A Review of Natural Language Processing Methods for Identifying "Greenwashing" in ESG Disclosures

0. A Review of Natural Language Processing Methods for Identifying "Greenwashing" in ESG Disclosures

1. Introduction

The escalating global emphasis on sustainable business practices has amplified the demand for corporate Environmental, Social, and Governance (ESG) disclosures, with companies increasingly showcasing environmental commitments to enhance public perception and attract environmentally conscious investors [5,7,12,13]. This heightened focus, however, has also precipitated the rise of "greenwashing"—a deceptive practice where organizations present a misleading impression of environmental responsibility without substantial operational changes [2,3,13,15]. Such deliberate misrepresentation undermines the integrity of ESG ratings and corporate sustainability reporting, necessitating robust detection mechanisms [3,15].

The pervasive nature of greenwashing is a significant concern, with a substantial proportion of corporate environmental claims found to be ambiguous, deceptive, or lacking verifiable evidence [15]. This issue is compounded by the acknowledgment from many corporate leaders in the United States regarding their engagement in greenwashing practices [15]. The ramifications of greenwashing are extensive, impacting risk assessments, regulatory compliance, ESG investment decisions, and corporate reputation [3,4]. Consequently, stakeholders face considerable difficulty in accurately assessing a company's genuine commitment to sustainability [2].

Traditional methods of analyzing ESG disclosures are increasingly inadequate due to the voluminous and text-heavy nature of corporate sustainability reports, making manual analysis cumbersome and time-intensive [6,10]. The sheer volume of information from diverse sources, including corporate reports, news, and social media, often overwhelms human analytical capabilities [12,14]. Moreover, the absence of standardized analytical tools hinders reproducibility and methodological robustness [6]. ESG rating systems also struggle with processing vast, often misaligned metrics, leading to potential manipulation of investor perceptions through low-quality indicators [11].

The manual identification of greenwashing is further complicated by the nuanced linguistic features in corporate sustainability reporting. Companies frequently employ vague and ambiguous language to mask or exaggerate their environmental efforts, using buzzwords without clear definitions or verifiable evidence [5,7,15]. The subjective nature of greenwashing definitions and the use of selective disclosure to create overly positive corporate images pose significant challenges for automated detection methods [1]. Discrepancies between internal corporate sentiment and external social media narratives can also signal potential greenwashing [2]. Additionally, the complexity and varied layouts of corporate PDF documents impede automated information extraction for NLP solutions [6].

These limitations underscore a critical demand for robust, automated detection mechanisms, particularly those leveraging Artificial Intelligence (AI) and Natural Language Processing (NLP). AI and Machine Learning (ML) offer the potential for accurate and rapid analysis of extensive textual information in sustainability reports, overcoming the challenges of manual scrutiny [5,13]. NLP is crucial for advancing ESG efforts by automating data analysis and uncovering insights for sustainable business practices [14]. It can automate ESG data extraction, enhance accuracy, and provide deeper insights for improvement [14]. Specific applications include classifying textual segments against precise ESG activities, often requiring domain-specific fine-tuning for general-purpose Large Language Models (LLMs) [9]. By improving transparency and accountability in ESG reporting, NLP can provide data-driven evidence of sustainability, fostering stakeholder confidence and driving sustainable long-term practices [8,14]. The development of AI-based detection models, potentially leveraging text and vision transformers to quantify sustainability messaging, is vital for company ratings and enhancing explainability [11]. This evolving landscape highlights the imperative for sophisticated NLP solutions to accurately identify misleading claims and promote genuine corporate accountability in ESG disclosures.

This survey aims to provide a comprehensive critical review of Natural Language Processing (NLP) methods specifically designed for identifying greenwashing in ESG disclosures. The objective is to systematically analyze existing research, identify prevalent methodologies, evaluate their strengths and weaknesses, and propose promising avenues for future research [1]. This endeavor builds upon the critical need to detect misleading climate-related corporate communications, as highlighted by existing surveys on NLP methods for such identification [7]. Similarly, a systematic literature review employing the PRISMA 2020 statement underscores the interrelationships between greenwashing, sustainability reports, AI, and ML, aiming to identify research patterns, gaps, and future opportunities [13].

The logical flow of this survey is structured to provide a clear narrative, progressing from understanding the multifaceted problem of greenwashing to exploring advanced NLP solutions and charting future research directions. Initially, the survey will delve into the foundational understanding of greenwashing, including its various manifestations and profound impact on sustainable business practices and investor confidence [12]. This initial section will establish the rationale for employing data analytics, particularly NLP, as a robust tool for detecting and preventing these unethical practices [12]. Subsequently, the survey will transition into a detailed examination of the NLP methods employed in greenwashing detection. This will involve a systematic categorization of methodologies, such as those that identify climate-related statements, assess green claims, perform sentiment/tone analysis, and conduct topic detection, often leveraging frameworks like the Task Force on Climate-related Financial Disclosures (TCFD) [4]. For instance, some research evaluates NLP frameworks specifically for detecting greenwashing in ESG, proposing innovative mechanisms for automated surveillance and examining the correlation between internal ESG sentiments and public opinion on social media [2]. One study, for example, evaluates 12 pharmaceutical entities by analyzing sentiment using the FinBERT-ESG-9-Categories model, suggesting that a lack of correlation between internal and external sentiment scores can indicate potential greenwashing [2].

The survey will also analyze the role of advanced language models, including Large Language Models (LLMs), in enhancing the precision of greenwashing detection. Papers focusing on the capabilities of current-generation LLMs in identifying text related to environmental activities, particularly aligning textual segments from Non-Financial Disclosures (NFDs) with the EU ESG taxonomy, will be reviewed [9]. This includes exploring how LLM performance can be significantly enhanced through fine-tuning on a combination of original and synthetically generated data, as demonstrated by the ESG-Activities benchmark dataset and detailed analysis of LLM performance in zero-shot and fine-tuning settings [9]. The integration of NLP tools can further streamline ESG reporting, automate data analysis, and uncover actionable insights, thereby improving transparency and accountability [14]. While one paper directly addresses how NLP, through services offered by Elite Asia, can enhance ESG marketing and reporting, leading to more sustainable business practices [14], it also underscores the broader utility of NLP for identifying opportunities for positive environmental, social, and governance impacts.

Furthermore, the survey will critically assess the limitations and challenges prevalent in current NLP approaches to greenwashing detection. This includes discussions on the availability and quality of datasets, the complexities of capturing nuanced deceptive language, and the computational resources required for advanced models [7]. The discussion will also encompass methodologies for assessing corporate disclosures and developing models to explain variations in ESG ratings, thereby bridging existing gaps in ESG measurement through NLP [8]. Finally, the survey will conclude by outlining future research directions, emphasizing the potential for multimodal deep learning approaches and the development of more robust, interpretable, and scalable NLP models for greenwashing detection. This forward-looking perspective aims to guide researchers toward unexplored areas and foster innovation in this critical domain, ensuring that the field continues to evolve in response to the dynamic nature of greenwashing practices [1,7]. While some papers focus on specific research projects developing AI models for greenwashing detection rather than comprehensive survey outlines [11], their contributions to specific techniques, such as multimodal deep learning, will be integrated into the broader discussion of potential solutions. The survey’s holistic structure is designed to provide a comprehensive and actionable overview of NLP's role in combating greenwashing, thereby supporting more genuine corporate sustainability efforts.

1.1 Background and Motivation

The increasing global focus on sustainable business practices has led to a surge in demand for corporate Environmental, Social, and Governance (ESG) disclosures, with companies often highlighting their commitment to environmental stewardship to enhance public image and attract environmentally conscious investors [5,7,12,13]. However, this heightened emphasis on ESG factors has also given rise to greenwashing, a deceptive practice where organizations create a false or misleading impression of their environmental responsibility without substantial operational changes [2,3,13,15]. This deliberate attempt to mislead investors and the public through unverified or ambiguous environmental claims poses a significant challenge to the integrity of ESG ratings and the reliability of corporate sustainability reporting, necessitating robust detection mechanisms [3,15].

The prevalence of greenwashing is a critical concern, with research indicating that a significant portion of corporate environmental claims are ambiguous, deceptive, or unfounded, and many entirely lack supporting evidence [15]. This widespread issue is further exacerbated by the acknowledgment from a substantial percentage of corporate leaders in the United States regarding their involvement in greenwashing practices [15]. The implications of greenwashing are far-reaching, leading to distorted risk assessments, regulatory compliance issues, flawed investment decisions in ESG-focused portfolios, legal liabilities, and reputational damage for companies [3,4]. Consequently, accurately gauging a company's genuine dedication to sustainability becomes exceedingly difficult for stakeholders, including investors and regulators [2].

Traditional methods of scrutinizing ESG disclosures are increasingly insufficient in addressing the complexities of greenwashing due to several inherent limitations. Corporate sustainability reports are often lengthy and text-heavy, making manual analysis cumbersome and time-consuming for analysts attempting to extract relevant information [6,10]. The sheer volume of information available across various sources, including corporate reports, news articles, and social media, overwhelms human analytical capabilities [12,14]. Moreover, the lack of standardized, open tools for report analysis burdens researchers, hindering reproducibility and raising concerns about methodological robustness [6]. Furthermore, traditional ESG rating systems struggle to process the vast and often misaligned reported metrics, which can lead to the manipulation of investor perceptions through the use of low-quality indicators [11].

The challenge of manually identifying greenwashing is compounded by specific linguistic features inherent in corporate sustainability reporting. Companies frequently employ nuanced, vague, and ambiguous language to mask their actual environmental impact or to exaggerate their efforts. Terms such as "net zero," "environmental-friendly," and "energy efficient" are often used as buzzwords without clear definitions or verifiable evidence, making it difficult to discern genuine commitment from mere rhetoric [5,7,15]. The subjective nature of defining and quantifying greenwashing further complicates automated detection methods, as companies may use selective disclosure to create an overly positive corporate image, misleading stakeholders about their actual environmental impact [1]. This deceptive portrayal can lead to a diminished correlation between in-house corporate sentiment metrics and external social media narratives, which can hint at potential greenwashing activities [2]. The complexity and varied layouts of corporate PDF documents also complicate automated information extraction, posing a significant hurdle for NLP solutions [6].

