ASSOCIATION FOR CONSUMER RESEARCH Labovitz School of Business & Economics, University of Minnesota Duluth, 11 E. Superior Street, Suite 210, Duluth, MN 55802 Consumer Perceptions of Green Brands and Actual Corporate Environmental Performance James Cordeiro, State University of New York, Brockport Joon Yong Seo, State University of New York, Brockport Recent media has spotlighted the gap between corporate green brand reputation and actual environmental performance. Some firms have green brand reputation that is substantially greater than their environmental performance, while others experience the opposite. We examine the determinants of the gap between individual corporate green brand reputation and environmental performance. [to cite]: James Cordeiro and Joon Yong Seo (2014) ,"Consumer Perceptions of Green Brands and Actual Corporate Environmental Performance", in NA - Advances in Consumer Research Volume 42, eds. June Cotte and Stacy Wood, Duluth, MN : Association for Consumer Research, Pages: 443-444. [url]: http://www.acrwebsite.org/volumes/1017722/volumes/v42/NA-42 [copyright notice]: This work is copyrighted by The Association for Consumer Research. For permission to copy or use this work in whole or in part, please contact the Copyright Clearance Center at http://www.copyright.com/. Consumer Perceptions of Green Brands and Actual Corporate Environmental Performance James J. Cordeiro, SUNY Brockport, USA Joon Yong Seo, SUNY Brockport, USA EXTENDED ABSTRACT er,” and “the firm has environmentally friendly products.” An ob- Consumer perceptions of the firm’s greenness may not always jective measure of corporate environmental performance is adopted line up with reality, that is, the firm’s actual sustainability efforts and from the 2012 Newsweek Green Ranking Score, which is a compos- their consequences. Newsweek recently partnered with Landor Asso- ite measure of (a) actual environmental management practices, (b) ciates, a brand consulting and design firm, and Penn Schoen Berland, actual environmental outcomes as measured by emissions and other a research and communication firm, to survey consumer perceptions harmful outputs, and (c) corporate environmental communication of green brands and firms’ sustainability practices. The survey re- and disclosure efforts. Finally, since our firms are situated in twenty sults spotlight a significant gap between consumer green brand rec- industry sectors, we cluster firms by industry when conducting the ognition and the firms’ actual environmental performance, using four regression analyses. brand categories of unsung heroes, free passers, losers, and winners The results revealed a positive relationship between green brand (Landor Associates, 2012). reputations and corporate environmental performance, mitigating the • Unsung Heroes: Brands with strong green practices, but little rapidly increasing public concerns about greenwashing to some de- public awareness gree. More important, we identified two factors that explain the gap between green brand reputations and corporate environmental per- • Free Passers: Brands with limited green practices, but strong formance, that is, the extent of firms’ information asymmetry and the brand halos that drive their green reputation extent of firm-level environmental disclosure. We also find these two • Losers: Brands with limited green practices that are publicly factors are significant predictors of “free passers” and “unsung he- recognized for these limitations roes”, respectively. The results showed that the level of information asymmetry (as proxied by the number of analysts following the firm) • Winners: Brands with strong green practices that are publicly is a significant predictor of “free passers”, suggesting that firms with acknowledged higher levels of information asymmetry are more likely to be in this Consumer perceptions of firms’ greenness are often inconsis- group. We also find that corporate environmental disclosure score is tent with the corresponding firms’ sustainability practices/outcomes, a significant predictor of “unsung heroes”, suggesting that firms with causing consumer confusion in the marketplace with regard to firms lower levels of environmental disclosure are more likely to be in this and products that make environmental claims. The lack of close con- category. Additionally, the “free passer” effect is heightened and the nection between consumer perceptions and firm behaviors under- “unsung hero” effect reduced by a more favorable general corporate scores the importance of aligning consumer knowledge with firms’ reputation (as proxied by the Fortune reputation score). sustainability initiatives, particularly when the firm’s actual green Our first contribution is demonstrating that at least in the case performance outweighs consumer perceptions of the firm’s green- of “green” brand reputations, the brand reputation across our sample ness. It also calls for the need for additional research on what drives of large US firms is plausibly driven by objective corporate envi- the gap between perceived and actual sustainability. The present re- ronmental performance, thus downplaying the role of greenwashing search attempts to meet this need. A better understanding of this issue as an important alternative determinant of brand reputation. In addi- will aid firms that are challenged with delivering both sustainable tion to the consumer benefits noted above, this finding should help business practice and effective communication to stakeholders. On forestall perceptions and concerns over greenwashing from powerful the other hand, having a better comprehension of the potential dis- stakeholders such as NGOs, environmental activists, and policy mak- parity between consumer perceptions of green brands and the firm’s ers. While the results above were “on average” results for the sample actual environmental performance will help consumers, investors, as a whole, it remains the case that some firms benefit from appar- and policy makers accurately assess whether a firm’s environmental ently unwarranted green brand reputations (“free passers”) while claim is a case of greenwashing or a true reflection of environmen- others suffer from lack of deserved recognition (“unsung heroes”). tally responsible business practices. Our second contribution lies in explaining the gap that has intrigued To address our key question about firms’ perceived sustainability recent media commentators on corporate green branding. We exam- and real sustainability, we develop two models. Our first model in- ine a prominent recent example of this gap, using the disparity data vestigates whether corporate green brand reputation as perceived by from Newsweek and demonstrate that the gap is related to the extent consumers is significantly related to objective measures of corporate of information asymmetry and general corporate reputation (which environmental performance. Our second model follows up by explor- evidently benefits the “free passers”) and also the extent of general ing the gap between corporate green brand reputation and corporate corporate reputation as well as firm-level environmental disclosure environmental performance, testing whether the gap can be explained (lack of which evidently hurts the “unsung heroes”), two plausible by variations in information asymmetry, corporate environmental dis- and interesting explanations for this phenomenon. Thus, firms that closure, and “halo” effects from general corporate reputation. have an image perception of “unsung heroes”, for instance, might For green brand reputations, we used the Newsweek (Green) well choose to deploy more extensive communications about their Reputation Score that was developed in 2012 by Landor Associates environmental performance in an effort to reduce the gap. Consumer and Penn Schoen Berland through online survey of 251 companies advocacy groups, NGOs, and environmental activists, on the other with a sample of 8,743 American adults (Newsweek, 2012). Each hand, should be wary of firms where levels of information asym- respondent evaluated a random selection of 13-15 major brands with metry is high, either due to structural reasons or because insiders questions regarding the firms’ various sustainability attributes such at these firms choose to keep outsiders in the dark, possibly due to as “the firm is a green company,” “the firm is an environmental lead- self-interested motives. Advances in Consumer Research 443 Volume 42, ©2014 444 / Consumer Perceptions of Green Brands and Actual Corporate Environmental Performance REFERENCES Elliott, W., Jackson, K. , Peecher, M. , White, B. (forthcoming), Bhattacharya, C. B., Korschun, D., & Sen, S. (2009). 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