The Greenwashing Paradox: Can Corporate Sustainability Narratives Truly Build Stakeholder Trust?

Stakeholder trust is a cornerstone of sustainability governance, shaped by intricate interdependencies including sustainability discrepancies, stakeholder scrutiny, and corporate practices. In an era of increasing scrutiny over corporate sustainability claims, this study investigates the dynamics of trust-building through a robust mixed-methods framework. Using a dataset of publicly listed European firms, the analysis captures the pivotal shift towards structured ESG strategies under increasing regulatory and stakeholder pressures. By integrating advanced econometric techniques, such as Panel ARDL and NARDL, with Necessary Condition Analysis (NCA) and fuzzy-set Qualitative Comparative Analysis (fsQCA), we offer a comprehensive examination of short- and long-run relationships, critical thresholds, and effective configurations influencing trust outcomes. This study contributes methodologically by combining econometric and configurational approaches, providing a multidimensional perspective on trust-building mechanisms. Our findings highlight that trust is shaped by systemic interactions among factors such as Sustainability Discrepancy (SUD), Stakeholder Scrutiny (STS), and External Audit Presence (EAP). Proactive alignment with transparency, accountability, and stakeholder engagement significantly strengthens trust while mitigating risks like greenwashing. These insights provide actionable guidance for policymakers and corporate leaders, advocating for robust regulatory frameworks, participatory governance, and region-specific strategies to foster trust and advance global sustainability goals.