Given these limitations, there is a critical and growing demand for more robust, automated detection mechanisms, particularly those leveraging Artificial Intelligence (AI) and Natural Language Processing (NLP). AI and Machine Learning (ML) offer the potential to analyze the extensive textual information within sustainability reports accurately and quickly, overcoming the challenges posed by manual scrutiny [5,13]. NLP, in particular, is highlighted as a crucial technology for advancing ESG efforts by automating data analysis and uncovering insights for more sustainable business practices [14]. It can automate ESG data extraction from diverse sources, saving time and maintaining accuracy, and enables businesses to gain deeper insights into their ESG performance, identifying areas for improvement [14]. Specific NLP applications include classifying textual segments against precise ESG activities, which is a more granular task than linking to broad SDG categories and necessitates domain-specific fine-tuning for general-purpose Large Language Models (LLMs) [9]. By enhancing transparency and accountability in ESG reporting, NLP can provide data-driven evidence of sustainability efforts, building stakeholder confidence and driving sustainable long-term business practices [8,14]. The development of AI-based detection models, potentially leveraging text and vision transformers to quantify sustainability-related messaging, is crucial for facilitating company ratings based on a "greenwashing score" and improving explainability by mapping textual and visual information onto sustainability axes [11]. This evolving landscape underscores the imperative for sophisticated NLP solutions to accurately identify misleading claims and promote genuine corporate accountability in ESG disclosures.

1.2 Survey Objectives and Structure

This survey aims to provide a comprehensive critical review of Natural Language Processing (NLP) methods specifically designed for identifying greenwashing in Environmental, Social, and Governance (ESG) disclosures. The objective is to systematically analyze existing research, identify prevalent methodologies, evaluate their inherent strengths and weaknesses, and propose promising avenues for future research [1]. This endeavor builds upon the critical need to detect misleading climate-related corporate communications, as highlighted by surveys focused on NLP methods for such identification [7]. Similarly, a systematic literature review employing the PRISMA 2020 statement underscores the interrelationships between greenwashing, sustainability reports, Artificial Intelligence (AI), and Machine Learning (ML), aiming to identify research patterns, gaps, and future opportunities [13].

Subsequently, the survey will transition into a detailed examination of the NLP methods employed in greenwashing detection. This will involve a systematic categorization of methodologies, such as those that identify climate-related statements, assess green claims, perform sentiment/tone analysis, and conduct topic detection, often leveraging frameworks like the Task Force on Climate-related Financial Disclosures (TCFD) [4]. For instance, some research evaluates NLP frameworks specifically for detecting greenwashing in ESG, proposing innovative mechanisms for automated surveillance and examining the correlation between internal ESG sentiments and public opinion on social media [2]. One study, for example, evaluates 12 pharmaceutical entities by analyzing sentiment using the FinBERT-ESG-9-Categories model, suggesting that a lack of correlation between internal and external sentiment scores can indicate potential greenwashing [2].

Finally, the survey will conclude by outlining future research directions, emphasizing the potential for multimodal deep learning approaches and the development of more robust, interpretable, and scalable NLP models for greenwashing detection. This forward-looking perspective aims to guide researchers toward unexplored areas and foster innovation in this critical domain, ensuring that the field continues to evolve in response to the dynamic nature of greenwashing practices [1,7]. While some papers focus on specific research projects developing AI models for greenwashing detection rather than comprehensive survey outlines [11], their contributions to specific techniques, such as multimodal deep learning, will be integrated into the broader discussion of potential solutions. The survey’s holistic structure is designed to provide a comprehensive and actionable overview of NLP's role in combating greenwashing, thereby supporting more genuine corporate sustainability efforts.

2. Understanding Greenwashing and ESG Disclosures

This section provides a foundational understanding of greenwashing within the context of ESG disclosures, a critical prerequisite for developing effective detection methodologies. It systematically explores the conceptual definitions and common manifestations of greenwashing, details the intricate landscape of ESG reporting and diverse data sources, and highlights the inherent challenges in identifying deceptive environmental claims.

Type of Greenwashing	Description	Examples
Vague Language	Use of ambiguous or unsubstantiated terms without clear definitions or verifiable evidence.	"Eco-friendly," "Net Zero," "Sustainable"
Irrelevant Claims	Highlighting an attribute that is technically true but irrelevant to environmental impact or misleading.	"CFC-free" (when CFCs are banned by law)
Hidden Trade-offs	Promoting one positive environmental aspect while ignoring significant negative impacts.	Recycled paper with high energy consumption in production
Unsubstantiated Claims	Environmental claims lacking supporting evidence or third-party verification.	Broad claims about carbon footprint reduction without data
Misleading Imagery/Graphics	Using visuals that evoke environmental responsibility but are not directly related to the product/company.	Images of nature for products with negative environmental impact
Selective Disclosure	Presenting only positive environmental information while omitting negative aspects.	Highlighting recycling efforts while ignoring waste generation
False/Exaggerated Claims	Making outright false or significantly exaggerated statements about environmental performance.	Claims of 100% renewable energy without proof
Irresponsible Marketing	Using environmental claims to mislead consumers about a product's or company's true environmental impact.	Promising "zero impact" for complex industrial processes

The initial subsection, "Conceptualizing ESG Compliance and Identifying Misinformation," delineates greenwashing as a deceptive communication strategy used by corporations to misrepresent their environmental or sustainability efforts. It synthesizes various definitions, emphasizing the deliberate misleading or false impression of environmental responsibility [2,5,15]. This subsection explores the nuances arising from the lack of a universal "green" definition and the exploitation of vague terminology [13]. It further categorizes common greenwashing types, such as vague language, irrelevant claims, and unsubstantiated statements, which collectively complicate automated detection [5,7,12]. The discussion then transitions to linguistic indicators of greenwashing, including the absence of specific commitments, non-specific language, and overly optimistic sentiment, and introduces frameworks like the "Green Authenticity Index" [1,3]. This lays the groundwork for understanding the textual characteristics that NLP models must identify.

Following this conceptual overview, the "The Landscape of ESG Reporting and Data Sources" subsection elaborates on the extensive nature of ESG reporting, from corporate sustainability reports to GHG emissions reports, and highlights the lack of standardization as a significant challenge [10,11,13]. It reviews the evolving legal and regulatory landscape, including international frameworks like the UNFCCC and regional initiatives such as the EU Green Claims Directive, which aim to establish clearer reporting requirements and reduce misleading claims [7,15]. Crucially, this subsection outlines the diverse data sources utilized in greenwashing detection, encompassing corporate documents (e.g., 10-K filings, sustainability reports) and external sources (e.g., news articles, social media, ESG ratings) [5,6,7,8]. It also discusses the implications of using different data sources, noting how external data can provide a more holistic and critical perspective than internal reports alone [3].

Finally, the "Challenges in Identifying Greenwashing" subsection delves into the inherent difficulties of detecting greenwashing. It identifies the primary obstacles as the pervasive subjectivity and ambiguity in defining greenwashing, the critical lack of standardization in ESG reporting, and the dynamic nature of misleading claims that continuously evolve [1,3,6,7,13]. This section highlights how these challenges necessitate advanced NLP models capable of deep semantic understanding, contextual reasoning, and adaptability to unstructured and multimodal data, underscoring the urgent need for robust, continuously learning AI systems [5,9,11]. Together, these three subsections provide a comprehensive overview of the fundamental concepts, contexts, and complexities involved in understanding and addressing greenwashing within ESG disclosures, thereby setting the stage for the subsequent discussion of NLP methods.

2.1 Conceptualizing ESG Compliance and Identifying Misinformation

Greenwashing, at its core, represents a deceptive communication strategy employed by corporations to misrepresent their environmental or sustainability efforts. Across various studies, common threads emerge in its definition, typically revolving around intentional misleading or the creation of a false impression of environmental responsibility. For instance, [15] defines greenwashing as a deliberate attempt to mislead the public and investors through false or unverified environmental claims, distinguishing it from mere poor ESG performance alongside public commitments. This resonates with the definition provided by [5], which describes greenwashing as "behavior or activities that make people believe that a company is doing more to protect the environment than it really is." Similarly, [2] characterizes it as the "deceptive portrayal of a firm's performance in environmental, social, or governance facets," emphasizing a discord between internal strategies and public perception.

Nuances in these definitions highlight the complexity of the phenomenon. While some definitions, like that from [15], acknowledge unintentional greenwashing stemming from a lack of understanding or transparency, others, such as [7], focus on the broader aspect of misleading the public about carbon transition efforts. The absence of a universally accepted definition of "green" or "sustainable" further contributes to ambiguity, allowing companies to exploit vague terminology, as noted by [13]. This ambiguity is often exploited as a marketing strategy to capitalize on consumer demand for sustainability without genuine operational changes [13].

Common types of greenwashing observed in text include vague language, irrelevant information, false claims, and the excessive use of ESG buzzwords, which collectively pose significant challenges for automated detection. Vague language, such as "eco-friendly" or "net zero" without clear definitions or evidence, is a recurring theme [3,12,15]. For instance, [12] points to terms like "CFC-free" as irrelevant claims, where the advertised attribute is unrelated to the product's actual impact because CFCs have long been banned. Hidden trade-offs, where one positive environmental aspect is promoted while significant negative impacts are ignored (e.g., energy consumption in recycled paper production), also fall under this category [12].

Other forms of greenwashing include the use of unreliable sustainability labels, presenting legal requirements as distinctive features, making claims about an entire product when only a part is environmentally friendly, and unsubstantiated environmental claims [7]. The use of misleading imagery and words without supporting evidence, such as tree images for products not involving trees, is also a recognized manifestation [5]. These manifestations make automated detection challenging due to the subjective nature of "misleading" information, the reliance on contextual understanding, and the difficulty in discerning intent.

To address the challenge of identifying misinformation, particularly greenwashing, researchers are increasingly focusing on the classification of text segments against precise ESG activities. The approach proposed by [9] exemplifies this, framing the problem as classifying text segments based on their relevance to specific ESG activities outlined by the EU taxonomy. This taxonomy provides a standardized framework for sustainable practices, enabling companies to evaluate and report their performance consistently. While not directly focused on greenwashing detection, this method of quantifying ESG communication can indirectly contribute to identifying misrepresentation by highlighting where reported claims deviate from established standards or lack supporting detail [8]. Tools like REPORTPARSE also aid in this by extracting specific sustainability-related information, which can then be evaluated against corporate commitments [6].

