05, *** p < 0.01.

. Moreover, this paper used a fixed effects model with fixed industry, province, and year effects. Columns (1)–(3) are the results of adding firm-level control variables and city-level control variables to (1), respectively. It can be seen that the regressions with the inclusion of control variables identify a much “cleaner” policy effect. It can be shown that regardless of whether the control variables are added or not, the honor of a city has a negative effect on corporate greenwashing, and it is significant at the level of 1%. That is, the selection of civilized cities effectively suppresses corporate greenwashing. The regression coefficient of column (3) is −0.488, which indicates that the selection as a civilized city reduces the greenwashing of corporate environmental information by 0.488 units. This may be due to the fact that the honorary title of the city prompts the government to strengthen its governing capacity, improve relevant laws and regulations, and strengthen the supervision of corporate behavior, while at the same time boosting entrepreneurs’ sense of urban identity and stimulating their social responsibility [15] and building a civilized city through “real green” to make city honor worthy of its name. The specific results are presented in Table 3.

4.3. Robustness Test

4.3.1. Parallel Trend Test

The assumption of a parallel trend is the premise of the double difference method, which means that the trend of greenwashing is the same before and after the civilized city selection. In order to verify the net effect of the civilized city selection, this paper used the event analysis method to study the dynamic effect of the enterprises’ greenwashing before and after the policy. The model is constructed as follows.

$$Gw{l}_{i,t}={\beta }_0+{{\displaystyle \sum }}_{-5}^5{\beta }_{m}DI{D}_{i,t}^m+\sum {\beta }_{m+1}Contro{l}_{i,j,t}+\sum Industry+\sum Province+\sum Yea{r}_t+{\epsilon }_{i,t}$$

(8)

$DI{D}_{i,t}^m$ is the dummy variable: whether the city was selected as a civilized city or not. In the first 5 years, the current year, and the last 5 years of the “civilized city” title, the value of the experimental group $DI{D}_{i,t}^m$ is 1; otherwise, it is 0. It can be seen from Figure 2 that the sign of the β coefficient is negative and insignificant before the selection of the civilized cities, which means that there is no difference between the parallel trend of the experimental group and the control group before the selection of civilized cities. The hypothesis of a parallel trend is satisfied. In the year of being selected as a civilized city, the β regression coefficient starts to be significantly negative. It indicates that the selection of a civilized city inhibits the enterprises from floating green and the inhibiting effect starts to diminish until the third year of policy implementation. This also reflects from the side that the civilized city policy plays an important role in encouraging enterprises to regulate their own behavior and strengthen environmental management. The specific results are presented in Figure 2.

4.3.2. Placebo Test

The greening behavior of enterprises may be influenced by other unobservable factors rather than by the civilized city selection policy. In order to exclude the influence of other omitted variables, this paper follows the practice of Shi, D.Q. et al. to randomly select individuals as the treatment group and conduct 500 repetitions of the experiment to finally plot the distribution of the estimated coefficients and the corresponding p-values [39]. From Figure 3, we can see that the kernel density curve is normally distributed, the estimated coefficients are mostly concentrated in the 0-point distribution, and the true coefficients are far away from the estimated coefficients. It shows that the estimated results are unlikely to be obtained randomly, and thus the greenwashing of enterprises is unlikely to be influenced by other factors, which confirms the reliability of this conclusion. See Figure 3 for specific results.

4.3.3. PSM-DID Test

There may be other differences between the experimental group and control group that lead to biased results. To avoid this problem, this paper used PSM for testing. First, the control variables were used as matching variables, and the propensity score values were estimated by logit regression of the control variables by whether they were selected as civilized cities or not. Then, one-to-one matching was performed using caliper nearest neighbor matching to obtain the control group samples. Figure 4 shows that the dispersion of covariates between the matched experimental group and control group is significantly lower, indicating that the variables are not very different from each other and the matching effect is better. Additionally, there are fewer samples that are out of the common range, showing that most of the samples are successfully matched with little sample loss. This justifies the rationality of the PSM-DID test, and the conclusions drawn from the matched regression results are consistent with the double difference results above. The specific results are listed in Figure 4 and Figure 5.

4.3.4. Reverse Causality Test

Some enterprises have implemented the concept of green development and have a lower degree of greenwashing, and the probability of their cities being selected as civilized cities is higher. In order to avoid this reverse causality problem, the regression test of whether the city is a civilized city (DID) as a new explained variable and the greenwashing degree (GWL) with a lag of one period as a new explanatory variable was conducted. The results were no longer significant. This hypothesis was excluded. Due to space limitations, experimental results are not presented.

