When Green Promises Invite Scrutiny: How Sustainability Policies Shape Shareholder Activism

Toco Toucan

16-10-2025

[…] for the fruitless searches for ultimate wisdom that usually result in absurdity, Zhuang suggests:
“Wise is the one who forgets what wisdom is supposed to look like.”

In Kingfisherish Wandering [1]

© Wix

Corporate sustainability policies are often celebrated as signals of ethical commitment and long-term vision [2,3]. Yet a new study by Maria Cristina Zaccone [4] reveals a more paradoxical reality: the more firms signal sustainability, the more they may invite targeted scrutiny from their shareholders.

Drawing on signaling theory and agency theory, Zaccone analyzed a longitudinal dataset of Fortune 250 U.S. firms between 2011 and 2019 to explore whether sustainability policies attract more shareholder activism and what type of issues such activism targets. The results challenge common assumptions. Sustainability commitments do not increase activism across the board; instead, they redirect shareholder attention toward symbolically charged governance issues, particularly CEO compensation.

When highly reputable firms adopt sustainability policies, they are held to stricter moral standards. Shareholders are quick to detect inconsistencies between “what the firm says” and “what it does.” In these cases, activism intensifies around executive pay—an issue representing fairness, accountability, and ethical congruence. Rather than protecting a company, sustainability rhetoric can become a magnifying glass that amplifies reputational risks and exposes governance hypocrisy [5,6].

The findings highlight that sustainability initiatives act as double-edged signals: they strengthen legitimacy when coherent with internal practices but invite criticism when misaligned. For large, visible corporations, sustainability thus becomes less a shield and more a commitment to consistency between values and actions.

Viewed through the lens of Nature Quotient (NQ), this study underscores that genuine sustainability requires internal coherence. Like ecosystems, organizations thrive on balance. Authenticity in leadership and governance sustains trust and peace within corporate communities [7]. When companies pursue green signaling without ethical integrity, they erode both individual peace (employees’ and investors’ trust) and social peace (public confidence in corporate sustainability) [8].

References

[1] Nguyen MH. (2025). Kingfisherish Wandering. https://www.amazon.com/dp/B0FVLLLXNW/

[2] Bettinazzi EL, Zollo M. (2017). Stakeholder orientation and acquisition performance. Strategic Management Journal, 38(12), 2465-2485. https://doi.org/10.1002/smj.2672 

[3] Gartenberg C, Serafeim G. (2019). 181 top CEOs have realized companies need a purpose beyond profit. Harvard Business Review.

[4] Zaccone MC. (2025). Signaling sustainability, inviting scrutiny: How sustainability policies shape the focus of shareholder activism. Corporate Social Responsibility and Environmental Management. https://doi.org/10.1002/csr.70232 

[5] Roberts PW, Dowling GR. (2002). Corporate reputation and sustained superior financial performance. Strategic Management Journal, 23, 1077-1093. https://doi.org/10.1002/smj.274 

[6] Zavyalova A, et al. (2016). Reputation as a benefit and a burden? How stakeholders' organizational identification affects the role of reputation following a negative event. Academy of Management Journal, 59(1), 253-276. https://doi.org/10.5465/amj.2013.0611

[7] Vuong QH, Nguyen MH. (2025). On Nature Quotient. Pacific Conservation Biology, 31, PC25028. https://doi.org/10.1071/PC25028

[8] Nguyen MH, Ho MT, La VP. (2025). On “An” (安): Inner peace through uncertainty, nature quotient, and harmony with Dao. http://books.google.com/books/about?id=NIKMEQAAQBAJ