Specific linguistic indicators of greenwashing, as highlighted across various papers, offer crucial insights for automated detection. [1] characterizes greenwashing language by four key attributes: absence of explicit climate-related commitments and actions, use of non-specific language, overly optimistic sentiment, and lack of evasive or hedging terms. These attributes, developed through literature review and expert corroboration, provide a preliminary mathematical formulation for quantifying greenwashing risk. Similarly, [3] introduces the "Green Authenticity Index" (GAI), which quantifies the sincerity of corporate claims through two dimensions: Certainty (clarity, factuality, specificity) and Agreement (alignment between reported claims and external data). Vague statements are explicitly contrasted with precise commitments as indicators of greenwashing.

The challenge of identifying misinformation within ESG disclosures is further complicated by the nuanced ways companies present their sustainability efforts. [11] conceptualizes greenwashing as a consequence of misaligned ESG reported metrics, where low-quality metrics are used to influence investor perceptions. This approach suggests mapping textual and visual information sources onto sustainability axes, like SDGs 14 and 15, to detect discrepancies. This aligns with the notion of "cheap talk," "selective disclosure," "deceptive techniques," or "biased narrative" as components indicative of greenwashing, as discussed in [7]. The inherent difficulty lies in discerning deliberate deception from genuine, albeit poorly articulated, efforts. For instance, vague expressions like "net zero" or "energy efficient" can be subjective and may not always indicate an intent to mislead, even if they lack direct evidence [15]. The distinction between genuine sustainability claims and greenwashing often hinges on the presence or absence of verifiable data, specific commitments, and alignment with external, objective standards. Hence, the move towards classifying text segments against precise ESG activities, guided by frameworks like the EU taxonomy, is a crucial step in formalizing the assessment of corporate sustainability claims and, by extension, identifying potential greenwashing [9].

2.2 The Landscape of ESG Reporting and Data Sources

The identification of greenwashing necessitates a thorough understanding of the intricate landscape of Environmental, Social, and Governance (ESG) reporting and disclosure. ESG reporting encompasses a broad spectrum of corporate communications designed to convey a company's impact and performance across these dimensions [10,13]. Key aspects relevant to greenwashing detection include the increasing volume and exhaustiveness of sustainability reports, which cover a wide array of ESG measures [10]. These reports serve as fundamental tools for communicating environmental, social, and economic impacts, often encompassing various documents such as Corporate Social Responsibility (CSR) reports and Greenhouse Gas (GHG) emissions reports [13]. The lack of alignment and standardization in reported metrics, despite the growing volume, poses a significant challenge, as it can facilitate misleading statements and makes cross-company comparisons difficult [11,15]. Greenwashing is often characterized by quantifiable outcomes and consistency with external data, highlighting the importance of verifying claims against independently audited information [3].

The legal and regulatory context profoundly influences the nature of greenwashing and introduces considerable challenges in its identification. A lack of clear, universally enforced standards in ESG reporting has historically enabled companies to make ambiguous or exaggerated sustainability claims [15]. However, global efforts are underway to mitigate this issue through a growing body of legislation and guidelines. Significant international frameworks include the United Nations Framework Convention on Climate Change (UNFCCC) and the Paris Agreement, which set overarching climate goals [7]. At the corporate level, reporting is increasingly shaped by guidelines from organizations such as the Global Reporting Initiative (GRI), the Task Force for Climate-related Financial Disclosures (TCFD), the International Sustainability Standards Board (ISSB), and the European Sustainability Reporting Standards (ESRS) [7,13]. The adoption of these standards is deemed indispensable for fostering a sustainable economy and meeting stakeholder expectations [13].

Regional and national regulatory initiatives are also emerging, such as the EU Green Claims Directive, the European Company Directive (CSRD), the UK Sustainability Disclosure Requirements, and various US regulations including Section 5 of the FTC Act, SEC Climate Disclosures, and the ESG Enforcement Task Force [15]. Asian countries like Singapore are also implementing green labeling schemes [15]. These regulations aim to establish clearer reporting requirements and hold companies accountable for their environmental claims, thereby reducing the prevalence of misleading statements. For instance, the ESG taxonomy in Europe provides a crucial benchmark for investors to assess sustainability, impacting how non-financial disclosures (NFDs) and sustainability reports are structured, particularly within specific industries like transportation [9]. The evolving regulatory landscape underscores the legal, financial, and reputational risks associated with greenwashing, motivating companies and investors to prioritize accurate and verifiable disclosures [15].

Studies on greenwashing detection employ a diverse range of financial and sustainability texts as data sources, each with distinct implications for the scope and effectiveness of detection. Corporate sustainability reports are consistently identified as a primary data source [4,5,6,7,10,12]. These documents, often hundreds of pages long and in PDF format, contain complex, unstructured data, varying in layout and disclosed items across companies [6]. Tools like ReportParse are specifically designed to extract information from these intricate documents [6]. Research also commonly leverages other official corporate disclosures, including 10-K filings, annual reports, policies, and executive statements from analyst calls [3,5,7]. For instance, some studies specifically analyze Non-Financial Disclosures (NFDs) to detect ESG activities within specific industries, benchmarking them against established ESG taxonomies [9]. The ClimateBERT dataset, which contains paragraphs from financial disclosures, has also been utilized for fine-tuning climate-related language models, with testing conducted on climate-related sections of sustainability reports [1].

Beyond official corporate documents, various external sources are incorporated to provide a more comprehensive view. News articles and press releases are frequently used, offering publicly available insights into corporate communications and public perception [3,4,8,12,14]. Social media platforms like Twitter are also valuable, providing real-time, unstructured data and public sentiment that can reveal inconsistencies with official statements [2,3,7,12,14]. Some research also integrates external data sources such as ESG ratings, independent audits, and verified emissions data to cross-reference corporate claims [3,7,12]. The use of multimodal deep learning, which considers both textual and visual data, further expands the scope of analysis, recognizing that greenwashing can manifest in various forms of corporate messaging [11].

The implications of using different data sources are significant. Relying solely on internal corporate reports provides direct insight into a company's self-proclaimed ESG performance, but these documents may be carefully curated to present a favorable image, potentially masking greenwashing. For instance, the use of datasets like ClimateBERT, derived from financial disclosures, offers a standardized approach to climate-related information but may not capture broader ESG nuances [1]. Incorporating external data, such as social media and news articles, offers a more holistic and often more critical perspective, enabling researchers to identify discrepancies between corporate rhetoric and public perception or actual performance. The inclusion of independently verified data, like audited emissions figures, is crucial for validating corporate claims and detecting instances where self-reported data might be misleading or incomplete [3]. However, combining diverse data sources also introduces challenges in data collection, processing, and normalization, as noted by studies that involve extensive preprocessing steps like tokenization, stopword removal, and translation for non-English content [2,12]. The breadth of data sources, from structured reports to unstructured social media posts, signifies a move towards more robust and comprehensive greenwashing detection methodologies, allowing for a multifaceted assessment of corporate sustainability claims and greater accuracy in identifying deceptive practices.

2.3 Challenges in Identifying Greenwashing

The detection of greenwashing is inherently challenging due to a confluence of factors, primarily stemming from the subjective definition of what constitutes misleading environmental claims, the pervasive lack of standardized reporting, and the dynamic, evolving nature of corporate communication [1,8].

One of the most prominent challenges is the inherent subjectivity and ambiguity surrounding the definition of "greenwashing" itself [1,4,7,13]. This lack of a commonly accepted, actionable definition complicates the establishment of precise metrics and effective policies for detection and regulation [7,13]. While certain attributes, such as positive sentiment and a lack of specificity, may indicate greenwashing, subtle nuances like legal hedging can be easily misconstrued, making it difficult to quantify risk [1]. Examples like a company claiming carbon neutrality while producing disposable plastic products underscore this subjectivity [12]. Furthermore, the legal and reputational consequences of false accusations, coupled with the often inconspicuous nature of greenwashing, add layers of complexity to its identification [7]. The subjective interpretation extends to instances where internal ESG sentiments diverge significantly from public opinion, suggesting potential greenwashing, particularly in sectors like pollution and waste [2]. This challenge necessitates NLP models capable of nuanced contextual understanding rather than mere keyword matching, compelling advancements in techniques that can discern subtle linguistic cues and implied meanings, as discussed in Chapter 3.

Another critical impediment is the lack of standardization in ESG reporting. Corporate sustainability reports vary significantly in layout, design, and disclosed items, often presented in complex, unstructured PDF formats [6]. This inconsistency, coupled with the sheer volume of information, overwhelms traditional rating systems and contributes to the use of low-quality metrics, which are indicative of greenwashing [11]. The absence of comprehensive, reliable data about companies' actual environmental performance further hinders the reliability of AI systems designed for greenwashing detection [5]. Moreover, green claims are frequently dispersed across multiple documents and data types, requiring extensive expertise and often debate for accurate annotation [7]. This highlights the need for advanced parsing and information extraction techniques, such as those provided by platforms designed to handle diverse document structures and semantics [6]. The integration of multimodal analysis, encompassing both textual and visual information, also becomes crucial given the varied sources of corporate communication [11].

The dynamic nature of misleading claims presents a continuous challenge, requiring adaptable and context-aware NLP techniques [1,8,9,11]. Companies are constantly refining their communication strategies to appear environmentally responsible, making static detection models quickly obsolete [3]. This adaptability challenge is further exemplified by the difficulty Large Language Models (LLMs) face in achieving fine-grained specificity for ESG activities [9]. General-purpose LLMs struggle with mapping text precisely to the complex and intricate ESG taxonomy, necessitating extensive fine-tuning and the development of high-quality, domain-specific datasets [9]. The scarcity of such annotated datasets is a significant hurdle, limiting the robustness and generalization capabilities of models across diverse, noisy real-world settings [4]. This situation underscores the need for NLP methodologies that are not only robust but also capable of continuous learning and adaptation to evolving corporate narratives and reporting landscapes.

These inherent challenges directly necessitate specific NLP methodological advancements. The subjectivity of greenwashing demands models capable of deep semantic understanding and contextual reasoning, moving beyond simple keyword matching to identify subtle linguistic patterns and deceptive framing. The lack of standardization in reporting requires sophisticated document parsing, information extraction, and multimodal fusion techniques to handle diverse and unstructured data formats effectively. Lastly, the dynamic nature of misleading claims and the need for fine-grained specificity with LLMs highlight the urgent requirement for adaptable, continuously learning NLP systems. These systems must be capable of frequent updates, leveraging techniques like transfer learning and few-shot learning to remain effective against evolving greenwashing tactics. The transition from manual, labor-intensive identification to automated, AI-driven solutions is thus not merely a matter of efficiency but a critical necessity for overcoming these multifaceted challenges [5,11].