4.3.5. Replace the Explained Variables

This paper draws on Wu Y. et al. by looking up the social responsibility reports of listed companies and scoring the 11 environmental disclosure matters in the reports to obtain the scores of symbolic and substantive disclosures and finally calculating the degree of corporate greenwashing using the following Formula (9) [36].

$$GW{L}^{\prime }=\frac{{\sum }_{i=1}^{11}{X}_i}{{\sum }_{i=1}^{11}{Y}_i+1}$$

(9)

The conclusion is consistent with the results of the baseline regression above, which further validates the correctness of Hypothesis 1. This is shown in

Table 4. Test results of replaced variables.

	(3)	(2)	(1)
Variables	GWL′	GWL′	GWL′
DID	−0.570 ***	−0.427 ***	−0.401 ***
	(0.070)	(0.066)	(0.066)
Size		−0.398 ***	−0.413 ***
		(0.042)	(0.043)
Growth		0.147 ***	0.145 ***
		(0.053)	(0.053)
Balance		−0.194 ***	−0.192 ***
		(0.033)	(0.033)
Independ		0.004	0.004
		(0.046)	(0.046)
ROE		−0.509	−0.545 *
		(0.323)	(0.320)
PFE			0.146 ***
			(0.056)
Environment			−0.019
			(0.076)
GDP			−0.109 ***
			(0.036)
_cons	0.006	−0.103	−0.220
	(0.137)	(0.132)	(0.136)
Industry	YES	YES	YES
Year	YES	YES	YES
Province	YES	YES	YES
N	955	955	955
R2	0.329	0.432	0.449

Standard errors in parentheses. * p < 0.1, *** p < 0.01.

.

5. Further Analysis

5.1. Spillover Effect Test

China attaches great importance to the construction of civilized cities and has held six civilized city selection activities. With the in-depth implementation of the policy, the number of civilized city selections has increased significantly. Under the proliferation of the civilized city policy, will the civilized city selection have a spatial spillover effect on corporate greenwashing? Will it bring about a strengthening or weakening of the policy effect? The answer to this question helps in discussing the diffusion value of the civilized city policy and is the key to discerning the policy advantage. Drawing on Yali Wang’s study [15], this paper constructed a civilized city policy diffusion variable (PD) to examine the spatial spillover effect of civilized city selection on corporate greenwashing and to verify Hypotheses 2.

Based on the results of the analysis, under the two constructions of policy diffusion quantity and quality, we conclude the following: the coefficient estimate of policy diffusion quantity (DID × Quantity) is negatively significant at the 5% level; the coefficient estimate of policy diffusion quality (DID × Quality) is negatively significant at the 10% level. This indicates that the selection of civilized cities has a spatial spillover effect on the enterprises’ greenwashing. In other words, under the civilized city policy diffusion, both the increase in the number of civilized cities and the improvement in the quality of civilized cities in the province will strengthen the inhibitory effect of civilized city creation on corporate greenwashing. The specific results are presented in

Table 5. Test of spillover effect.

	Gwl	Gwl
DID	−0.884 ***	−0.526 ***
	(0.107)	(0.071)
Quantity	−0.285 *
	(0.156)
DID × Quantity	−0.277 **
	(0.114)
Quality		−0.509 **
		(0.196)
DID × Quality		−0.513 *
		(0.198)
Controls	YES	YES
_cons	0.512 ***	−0.162
	(0.162)	(0.147)
Industry	YES	YES
Year	YES	YES
Province	YES	YES
N	955	955
R2	0.505	0.447

Standard errors in parentheses. * p < 0.1, ** p < 0.05, *** p < 0.01.

.

5.2. Intermediation Effect Test

The empirical analysis verifies that Hypothesis 1 is valid, and that the honor of a city can indeed inhibit corporate environmental information greenwashing. How does the honor of a city inhibit corporate greenwashing? This section focuses on the transmission channel between the two in order to verify Hypotheses 3 and 4.

The intermediary effect includes environmental regulation at the government level and social responsibility at the enterprise level. On the one hand, the selection of civilized cities is a process to improve the effectiveness of government governance. In addition, the honorary title of “Civilized City” strengthens the government’s environmental regulation and helps to prevent enterprises from greenwashing. From column (2), it can be seen that the coefficient ${\gamma }_1$ is positive and significant at the 1% level. This suggests that the selection of civilized cities can accelerate the transformation of government functions, strengthen environmental supervision, and urge enterprises to disclose environmental information in a standardized and timely manner, improving the quality of the urban environment, and allowing people to share the fruits of civilized cities. In column (3), the coefficients ${\delta }_1$ and ${\delta }_2$ are negatively significant, which indicates that government environmental regulation effectively deters enterprises and motivates them to take the responsibility of environmental management. On the other hand, the selection of civilized cities is a process for enterprises to shape their corporate culture. Additionally, the honorary title of “Civilized City” induces enterprises to fulfill their social responsibility, thus reducing the degree of greenwashing. From column (4), we can see that the coefficient ${\gamma }_1^{\prime }$ is positive and significant. That is to say, the selection of civilized cities encourages enterprises to strengthen their core awareness, implement greater responsibility, and metaphorically stack bricks towards the construction of a civilized city. In column (5), the coefficients ${\delta }_1^{\prime }$ and ${\delta }_2^{\prime }$ are significant and negative in sign. It is not difficult to see that strengthened social responsibility helps enterprises to actively carry out corporate environmental governance, strengthen the ESG development concept, truthfully disclose environmental information, and whitewash greenwashing behavior. The specific results are presented in

Table 6. Test of mediation variables.

