The Value of NGO Activism: Evidence from Sustainability Disclosures

We examine the implications of NGO activism around the world and their role as corporate watchdogs using novel data on NGO allegations about misleading or false corporate environmental and social claims (“E&S-washing”). These NGO campaigns primarily target large, visible firms in the consumer-facing or oil and gas industries, focusing predominantly on statements on how firms impact climate change, consumer health, and waste. NGOs target E&S-washing in customer-focused disclosures like advertisements, product labels, and packaging, which are unaffected by recent sustainability disclosure regulations. Stocks react with negative announcement returns to NGO allegations, especially when the alleged behavior concerns financially-material E&S issues. Negative media reporting also rises. NGO campaigns have real effects: Firms criticized for climate-related claims reduce their Scope 1 emissions, but this effect comes with a simultaneous increase in emissions in the supply chain. The corporate response arises, at least partially, because NGOs catalyze engagement by institutional investors.