3. Natural Language Processing Methods for Greenwashing Detection

The detection of "greenwashing" in Environmental, Social, and Governance (ESG) disclosures has become a critical area of focus, driven by the increasing demand for corporate transparency and accountability in sustainability claims. Natural Language Processing (NLP) methods have evolved significantly to meet this challenge, offering increasingly sophisticated tools to unmask misleading narratives. This section provides a structured overview of these advancements, tracing the progression from foundational text analysis techniques to the cutting-edge capabilities of large language models and multimodal approaches.

The journey begins with Traditional NLP Approaches, which form the bedrock of text analysis for identifying greenwashing [2,7]. These methods, including keyword matching, lexicon-based sentiment analysis, and topic modeling, leverage basic linguistic patterns and statistical properties of text. While offering interpretability and requiring less computational power, their limitations in understanding context and nuanced language have necessitated the development of more advanced techniques. They operate on the assumption that greenwashing is detectable through explicit linguistic cues like specific keywords or shifts in sentiment, often relying on hand-crafted features. Data requirements for these methods are comparatively lower, typically involving structured text documents such as sustainability reports. However, their rigidity, proneness to false positives/negatives, and struggle with polysemy and synonymy underscore the need for more adaptable models capable of discerning subtle deceptive tactics.

Building upon these foundations, Advanced Neural Network Architectures like Convolutional Neural Networks (CNNs) and Long Short-Term Memory networks (LSTMs) represent a significant leap forward [7,11]. These models automate feature extraction, capturing complex patterns and long-range dependencies within textual data. Unlike traditional methods, deep learning models assume that abstract features indicative of greenwashing can be automatically learned from large datasets, reducing reliance on manual feature engineering. However, this shift increases the demand for substantial, high-quality labeled datasets for training. The emergence of Transformer-based architectures, such as BERT and its variants, has further revolutionized this space, largely superseding LSTMs and CNNs by leveraging attention mechanisms to capture global dependencies more effectively. These models signify a move towards capturing deeper semantic meanings and contextual relationships beyond superficial lexical analysis.

The concept of Transfer Learning and Pre-trained Models revolutionized NLP by enabling models to leverage knowledge acquired from vast general or domain-specific corpora (e.g., ClimateBERT, FinBERT-ESG-9-Categories) and fine-tune them on smaller, task-specific datasets [1,2,7]. This approach significantly mitigates data scarcity issues in specialized domains like ESG, improving efficiency and accuracy in greenwashing identification. The underlying assumption is that general linguistic knowledge is transferable and adaptable, leading to robust performance even with limited target data. Compared to training models from scratch, transfer learning offers reduced computational costs and time, while enhancing performance by leveraging extensive pre-trained knowledge.

Currently, Specialized and Large Language Models (LLMs) and Their Applications represent the frontier of greenwashing detection [3,5]. These models, including generalist LLMs and their domain-adapted variants (e.g., ClimateGPT), offer unparalleled contextual understanding and reasoning capabilities. They enable the detection of highly sophisticated greenwashing through advanced sentiment analysis, Named Entity Recognition (NER), topic modeling, and relationship extraction. Fine-tuning, especially with techniques like Low-Rank Adaptation (LoRA), has proven highly effective, often outperforming zero-shot approaches for nuanced greenwashing detection [9]. However, LLMs present challenges related to interpretability ("black box" nature), potential for hallucination, and prompt sensitivity, requiring robust validation frameworks and human oversight.

Finally, Multimodal Approaches integrate textual and visual information to provide a more holistic assessment of corporate communication [11]. This approach assumes that greenwashing is a multifaceted phenomenon expressed across various communication channels. By combining insights from different data types, these methods aim to capture inconsistencies and contradictions that purely text-based methods might miss. While offering a more comprehensive view, multimodal approaches introduce increased complexity in data acquisition, model design (e.g., effective feature fusion), and interpretability due to the integration of disparate data types.

The progression through these NLP techniques illustrates a clear trend towards more sophisticated, context-aware, and data-intensive methods, reflecting the increasing complexity of greenwashing tactics and the ongoing efforts to enhance detection accuracy and robustness. Each advancement builds upon its predecessors, addressing limitations and offering more nuanced insights into deceptive corporate sustainability claims.

3.1 Key NLP Techniques and Methodologies

This section provides a comprehensive overview of the Natural Language Processing (NLP) techniques and methodologies employed for detecting "greenwashing" in ESG disclosures. Greenwashing, the deceptive practice of making unsubstantiated claims about environmental friendliness, poses a significant challenge to corporate transparency and sustainable finance. The evolution of NLP methods, from traditional statistical approaches to advanced deep learning and multimodal models, has progressively enhanced the ability to unmask these misleading narratives.

The discussion begins with Traditional NLP Approaches, which form the bedrock of text analysis for greenwashing detection. These methods, including keyword matching, lexicon-based sentiment analysis, and topic modeling, leverage basic linguistic patterns and statistical properties of text to identify potential deceptive claims [2,7]. While offering high interpretability and requiring less computational power, their limitations in understanding context and nuanced language have spurred the development of more sophisticated techniques.

Building upon these foundations, Advanced Neural Network Architectures such as Convolutional Neural Networks (CNNs) and Long Short-Term Memory networks (LSTMs) are explored. These models represent a significant leap forward by automatically extracting complex features and capturing long-range dependencies within textual data [7,11]. Their ability to learn intricate patterns without extensive manual feature engineering has improved the detection of subtle greenwashing tactics.

The section then delves into Transfer Learning and Pre-trained Models, a paradigm-shifting approach that has revolutionized NLP. This methodology leverages models pre-trained on vast general or domain-specific corpora (e.g., ClimateBERT, FinBERT-ESG-9-Categories) and fine-tunes them on smaller, task-specific datasets [1,2,7]. This approach significantly mitigates data scarcity issues in specialized domains like ESG, leading to improved efficiency and accuracy in greenwashing identification.

Finally, Specialized and Large Language Models (LLMs) and Their Applications are discussed as the current frontier in NLP for greenwashing detection. These models, including generalist LLMs and their domain-adapted variants, offer unparalleled contextual understanding and reasoning capabilities, enabling the detection of highly sophisticated greenwashing through advanced sentiment analysis, Named Entity Recognition (NER), topic modeling, and relationship extraction [3,5]. While powerful, LLMs present challenges related to interpretability, potential for hallucination, and prompt sensitivity.

The concluding part of the section will introduce Multimodal Approaches, which integrate textual and visual information to provide a more holistic assessment of corporate communication. By combining insights from various data types, these approaches aim to capture inconsistencies and contradictions that purely text-based methods might miss, addressing the multifaceted nature of greenwashing [11].

The progression through these techniques illustrates a clear trend towards more sophisticated, context-aware, and data-intensive methods, reflecting the increasing complexity of greenwashing tactics and the ongoing efforts to enhance detection accuracy and robustness.

3.1.1 Traditional NLP Approaches

Traditional Natural Language Processing (NLP) techniques constitute the foundational layer for identifying greenwashing within Environmental, Social, and Governance (ESG) disclosures, leveraging Artificial Intelligence (AI) and advanced analytics to unmask misleading claims [2,5,12]. These methods typically involve basic text analysis such as keyword matching, lexicon-based approaches, rule-based systems, and classical machine learning with hand-crafted features [7]. Early work in this domain often relied on hand-selected keywords to filter climate-related text from company reports, aiming to flag terms like "carbon neutral" or "recyclable" for subsequent human review [5,7].

Sentiment analysis is a primary application of NLP in greenwashing detection, offering insights into the emotional undertones of corporate communications. For instance, studies have employed tools like TextBlob, a lexicon-focused sentiment analysis library, to assign sentiment scores (ranging from negative to positive) to corporate internal ESG declarations [2,12]. This allows researchers to gauge the general mood and compare it with public sentiment on social platforms like Twitter. Discrepancies identified through correlation coefficient analysis between internal corporate sentiments and external public opinions can indicate greenwashing [2]. For example, a company might present an overwhelmingly positive self-assessment in its official reports while public discourse reflects skepticism or negative sentiment regarding its environmental claims.

Topic modeling further aids in greenwashing detection by identifying the prevalent subjects discussed within ESG reports. By analyzing the frequency and co-occurrence of words, topic modeling algorithms can reveal what companies are genuinely emphasizing in their disclosures [7]. Discrepancies between espoused values and actual textual content, or an excessive prevalence of "buzzwords" without substantive action, can signal greenwashing. For instance, if a company frequently uses terms like "sustainability" and "eco-friendly" but its reports lack specific details on initiatives, investments, or measurable outcomes, it could indicate a greenwashing attempt. Some research suggests that even simpler baselines, such as TF-IDF (Term Frequency-Inverse Document Frequency), can achieve competitive performance in certain greenwashing detection tasks, occasionally outperforming more complex Transformer models, which implies that specific topics might possess highly distinguishable vocabularies that these methods can effectively capture [7].

The underlying assumptions of traditional NLP methods are generally that greenwashing manifests through identifiable linguistic patterns, keyword usage, or shifts in sentiment. Their data requirements are comparatively lower than deep learning approaches, often relying on structured text documents like sustainability reports, press releases, and social media data [12]. These methods offer high interpretability; for example, keyword lists or sentiment scores are directly understandable, making it straightforward to identify why a particular document was flagged. Foundational NLP tools like PyMuPDF for text extraction and spaCy for sentence tokenization are often prerequisites for preparing data for these analyses, enabling structured processing of corporate sustainability reports [6].