Variables	GWL	Mediating Role 1		Mediating Role 2
		Gover	GWL	CSR	GWL
	(1)	(2)	(3)	(4)	(5)
DID	−0.488 ***	0.249 ***	−0.456 ***	0.499 ***	−0.594 ***
	(0.065)	(0.056)	(0.065)	(0.069)	(0.065)
Cover			−0.127 ***
			(0.038)
CSR					−0.147 ***
					(0.032)
Controls	YES	YES	YES	YES	YES
_cons	−0.185	0.343 ***	−0.141	−1.578 ***	−0.150
	(0.134)	(0.116)	(0.134)	(0.142)	(0.140)
Industry	YES	YES	YES	YES	YES
Year	YES	YES	YES	YES	YES
Province	YES	YES	YES	YES	YES
N	955	955	955	955	955
R2	0.467	0.602	0.473	0.402	0.494

Standard errors in parentheses. *** p < 0.01.

.

6. Heterogeneity Test

6.1. Heterogeneity at the Regional Level

6.1.1. Heterogeneity of Market Environment

In this paper, we referred to X. M. Xie’s study and used the provincial marketization index to measure the market environment [40]. As shown in

Table 7. Inspection of regional heterogeneity.

	(1)	(2)	(3)	(4)
	High Market	Low Market	High GDP	Low GDP
DID	−0.503 ***	−0.389 ***	−0.687 ***	−0.366 ***
	(0.098)	(0.091)	(0.075)	(0.113)
Controls	YES	YES	YES	YES
_cons	−0.175	−0.435 *	−0.235	−0.545 ***
	(0.196)	(0.224)	(0.275)	(0.184)
Industry	YES	YES	YES	YES
Year	YES	YES	YES	YES
Province	YES	YES	YES	YES
N	476	479	478	477
R2	0.504	0.573	0.615	0.468

Standard errors in parentheses. * p < 0.1, *** p < 0.01.

, regardless of the market environment, the title of “Civilized City” is negatively significant at the 1% level for enterprises’ greenwashing and the policy of “Civilized City” in areas with low marketization degree has little effect on the degree of greenwashing. This may be due to the fact that in a highly competitive market environment where firms compete with each other for competitive resources, it is difficult to survive without technological advantages. It leads firms to change their development strategies in an attempt to gain technological advantages through green innovation, which enhances their green performance [41]. The specific results are shown column (1) and column (2) in Table 7.

6.1.2. Heterogeneity in the Level of Economic Development

Using the median regional GDP as the criterion, the observed sample was divided into two groups: higher level of economic development and lower level of economic development, and group regression was conducted. From column (3), we can see that the higher the level of local economic development, the lower the degree of greenwashing of enterprises. This is because enterprises in economically developed regions are more likely to obtain superior resources, receive preferential policies, pursue long-term benefits while improving their own economic benefits, actively develop green products, promote green innovation, and also enhance environmental self-awareness and active disclosure of environmental information. The policy impact of regions with low economic development level is lower than that of regions with high economic development level. The strategies of these enterprises focus on improving corporate profitability and pay less attention to environmental pollution, and the policy has little impact on the environmental behavior of enterprises. The specific results are shown column (3) and column (4) in Table 7.

6.2. Heterogeneity at the Enterprise Level

6.2.1. Heterogeneity of Ownership

In this paper, the sample enterprises were divided into state-owned enterprises (SOE) and non-state-owned enterprises (NSOE) according to their equity nature for group regression. The results show that the policy effect of the SOE sample is negatively significant at the 1% level, which indicates that SOEs actively respond to the state’s policy of promoting green governance and they timely correct timely the deficiencies in environmental information disclosure. This is because SOEs have a natural political association with the state, which takes advantage of state policies to achieve their economic performance. Furthermore, the state also urges SOEs to fulfill their social responsibilities through mandatory orders, thus achieving public interest goals [42]. Therefore, civilized city selection is more policy-bound for SOEs, while NSOEs, with profit as their main goal, are less influenced by policy and exhibit lower environmental responsibility. The specific results are shown column (1) and column (2) in

Table 8. Inspection of enterprise heterogeneity.

