Environmental Regulation, Greenwashing Behaviour, and Green Governance of High-Pollution Enterprises in China

Abstract

This study analyses the relationship between greenwashing behaviour, a lack of government supervision, and imperfect green certification mechanisms in China. To improve green governance and greenwashing governance in light of rent-seeking behaviour between high-pollution enterprises and third-party green certification institutions (GCIs), we construct a tripartite game model for the green governance system using an evolutionary game and analyse the interaction and evolutionary trajectory between the three parties. Our results indicate that increasing local government incentives and penalties not only facilitate strengthened green governance by high-pollution enterprises that do not greenwash but also help third-party GCIs to decline to engage in rent-seeking. However, increased incentives lead to relaxed governmental supervision. In addition, the government’s incentives and penalties only meet conditions that each agent’s total incentives and penalties exceed its speculative gain, and green governance systems can be effectively prevented from resulting in unsatisfactory and unstable strategies. Moreover, the accountability that higher levels of government have to local governments effectively enables high-pollution enterprises’ refusal to greenwash and third-party GCIs’ refusal to engage in rent-seeking. Our results counsel further research on environmental regulation, green governance, and enterprises’ greenwashing, with theoretical and practical applications for both policymakers and enterprises.