Despite their utility and interpretability, traditional NLP approaches have inherent limitations that have motivated the development of more advanced techniques. Keyword matching and lexicon-based methods are often rigid and prone to false positives or negatives due to their inability to understand context, irony, or subtle nuances in language. For instance, a company genuinely engaged in sustainable practices might use many "green" keywords, leading to a false positive, while a sophisticated greenwasher might employ evasive language that bypasses simple keyword filters. Rule-based systems, while more flexible, require extensive manual effort to create and maintain rules, making them less scalable for the vast and evolving landscape of corporate disclosures. Furthermore, these methods often struggle with polysemy (words with multiple meanings) and synonymy (different words with the same meaning), which can lead to imprecise detection. The inability to capture complex semantic relationships and deeper contextual meaning is a significant drawback. This limitation becomes particularly pronounced when identifying sophisticated greenwashing tactics that rely on vague language, misdirection, or the omission of crucial information rather than direct falsehoods. The need to move beyond simple pattern detection and develop more nuanced, domain-specific models, capable of understanding the context and intent behind corporate statements, has driven the shift towards deep learning approaches. While some studies show that unsupervised text mining and keyword identification can serve as foundational elements, they implicitly highlight the necessity for more sophisticated methodologies that can learn intricate patterns and relationships from large datasets [4].

3.1.2 Advanced Neural Network Architectures

The application of advanced neural network architectures, particularly deep learning models, has significantly enhanced the detection of greenwashing in ESG disclosures. These architectures, including Convolutional Neural Networks (CNNs) and Long Short-Term Memory networks (LSTMs), exhibit strengths in feature extraction and pattern recognition within complex text data, moving beyond the limitations of traditional rule-based or simple machine learning methods [7,11].

Initially, traditional NLP methods often relied on lexicons, keyword matching, or shallow machine learning algorithms (e.g., SVM, Naive Bayes) for greenwashing detection. While these methods offered interpretability due to their transparent feature engineering, they struggled with capturing nuanced semantic relationships, contextual dependencies, and implicit deceptive language prevalent in greenwashing practices. Their effectiveness was often limited by the quality and exhaustiveness of predefined rules or features, requiring extensive domain expertise and manual effort.

Deep learning architectures, conversely, offer an end-to-end learning approach, automatically extracting hierarchical features from raw text data. LSTMs, a type of Recurrent Neural Network (RNN), are particularly adept at processing sequential data, making them suitable for capturing long-range dependencies and contextual information within text. Their ability to remember information over long sequences through their gate mechanisms (input, forget, output gates) allows them to model the temporal flow of language, which is crucial for identifying complex narrative inconsistencies or subtle linguistic cues associated with greenwashing. For instance, LSTMs can discern how specific claims are presented in relation to broader corporate narratives, highlighting discrepancies that might indicate misleading practices.

CNNs, while traditionally used for image processing, have also found utility in text classification. In NLP, CNNs can identify local patterns (n-grams) within text through various filter sizes, effectively capturing phrases or segments that indicate specific themes or sentiments. Their ability to learn spatial hierarchies of features allows them to detect relevant textual patterns regardless of their position in a document. The strength of CNNs lies in their capacity for parallel computation and efficient feature extraction, making them suitable for identifying recurring deceptive phrases or structural anomalies in ESG reports.

However, the primary advancement in greenwashing detection using neural networks has been driven by Transformer-based architectures, such as BERT and its variants (e.g., RoBERTa, DistilBERT), which have largely superseded LSTMs and CNNs in many complex NLP tasks [7]. These models leverage the attention mechanism, allowing them to weigh the importance of different words in a sequence when processing other words, thereby capturing global dependencies more effectively than LSTMs. The survey by Sun et al. highlights the prominence of Transformer-based architectures for tasks like topic detection, risk classification, and claim detection in greenwashing contexts, noting their high performance when sufficient labeled data is available [7].

The underlying assumptions of these deep learning models differ significantly from traditional methods. Traditional methods often assume that greenwashing can be identified through a predefined set of keywords or simple semantic rules, requiring explicit feature engineering. In contrast, deep learning models operate on the assumption that complex, abstract features indicative of greenwashing can be automatically learned from large datasets through multi-layered neural networks. This shift reduces reliance on manual feature engineering but increases the demand for large, high-quality labeled datasets for training.

Data requirements for advanced neural networks are substantial. Unlike traditional methods that can perform adequately with smaller, meticulously curated datasets, deep learning models, especially Transformer-based ones, require vast amounts of text data for pre-training to learn general language representations. For example, specialized models like FinBERT-ESG-9-Categories, based on the BERT architecture, are pre-trained on extensive financial text corpora to capture the nuances of financial documents relevant to ESG themes, including Climate Change, Natural Capital, and Corporate Governance [2]. Similarly, models like ClimateBERT are fine-tuned on climate-related texts specifically for greenwashing risk classification [1]. The development of domain-specific models and the necessity for pretraining NLP models on climate-related corpora are crucial for achieving accurate performance in climate-related tasks [4]. This contrasts with traditional methods, which might require less raw data but more human expertise for feature definition.

Interpretability remains a challenge for deep learning models compared to traditional methods. While traditional methods offer clear insights into why a particular classification was made (e.g., specific keywords triggered a rule), the complex, non-linear transformations within deep neural networks make their decision-making processes less transparent. Researchers are actively working on explainable AI (XAI) techniques to mitigate this, but it remains a critical difference.

These advanced architectures significantly improved upon traditional techniques by moving beyond superficial lexical analysis to capture deeper semantic meanings and contextual relationships. For instance, the use of "valuable third-party models" like DistilBERT-SST2 for sentiment analysis in document structure and semantics extraction demonstrates the integration of sophisticated neural networks into broader NLP tools for corporate sustainability reporting [6]. Furthermore, the shift towards pre-trained models, particularly transformer-based architectures like BERT, represents a paradigm shift from traditional methods [8]. These models are pre-trained on vast text datasets, learning rich, general-purpose language representations, which are then fine-tuned on smaller, task-specific datasets for greenwashing detection. This transfer learning approach leverages the extensive knowledge embedded in large pre-trained models, significantly reducing the data requirements for fine-tuning and improving performance compared to training models from scratch.

Moreover, the advancement of these architectures has led to specialized applications, such as multimodal deep learning that integrates both text and visual information for quantifying sustainability messaging [11]. While some studies focus on developing custom models like ClimateQA for question-answering systems in sustainability reports [10], the general trend leans towards leveraging existing powerful language models. The evolution from simple neural networks to sophisticated Transformer-based Large Language Models (LLMs) represents a leap in NLP capabilities, offering unparalleled contextual understanding and generation abilities. These LLMs, discussed in detail in subsequent sections, represent the current frontier, further advancing greenwashing detection by providing even more nuanced understanding of complex linguistic patterns and deceptive strategies. They build upon the strengths of earlier deep learning architectures, particularly in representation learning and pattern recognition, while offering enhanced capabilities through their massive scale and emergent reasoning abilities.

3.1.3 Transfer Learning and Pre-trained Models

The application of transfer learning and pre-trained models has emerged as a pivotal advancement in the analysis of specialized ESG text, particularly for identifying "greenwashing." This approach leverages models pre-trained on vast datasets, allowing them to capture intricate linguistic patterns and semantic nuances relevant to corporate disclosures. A key benefit of transfer learning is its ability to significantly improve efficiency and accuracy in greenwashing detection, especially in scenarios characterized by limited annotated data [1,7,11].

Domain-specific pre-trained models, such as ClimateBERT, FinBERT-ESG-9-Categories, ClimateGPT-2, and EnvironmentalBERT, are particularly instrumental in this context [2,7]. ClimateBERT, for instance, has been extensively trained on over 1.6 million climate-related paragraphs, equipping it with a specialized understanding of climate-specific terminology and discourse [5]. This domain adaptation is crucial because general-purpose language models, while powerful, may lack the nuanced understanding required to discern subtle forms of greenwashing embedded in highly specialized ESG reports and communications. The REPORTPARSE tool, for example, explicitly utilizes NLP models tailored for the climate change and sustainability domain, integrating annotators based on existing models for climate policy engagement and climate sentiment [6]. Similarly, the pre-training of specific E, S, and G models on large corpora, such as over 13.8 million texts, further exemplifies the utility of transfer learning in enhancing transparency and accuracy in ESG evaluation [8].

The process typically involves fine-tuning these pre-trained models on smaller, task-specific datasets. For instance, fine-tuning the entire ClimateBERT model, rather than freezing certain layers (e.g., RoBERTa layers), has demonstrated superior performance in greenwashing detection, yielding higher mean validation accuracy and F1 scores [1]. This indicates that allowing the model to learn and adjust all its layers to the nuances of the target task significantly enhances its ability to capture relevant information. This approach contrasts with zero-shot learning, where models are used directly without further training, as fine-tuning has been shown to significantly improve classification accuracy for ESG activity detection [9]. The underlying assumption is that the knowledge acquired during pre-training on a large, general or domain-specific corpus can be effectively transferred and adapted to new, related tasks, even with limited target data.

Compared to standalone deep learning architectures trained from scratch, transfer learning offers several distinct advantages. Firstly, it substantially reduces the computational resources and time required for training, as the models have already learned foundational linguistic representations. Secondly, it mitigates the common challenge of data scarcity in specialized domains like ESG, where obtaining large volumes of meticulously annotated greenwashing examples can be prohibitively expensive and time-consuming. By leveraging knowledge from broader datasets, transfer learning models can achieve robust performance even with relatively small task-specific datasets [7,11]. The interpretability of these models often stems from their foundation in transformer architectures, which allow for insights into feature importance and attention mechanisms, though full transparency remains an ongoing research challenge.

The data requirements for pre-trained models involve access to large, diverse corpora for the initial pre-training phase, followed by smaller, task-specific annotated datasets for fine-tuning. The quality and relevance of the pre-training data are critical, as they dictate the breadth and depth of knowledge the model acquires. For instance, ClimateBERT's efficacy is directly linked to its training on extensive climate-related texts [5]. In contrast, training deep learning models from scratch for greenwashing detection would necessitate collecting and annotating enormous volumes of highly relevant text data, a task that is often impractical.

The success of transfer learning with pre-trained models has demonstrably paved the way for the emergence and widespread application of Large Language Models (LLMs) in various NLP tasks, including greenwashing detection. These models exemplify the power of large-scale pre-training on massive text datasets, demonstrating that models can learn rich, transferable representations of language. The ability to leverage such pre-trained knowledge and fine-tune it for specific, complex tasks like identifying subtle deception in corporate disclosures highlights a paradigm shift from traditional, task-specific model development to an approach that capitalizes on vast computational resources and data for initial general-purpose learning. The continuous development of domain-specific models like ClimateBERT and the fine-tuning of general LLMs on ESG data underscore a growing recognition within the field of the indispensable role of pre-training and transfer learning in addressing the complexities of sustainability communication and combating greenwashing.