	(1)	(2)	(3)	(4)
	SOE	NSOE	Big	Small
DID	−1.259 ***	0.116 **	−0.634 ***	−0.344 ***
	(0.191)	(0.057)	(0.092)	(0.085)
Controls	YES	YES	YES	YES
_cons	−0.883 **	−0.154	−0.436 **	0.126
	(0.405)	(0.165)	(0.211)	(0.213)
N	756	199	477	478
Industry	YES	YES	YES	YES
Province	YES	YES	YES	YES
Year	YES	YES	YES	YES
R2	0.675	0.465	0.459	0.569

Standard errors in parentheses. ** p < 0.05, *** p < 0.01.

.

6.2.2. Heterogeneity of Enterprise Size

In this paper, the median of the total assets of enterprises was used as the basis for classification, and the sample was divided into large-scale enterprises and small-scale enterprises for regression analysis. The results show that regardless of the size of the enterprises, they show a lower level of greenwashing for the civilized city policy, but the large-scale enterprises show a higher correlation than the small-scale ones. It may be due to the fact that large-scale enterprises are relatively strong and have more funds for green technology innovation to pursue long-term benefits, and the executives have a higher level of quality and show a stronger entrepreneurial spirit [43], which helps to form a strong green corporate culture within the enterprise and make environmental information disclosure more responsibly. The specific results are shown column (3) and column (4) in Table 8.

7. Discussion

7.1. Conclusions

Civilized city selection is an important means for the government to use authoritative tools to improve urban governance. It is also a process for enterprises to combine their own management with urban construction [43]. In the process of building a civilized city, ecological environment construction is on the agenda. As an important force in the construction of the city, the planning and layout of the city will inevitably have an impact on companies’ behavior. Based on the above analysis, we have come to the following conclusions:

Firstly, the city selected as a civilized city can significantly inhibit enterprises from greenwashing and promote them to remove the mask of greenwashing. The selection of a civilized city places high demands on the environmental quality of the city, and enterprises will improve their own environmental behavior. At the same time, in order to obtain and maintain the honor of their cities, enterprises will engage in entrepreneurial constructions, aim at sustainable development, integrate green production into the whole process of business management, and announce their environmental contributions to the society in a timely manner.

Secondly, the selection of civilized city is not only the process of improving the government’s governance ability, but it is also the process of shaping corporate culture and philosophy. Participating in the selection of a civilized city can inhibit corporate greenwashing by strengthening government environmental supervision and enhancing corporate social responsibility. On the one hand, the construction of civilized cities is an important part of promoting urban governance, of which the construction of ecological environment is an important part of the construction of civilized cities. In order to promote the improvement of urban governance, the government will introduce a series of environmental regulations, require enterprises to adopt the concept of green development, and strengthen the supervision of corporate environmental behavior. At the same time, guided by the concept of sustainable development, enterprises will create environmental value to the maximum extent, assume social responsibility, consciously disclose environmental information, and reduce their own greenwashing behavior.

Thirdly, the impact of civilized cities on corporate greenwashing varies across regions and companies. Specifically, at the regional level, the effect of regions with high degree of marketization is greater than that of regions with low degree of marketization, and the effect is greater in economically developed areas than in economically less developed areas; at the enterprise level, the effect of SOEs is greater than that of NSOEs, and the effect is greater in large-scale enterprises than in small-scale enterprises.

7.2. Recommendations

Based on the above analysis, this paper puts forward the following suggestions from the perspective of government and enterprises.

For the government, first of all, the local government should implement a more diversified and systematic development strategy, such as creating a civilized city as its own strategic plan. The selection of civilized cities is a policy tool to optimize the allocation of resources within cities, combining goals with governance, strengthening the investment of resources in environmental governance for cities, and engaging the public in environmental management [44]. Secondly, the government should improve and standardize the supply of systems of environmental protection regimes, carbon emission standards and environmental information disclosure of enterprises to strengthen the authority and deterrence, and play the role of environmental regulation as a means to improve the binding force on corporate behavior [45]. Finally, the government should actively guide enterprises and the public to participate in the construction of civilized cities and provide appropriate preferential policies and financial subsidies. At the same time, the benchmark demonstration effect of civilized cities should be brought into play to strengthen the recognition and sense of belonging of enterprises and the public to the city and to raise their awareness of action.

For enterprises, on the one hand, they should establish a sense of ownership, consider the city in which they are located as an important support for their long-term development, actively enhance their own sense of honor and responsibility, combine their development strategies with the construction of civilized cities, and set the goal of green and sustainable development; on the other hand, they should consciously comply with environmental laws and regulations, actively introduce talent for green transformation, increase investment in environmental protection, improve the competitiveness of green products, disclose environmental information, truly and actively, and establish a green and responsible corporate image [46].