Greenwashing in the Fashion, Energy, and Finance Sectors: A Systematic Review of the European Union, North America, and Asia-Pacific

Abstract

Greenwashing has become concerning as companies have started to promote environmental commitments in their public communication. Reporting of sustainability and marketing environmental claims have increased a lot but has also led to doubts regarding these claims. This study examines the appearance of greenwashing across three sectors - fashion, energy and finance - across three major regions: the European Union, North America and Asia-Pacific. It uses a systematic literature review of 50+ peer reviewed papers published between 2003 - 2025. The aim is to show how environmental narratives are shaped by companies and how stakeholders interpret them.

The study draws on legitimacy theory which explains how greenwashing is used as a strategy by companies to maintain their public approval when their actual performance does not match their communication.

All the three sectors show different forms of greenwashing. In the fashion industry, "sustainable" and "conscious" collections are promoted by companies even though they continue high production and there is restricted transparency in supply chains. In the energy sector, greenwashing often appears through long-term transition narratives and net-zero pledges that lack clear interim targets or strong evidence of real emission reductions. In financial services, due to confusion regarding ESG ratings and methods misleading communication occurs. Assessing sustainability claims is difficult for investors as well as consumers as different institutions use different ESG standards and the sustainable investment portfolio composition is not always transparent.

The regional differences are also clear. A major role is played by regulatory strength in shaping greenwashing practices. In the European Union, stricter frameworks like the Green Claims Directive ensure that environmental claims are measurable as well as verifiable. In North America, regulation is more fragmented. Guidance-based systems like the Federal Trade Commission’s Green Guides allows more flexibility in how companies frame sustainability claims. The Asia Pacific region shows high variation. Regulatory systems and enforcement capacity of many countries differ widely.

Several common drivers appear throughout the literature. Companies exaggerate or selectively present environment related information due to institutional pressure, competition and the need to maintain legitimacy. Stricter regulation and risk to reputation discourages misleading claims. This study also shows that as sustainable disclosure rules are becoming much stricter, it is leading to greenwashing becoming more subtle.

This study shows how greenwashing in diferent regulatory and industry contexts has evolved and also identifies gaps in current research. The findings help companies improve the credibility of their environmental communication.