3.1.4 Specialized and Large Language Models (LLMs) and Their Applications

The application of Large Language Models (LLMs) and specialized models has become increasingly prominent in the detection of ESG activities and greenwashing, offering advanced capabilities for contextual understanding and nuanced analysis of financial and corporate disclosures. The landscape of these models encompasses both generalist LLMs and domain-specific adaptations, each with distinct advantages and methodological considerations.

A key distinction in the application of LLMs for greenwashing detection lies between generalist models and those specialized through pre-training or fine-tuning on domain-specific datasets. While general LLMs like Llama (3B, 2 7B, 3 8B), Gemma (2B, 7B), Mistral (7B), and GPT-4o Mini are versatile, their direct application in zero-shot or few-shot learning scenarios for highly specialized tasks such as identifying intricate greenwashing tactics can be limited [7,9]. In contrast, specialized models, such as ClimateBERT and FinBERT-ESG-9-Categories, demonstrate superior performance due to their pre-training on extensive climate-related or financial and ESG texts, respectively [1,2]. These models are not general LLMs in the broader sense but represent highly effective applications of transformer-based architectures tailored for specific domains. The development of domain-specific LLMs like ClimateGPT, trained on climate-related data, further underscores the efficacy of specialized models, showing superior performance on specific climate benchmarks compared to their generalist counterparts [7].

The efficacy of LLMs in greenwashing detection is significantly influenced by the chosen learning paradigm: zero-shot versus fine-tuning approaches. Zero-shot learning, where a model is prompted to perform a task without explicit examples, leverages the pre-trained knowledge of general LLMs. However, for the intricate and context-dependent nature of greenwashing, fine-tuning often yields superior results. For instance, the fine-tuning of relatively small open-source models like Llama 7B has been shown to achieve excellent performance in identifying text related to environmental activities within ESG taxonomies, sometimes even surpassing larger proprietary models [9]. This fine-tuning process frequently involves techniques such as Low-Rank Adaptation (LoRA), which efficiently updates a low-rank subspace of the model's pre-trained weight matrices, thereby maintaining efficiency while adapting the model to specific tasks like binary classification for ESG activity detection [9]. The use of synthetically generated data, combined with original data, is crucial in overcoming data scarcity challenges inherent in this specialized domain, further enhancing fine-tuned model performance [7,9].

Prompting strategies also play a vital role in the performance of LLMs, especially in zero-shot or few-shot settings. While specific details on optimal prompting are noted as important for LLM applications, their detailed methodologies are often proprietary or subject to ongoing research [7]. However, the concept of a unified NLP tool, as suggested by REPORTPARSE, allows users to select various NLP methods, some of which may be LLM-based, highlighting the potential for integrating diverse semantic analysis models for comprehensive greenwashing detection [6].

LLMs offer significant strengths in understanding complex contextual information within corporate disclosures. Their advanced natural language processing capabilities, including sentiment analysis, Named Entity Recognition (NER), topic modeling, and relationship extraction, enable them to analyze extensive data, uncover hidden patterns, and identify discrepancies in corporate claims [3,5]. For example, sentiment analysis can detect overly positive language, while topic modeling can reveal broad, unsubstantiated claims versus actionable commitments. NER helps link claims to measurable outcomes, and relationship extraction identifies mismatches between stated policies and actual practices [3]. This sophisticated contextual understanding represents a significant advancement over previous deep learning approaches that might have relied on more rigid feature engineering or less adaptable architectures.

Despite their strengths, LLMs and specialized models are not without limitations. Challenges include the potential for hallucination, where models generate factually incorrect or nonsensical information, and biases inherited from their training data. These issues can compromise the reliability of detection in sensitive areas like greenwashing, where precision and factual accuracy are paramount. Furthermore, prompt sensitivity—where minor changes in input phrasing can lead to vastly different outputs—poses a challenge for consistent and reliable application. The need for continuous updates and retraining of AI models to accurately detect evolving greenwashing practices is also a critical consideration, as corporate deception strategies are dynamic [5]. Moreover, while AI and NLP tools can serve as "perfect assistants" for ESG raters, human oversight remains essential. AI-driven critical decisions must be thoroughly investigated and combined with human expertise to mitigate the risks of subjectivity, limited context, and the absence of verifiable evidence [15].

Comparing LLMs to previous deep learning approaches reveals several shifts in underlying assumptions, data requirements, and interpretability. Earlier deep learning models for text analysis, such as those relying on traditional word embeddings or simpler recurrent neural networks, often required extensive labeled datasets for supervised training and struggled with capturing long-range dependencies and nuanced contextual meanings. While deep learning models like "text and vision transformers" are broad categories, their application prior to the advent of large pre-trained models required substantial domain-specific data and careful architectural design [11]. LLMs, by contrast, are pre-trained on vast amounts of diverse text data, allowing them to develop a generalized understanding of language, which can then be adapted to specific tasks with less labeled data through fine-tuning or even zero-shot learning. This pre-training enables LLMs to offer enhanced contextual understanding, capturing semantic relationships and nuances that were challenging for prior models. However, this enhanced understanding comes with new challenges: LLMs often act as "black boxes," making their decision-making processes less interpretable than simpler models. Their performance is also highly sensitive to prompting strategies, and the potential for generating misleading or biased information (hallucinations) necessitates robust validation frameworks. The transition towards LLMs has thus shifted the paradigm from purely data-driven model training to a combination of pre-training on massive datasets and subsequent fine-tuning or sophisticated prompting for domain-specific applications, demanding greater attention to model robustness and ethical implications.

3.1.5 Multimodal Approaches

While many existing approaches to greenwashing detection primarily rely on textual data, a more comprehensive assessment can be achieved through multimodal deep learning, which combines information from various sources, particularly text and visual content [1,2,4,6,7,8,10,14,15]. The integration of text and vision transformers allows for the mapping of diverse textual and visual sources of information onto sustainability axes, enabling a more holistic analysis of corporate claims [11]. This approach is advantageous because greenwashing often manifests not only through deceptive language but also through misleading imagery, logos, and campaign designs that evoke a false sense of environmental responsibility. By simultaneously processing both modalities, multimodal models can capture subtle inconsistencies and contradictions that might be missed by purely text-based methods. For instance, a company's report might use positive environmental language in its text while featuring images of highly polluting industrial operations, a discrepancy that a multimodal model could identify.

Multimodal deep learning for greenwashing detection presents several advantages over traditional text-based methods. Primarily, it offers a more comprehensive view by leveraging complementary information from different data types. Textual data can provide explicit claims, statistics, and narrative descriptions, while visual data can convey implicit messages, brand imagery, and contextual cues that reinforce or contradict the textual content. For example, a company might use sophisticated NLP techniques to analyze the language in annual reports or press releases [1,7], but if those reports are accompanied by manipulated or misleading images, the textual analysis alone would be insufficient. The synergy between modalities can reveal a more complete picture of a company's environmental performance and communication strategy, helping to uncover more sophisticated forms of greenwashing.

Despite the significant advantages, integrating disparate data types in multimodal approaches for greenwashing detection poses several challenges. One primary challenge lies in the effective fusion of features extracted from different modalities. Textual data, typically processed by language models, results in high-dimensional embeddings that capture semantic relationships, while visual data, processed by vision transformers, yields feature representations related to visual patterns, objects, and scenes [11]. Aligning these distinct feature spaces and developing architectures that can learn meaningful cross-modal interactions is complex. This includes determining the optimal fusion strategy (e.g., early fusion, late fusion, or hybrid fusion), handling missing modalities, and ensuring that noise from one modality does not degrade the signal from another. Furthermore, obtaining large, annotated datasets with both textual and visual greenwashing examples is a significant hurdle, as manual labeling is resource-intensive and requires expert domain knowledge to discern subtle greenwashing tactics across modalities. The scarcity of such integrated datasets limits the training and generalization capabilities of multimodal models.

When comparing multimodal approaches against purely text-based methods, several key differences emerge in terms of underlying assumptions, data requirements, and interpretability.

Underlying Assumptions:

Purely Text-Based Methods: These methods typically assume that greenwashing is primarily conveyed through linguistic cues, semantic inconsistencies, and rhetorical strategies embedded within text [1,2,7]. They often rely on the premise that deceptive communication can be identified by analyzing word choice, sentiment, factual claims, and thematic coherence.
Multimodal Approaches: These approaches assume that greenwashing is a multifaceted phenomenon expressed across multiple communication channels, including both explicit textual claims and implicit visual cues [11]. The core assumption is that a more accurate assessment requires synthesizing information from these complementary sources, as one modality might corroborate or contradict the other. This view acknowledges that sophisticated greenwashing often involves a coordinated effort across different media.

Data Requirements:

Purely Text-Based Methods: These methods primarily require large corpora of textual data, such as corporate sustainability reports, annual reports, news articles, social media posts, and press releases [6,8,10]. The quality and quantity of textual data are crucial for training robust NLP models.
Multimodal Approaches: In addition to textual data, these approaches require corresponding visual data (e.g., images, infographics, videos) that are semantically aligned with the text. This necessitates the collection of datasets where textual documents are paired with relevant visual content, which is often more challenging to procure and pre-process. The data must be synchronized, meaning that the visual content should directly relate to or illustrate the textual claims being made, a requirement that significantly increases data curation complexity [11].

Interpretability:

Purely Text-Based Methods: The interpretability of text-based models can vary depending on the complexity of the NLP model used. Simpler models like rule-based systems or traditional machine learning classifiers with feature engineering can offer higher transparency, allowing researchers to identify specific words, phrases, or linguistic patterns indicative of greenwashing. Even with deep learning models, techniques like attention mechanisms or LIME (Local Interpretable Model-agnostic Explanations) can shed light on which parts of the text contribute most to a greenwashing classification.
Multimodal Approaches: Interpretability in multimodal models is inherently more challenging due to the increased complexity of integrating disparate data types. While individual modality-specific components (e.g., text transformers, vision transformers) may offer some degree of interpretability within their respective domains, understanding how the cross-modal interactions lead to a final greenwashing prediction is significantly more difficult. Explaining why a combination of certain text phrases and specific visual elements triggers a greenwashing detection requires sophisticated attribution methods that can simultaneously analyze contributions from both modalities. This reduced interpretability can be a drawback, particularly in sensitive applications like financial disclosure analysis, where explanations for model decisions are often required.

