Does carbon assurance deter corporate greenwashing?

Purpose This paper investigates whether third-party carbon assurance deters corporate greenwashing. Motivated by competing theoretical perspectives, where assurance may either enhance accountability or provide symbolic legitimacy, we examine whether carbon assurance aligns firms' environmental disclosures with their actual performance. Design/methodology/approach Using 2,276 US publicly listed firm-year observations from 2007–2020, we analyse the association between carbon assurance and greenwashing, measured as the divergence between ESG disclosure and ESG performance. Findings Carbon assurance reduces greenwashing, supporting its monitoring and signalling roles. We document that environmental innovation is a channel for this relationship: carbon assurance is associated with greater environmental innovation, which in turn lowers greenwashing. The effect is concentrated in non-RGGI states and is stronger in less competitive product markets. The results are robust across alternative specifications and endogeneity tests, particularly for assurance level and percentage. Originality/value This study provides the first large-scale evidence that carbon assurance effectively curbs corporate greenwashing and identifies environmental innovation as the key mechanism. The findings inform regulators considering mandatory carbon assurance, and assist investors and creditors evaluating firms' environmental credibility.