In summary, while purely text-based methods remain foundational for greenwashing detection due to their relative simplicity and extensive availability of textual data [2,7], multimodal approaches offer a demonstrably more holistic view. By incorporating visual cues alongside textual analysis, they can capture the full spectrum of deceptive corporate communication [11]. However, this enhanced comprehensiveness comes at the cost of increased complexity in data acquisition, model design, and interpretability. Future research in this area will likely focus on developing more robust and interpretable multimodal fusion techniques, as well as curating larger, high-quality multimodal datasets to fully realize the potential of these advanced detection methods. While some work implicitly touches on multimodal aspects by considering "external data" alongside text [3], a dedicated focus on integrating and analyzing specific textual and visual elements for greenwashing remains a critical area for advancement.

4. Datasets and Evaluation in Greenwashing Detection

The efficacy of Natural Language Processing (NLP) models in detecting greenwashing is fundamentally dependent on the quality and availability of datasets and the rigor of evaluation methodologies. This section explores the critical aspects of dataset creation, ground truth generation, and performance metrics, highlighting current challenges and future directions in the field [7].

Challenges_in_Annotated_Dataset_Creation_for_Greenwashing_Detection

The development of robust greenwashing detection models is significantly hampered by the scarcity of comprehensive, annotated datasets specifically tailored for this purpose [4,5,7]. While some studies utilize proprietary datasets or leverage existing ones for intermediate tasks like climate-related topic detection or ESG classification, these often lack the specific linguistic nuances required for identifying subtle greenwashing tactics [7,10]. The ESG-Activities benchmark represents a notable effort, combining expert annotation with synthetic data augmentation using large language models (LLMs) to address data scarcity, particularly for environmental activities in the transport sector [9]. However, the generalizability of synthetic data for complex greenwashing phenomena requires further investigation. The integration of specific linguistic attributes—such as sentiment, commitment, specificity, and hedging language—into annotation guidelines is crucial for capturing the multifaceted nature of greenwashing and enhancing model robustness [1].

The generation of accurate ground truth for greenwashing detection is inherently challenging due to its subjective nature. Approaches range from rigorous expert annotation, often employing inter-annotator agreement mechanisms like majority rule, to more automated methods involving LLMs [7,9]. While expert-driven annotation provides high-quality, nuanced labels, it is resource-intensive and can be susceptible to expert biases [9]. LLM-based approaches, such as formulating greenwashing risk based on linguistic attributes, offer scalability but are highly dependent on the quality and representativeness of their initial training data, potentially propagating biases [1]. The concept of a "Green Authenticity Index" (GAI) which evaluates claims based on certainty and agreement with external data, underscores the importance of integrating verifiable objective evidence with subjective linguistic analysis for a more robust ground truth [3]. Future research should focus on multi-faceted methodologies that combine expert knowledge with external, verifiable data to enhance the reliability and validity of ground truth generation.

Performance_Metrics_for_Greenwashing_Detection_Models

Evaluating greenwashing detection models necessitates a careful selection of performance metrics. Common metrics include accuracy, F1-score, and ROC-AUC [1,7,9]. Given the often imbalanced nature of greenwashing datasets, where true instances are rare, metrics like precision, recall, and F1-score are particularly valuable. Precision minimizes false positives (incorrect accusations of greenwashing), crucial when the cost of misidentification is high, while recall minimizes false negatives (missed greenwashing instances), important for advocacy and regulatory oversight [7]. The F1-score provides a balanced measure, reflecting the trade-off between these two aspects and offering a more comprehensive assessment than simple accuracy [7]. Challenges persist in rigorous evaluation practices, with many studies failing to report uncertainty measures, compare against robust baselines, or address model robustness against noisy data and adversarial attacks [7]. Addressing these limitations is essential for advancing the field towards more reliable and generalizable greenwashing detection systems.

4.1 Annotated Datasets for Greenwashing Detection

The efficacy of Natural Language Processing (NLP) models in detecting greenwashing is intrinsically linked to the availability and quality of annotated datasets. A pervasive challenge identified across the literature is the significant scarcity of comprehensive, real-world datasets explicitly annotated for greenwashing detection [4,5,7]. Many existing studies either do not detail their dataset characteristics, size, or annotation guidelines [3,10,11,12,14,15], or rely on proprietary/internal datasets without publicly available details, complicating reproducibility and benchmarking [2]. This lack of standardized, robust datasets significantly impedes the development of generalized and high-performing greenwashing detection models.

While direct greenwashing datasets are sparse, researchers often leverage datasets for intermediate tasks such as climate-related topic detection, ESG classification, TCFD disclosure classification, green claim detection, and stance detection [7]. For instance, some studies utilize subsets of datasets like ClimateBERT, which comprises climate-related paragraphs, for initial training and validation [1]. However, these intermediate datasets, while useful for broader sustainability analyses, may lack the specific linguistic nuances and contextual indicators critical for pinpointing subtle greenwashing tactics. The limitations include variations in label definitions and potential issues arising from automatic labeling processes [7].

A notable development is the ESG-Activities benchmark, introduced to classify text segments according to the EU ESG taxonomy, with a specific focus on environmental activities in the transport industry [9]. This dataset comprises 1,325 labeled text segments, constructed from Non-Financial Disclosures (NFDs) of four companies. A meticulous annotation process involved a Retrieval-Augmented Generation (RAG) pipeline to identify candidate mappings, which were subsequently validated by three domain experts, requiring at least two positive votes for validity. While the initial dataset contained 265 entries (78 true matches), a significant portion of the training set (1,060 out of 1,272 instances) was augmented with synthetically generated sentences using ChatGPT-4o to address data scarcity [9]. The test set, however, exclusively comprises 53 expert-curated instances to ensure high-quality evaluation [9]. This approach of combining expert annotation with synthetic data generation presents a promising strategy for overcoming data limitations, though the representativeness of synthetic data for complex greenwashing phenomena remains an area for further investigation.

Another study developed three 2k datasets for classifying ESG-related texts, specifically for evaluating pre-trained E, S, and G models aimed at precise ESG activity classification [8]. However, the specific annotation guidelines and explicit discussions on representativeness within these datasets are not detailed, limiting insights into their applicability for nuanced greenwashing detection. The methodology employed in [1] for generating ground truth labels for greenwashing risk is particularly insightful. It relies on a combination of four linguistic attributes, which highlights the importance of detailed linguistic features in dataset annotation. The acknowledgment of a small, expert-annotated sample size and the call for future expansion underscore the resource-intensive nature of creating high-quality greenwashing datasets [1].

The characteristics of annotated datasets directly influence the performance and generalizability of greenwashing detection models. Datasets with precise annotation guidelines, encompassing diverse greenwashing phenomena, and incorporating specific linguistic features (e.g., vague language, hidden trade-offs, irrelevant claims) are crucial for training robust models capable of detecting evolving greenwashing strategies. For instance, the multi-attribute linguistic annotation strategy mentioned in [1] can empower models to discern subtle cues. In contrast, datasets that are limited in size, lack comprehensive annotation guidelines, or are not explicitly curated for greenwashing may lead to models with reduced accuracy, poor generalization capabilities, and an inability to detect emerging forms of greenwashing. The implicit reliance on datasets from prior studies for tools like ReportParse [6] underscores the importance of transparent dataset reporting to assess their impact on model performance.

Challenges in creating comprehensive and accurately annotated datasets for greenwashing detection are multifaceted. Data scarcity is a primary impediment, as real-world instances of explicit greenwashing can be subtle and difficult to discern without domain expertise [1,9]. The cost of annotation, particularly for expert-level labeling required to identify complex linguistic patterns and contextual nuances, is substantial [9]. Furthermore, the dynamic nature of greenwashing strategies necessitates continuous updates and expansion of datasets to ensure models remain effective against evolving deceptive practices. The domain specificity of greenwashing, often embedded within complex financial and sustainability reports, adds another layer of complexity to annotation, requiring annotators with both linguistic and domain expertise.

Comparing datasets used across papers reveals variations in size, domain specificity, and annotation methods. While some papers rely on smaller, expert-annotated samples, others explore synthetic data augmentation to scale their training sets. The use of publicly available financial and sustainability reports as data sources is common [12], but the transformation of these raw texts into annotated greenwashing instances remains a significant undertaking. The implications of dataset quality and availability on model performance and generalization are profound. High-quality, diverse, and adequately sized datasets are essential for training models that can generalize effectively across different industries, reporting styles, and greenwashing manifestations. Conversely, reliance on limited or poorly annotated datasets can lead to models that are brittle, prone to overfitting, and ultimately ineffective in real-world greenwashing detection scenarios, hindering the advancement of this critical field.

4.2 Ground Truth Generation

The generation of robust ground truth is a critical yet challenging aspect in the development of natural language processing (NLP) models for identifying greenwashing, primarily due to the subjective nature of the task. Various approaches have been employed, ranging from expert-driven annotation to more automated methods involving Large Language Models (LLMs).

A prominent method for ground truth generation, particularly for intermediate tasks, involves human annotation and expert review, often supplemented by rule-based labeling [7]. For instance, the ESG-Activities dataset employed a rigorous process where three domain experts independently assessed candidate text-activity mappings, with a majority rule (at least two positive votes) confirming validity [9]. This approach aims to minimize individual bias through inter-annotator agreement, though it is resource-intensive and still susceptible to the collective biases or interpretations of the chosen experts. The importance of expert validation in dataset creation is frequently highlighted in the literature [7]. Similarly, some studies developing datasets to classify ESG-related texts against specific activities implicitly rely on such forms of ground truth generation, although the detailed human annotation processes or expert review methodologies are not always explicitly detailed [8].

The application of LLMs in ground truth generation, while promising, introduces its own set of complexities. One notable approach uses a preliminary mathematical formulation to quantify greenwashing risk based on a linear combination of four key attributes: sentiment, commitment, specificity, and hedging language [1]. Two formulations were explored: a regression-derived model from a small expert-annotated sample, represented as $y = 0.71 \cdot \text{sentiment} + 0.14 \cdot \text{commitment} - 0.86 \cdot \text{specificity} - 0.71 \cdot \text{hedging}$ , and another based on a conceptual understanding of greenwashing characteristics, $x = -\text{sentiment} + \text{commitment} + \text{specificity} + \text{hedging}$ [1]. The output of the first formulation was then passed through a sigmoid function with a threshold. While this method attempts to formalize subjective elements, it relies heavily on the initial expert annotations, which in this case were limited to 10 exemplars, raising questions about scalability and representativeness [1]. The challenge with such models lies in their inherent dependency on the quality and representativeness of the data they are trained on, which can propagate biases present in the initial expert annotations.

Another method proposes a "Green Authenticity Index" (GAI) which evaluates corporate sustainability claims across two dimensions: Certainty (clarity, factuality, specificity) and Agreement (alignment with external data) [3]. This approach conceptualizes NLP models assigning weights to linguistic patterns and factual consistency. While this provides a structured framework for evaluation, the specific methodology for generating the underlying ground truth labels, such as detailed human annotation or expert review processes, is not explicitly provided [3]. The reliance on "factual verification" in cases like the Tide Purclean detergent lawsuit underscores that identifying greenwashing often necessitates comparing claims against verifiable external data, suggesting a ground truth rooted in objective evidence rather than solely subjective interpretation [5].

A significant challenge in ground truth generation for greenwashing lies in its inherent subjectivity. Unlike factual claims that can be definitively proven true or false, greenwashing often involves nuanced language, ambiguous commitments, and strategic omissions, making definitive labeling difficult. Many studies, as noted, operate on limited datasets not explicitly curated for greenwashing, leading to inconsistent or ad-hoc labeling processes that lack detailed human annotation or expert review methodologies [4]. This lack of consistent, high-quality ground truth datasets is a major impediment to developing robust and generalizable greenwashing detection models.

The reliability and validity of different ground truth generation techniques are paramount. Inter-annotator agreement is a crucial metric for evaluating the consistency of human judgments, especially in tasks where subjectivity is high. The "majority rule" approach used in some expert-driven datasets represents an effort to achieve consensus and mitigate individual biases [9]. However, even expert consensus can be influenced by inherent biases, such as confirmation bias or a tendency to interpret ambiguous statements in a particular way. For example, expert biases can stem from their background, domain-specific knowledge, or even the initial framing of the annotation task. This highlights the importance of transparent and well-documented annotation guidelines to minimize variability and ensure consistency across annotators.

Furthermore, the integration of external, verifiable data can enhance the objectivity of ground truth. For instance, some approaches involve quantifying discrepancies between predicted and official rankings or comparing sentiment scores from internal documents with external sources like Twitter to identify inconsistencies, albeit without detailing a formal ground truth generation process for greenwashing itself [2,11]. The use of publicly available financial reports and supply chain analytics, combined with methodologies like the GHG protocol for emissions calculations, offers a more objective basis for debunking greenwashing claims [12]. This integration of quantitative data with qualitative linguistic analysis provides a more comprehensive and verifiable ground truth.

In summary, while expert human annotation remains a cornerstone for generating ground truth for greenwashing, particularly for capturing nuanced linguistic attributes like commitment, specificity, sentiment, and hedging language [1,7], the inherent subjectivity of the task necessitates careful consideration of inter-annotator agreement and potential expert biases. The emergent use of LLMs for this purpose, while offering scalability, introduces dependency on potentially limited or biased initial annotations. Future research must focus on developing more standardized, transparent, and multi-faceted ground truth generation methodologies that blend expert knowledge with verifiable external data, thereby enhancing the reliability and validity of greenwashing detection models.

4.3 Performance Metrics and Evaluation Methodologies

Evaluating the efficacy of Natural Language Processing (NLP) models in detecting greenwashing necessitates a robust set of performance metrics that account for the nuances of this complex task. Common evaluation metrics applied in greenwashing detection studies include accuracy, F1-score, and ROC-AUC (Receiver Operating Characteristic - Area Under Curve) [1,7,9]. Beyond these, some studies employ custom metrics or analyze disparities between internal and external sentiments, such as the negative linear correlation between official sentiment scores and Twitter scores for "pollution and waste" as an indicator of potential greenwashing [2].

The choice of evaluation metrics is crucial and often reflects underlying assumptions about the cost of different types of errors in greenwashing detection. Accuracy, while intuitive, can be misleading, particularly in scenarios with imbalanced datasets, which are common in greenwashing detection where instances of genuine greenwashing may be rare compared to legitimate sustainability claims [7]. In such cases, a model that simply predicts the majority class (e.g., no greenwashing) could achieve high accuracy without effectively identifying any true greenwashing instances. This limitation highlights why metrics like precision, recall, and F1-score are often preferred.

Precision measures the proportion of true positive predictions among all positive predictions, minimizing false positives. High precision is critical when the cost of a false accusation of greenwashing is high, such as in regulatory oversight or public shaming, where misidentifying a company as a greenwasher could have severe reputational and financial repercussions. Conversely, recall, which measures the proportion of true positive predictions among all actual positive instances, is vital when the cost of missing greenwashing (false negatives) is high. For instance, an environmental advocacy group might prioritize high recall to ensure that as many greenwashing instances as possible are identified, even if it means tolerating some false positives.

The F1-score, the harmonic mean of precision and recall, offers a balanced measure, particularly useful when both false positives and false negatives carry significant costs. It provides a single metric that considers both aspects of performance, making it a more comprehensive indicator for imbalanced datasets than simple accuracy [1,7,9]. Studies employing Large Language Models (LLMs) for ESG activity detection often report F1 scores, noting that fine-tuning significantly enhances classification accuracy compared to zero-shot learning [9]. For example, one study achieved an average accuracy of 86.34% and an F1 score of 0.67 on an out-of-distribution (OOD) test set, observing higher F1 score variation due to dataset imbalance and chunking strategies [1]. The ROC-AUC, which evaluates the trade-off between true positive rate and false positive rate across various threshold settings, is also a robust metric for imbalanced datasets, providing an aggregated measure of model performance.

A significant challenge in greenwashing detection is the prevalence of imbalanced datasets. Many studies fail to rigorously evaluate their models on real-world imbalanced datasets, often reporting performance only on balanced subsets, which can drastically inflate perceived effectiveness [7]. The varying F1 scores observed on OOD evaluations serve as a clear indicator of potential issues related to dataset imbalance or model robustness [1,7]. When greenwashing instances are subtle or infrequent, models might struggle to generalize from limited examples, leading to poor recall if not explicitly optimized for it.

The choice of metrics directly impacts how specific types of greenwashing or model failures are highlighted or obscured. For example, if a model consistently achieves high precision but low recall, it might be excellent at confirming genuine greenwashing instances when it finds them, but it could miss a significant number of other subtle misrepresentations. Conversely, high recall with low precision might lead to an excessive number of false alarms, potentially desensitizing users or leading to unnecessary investigations. In a real-world greenwashing detection scenario, simple accuracy might mask a model's inability to identify the minority class (greenwashing), whereas precision and recall provide a more granular insight into where the model excels and where it fails. The criticality of the precision-recall trade-off is thus paramount, as it must align with the specific use case and the tolerance for false positives versus false negatives [7].

Furthermore, a recurring critique in the field is the lack of rigorous evaluation practices. Many studies do not report measures of uncertainty (e.g., confidence intervals, standard deviations), fail to compare new methodologies against simple baselines (e.g., random, majority, TF-IDF), or lack human baselines for comparison [7]. The robustness of models against noisy data and adversarial attacks also needs more attention in evaluation, as greenwashing claims are often crafted to evade straightforward detection [7]. The impact of choices like different readers (e.g., PyMuPDF vs. deepdoctection) or annotators on analysis trends further underscores the importance of considering methodological choices for research robustness and reproducibility, even if specific performance metrics are not always detailed [6]. While some studies focus on explainability and interpretability or qualitative scoring [3,11], the transition from qualitative assessments to quantifiable, reliable metrics remains a critical area for advancement.

5. Applications and Impact

This section delves into the practical applications and profound impact of Natural Language Processing (NLP) methods in the realm of Environmental, Social, and Governance (ESG) disclosures, particularly in identifying "greenwashing." It is structured into two main subsections: "Quantifying ESG Communication and Risk" and "Tools and Architectures for Sustainability Reporting." The first subsection elaborates on how NLP bridges the gap in ESG measurement by enabling the precise quantification of corporate communication and the assessment of associated risks, especially greenwashing [8,11]. It highlights NLP's utility in analyzing vast unstructured textual data to derive actionable insights into a company's sustainability efforts and identify discrepancies between claims and actual practices [12,14]. This quantitative approach helps stakeholders, including investors, in making informed decisions by distinguishing genuine sustainability initiatives from deceptive ones [7,9].

The second subsection, "Tools and Architectures for Sustainability Reporting," focuses on the advanced NLP tools and system architectures developed to standardize data extraction from complex corporate sustainability reports and enhance greenwashing detection. It introduces tools like REPORTPARSE, which streamlines the parsing of sustainability reports, and ESGQuest, a research prototype leveraging Retrieval-Augmented Generation (RAG) pipelines for annotating Non-Financial Disclosures with ESG-related activities [6,9]. This subsection also explores the broader application of AI and machine learning techniques, including custom NLP tools like ClimateQA and frameworks for transforming ESG data into structured question-and-answer pairs, all aimed at improving the accuracy and efficiency of sustainability assessments [2,10]. Collectively, these sections underscore the transformative potential of NLP in fostering greater transparency, accountability, and reliability in corporate ESG disclosures, thereby safeguarding financial decisions and promoting genuinely sustainable practices [1,3].

5.1 Quantifying ESG Communication and Risk

Natural Language Processing (NLP) plays a pivotal role in bridging the existing gap in Environmental, Social, and Governance (ESG) measurement by enabling the quantification of corporate communication and associated risks [8,11]. This technological advancement allows for a more granular and objective assessment of a company's sustainability efforts, moving beyond traditional qualitative evaluations to provide actionable insights for various stakeholders.

One of the primary applications of NLP in this domain is the automated analysis of vast amounts of unstructured textual data, including corporate sustainability reports, financial disclosures, press releases, and social media content [12,14]. By processing these diverse sources, NLP tools can generate valuable insights into a company's ESG performance, pinpointing areas of strength and identifying opportunities for improvement in their sustainability strategies [14]. For instance, LLMs can classify text segments from financial documents against specific ESG activities, aiding investors in assessing a company's alignment with frameworks like the EU ESG taxonomy and sustainability reporting requirements [9]. This classification process facilitates the identification of companies genuinely committed to sustainability, thereby enabling the redirection of capital towards aligned initiatives [9].

Furthermore, NLP is instrumental in quantifying ESG communication by providing a more precise and transparent method for analyzing corporate disclosures and understanding adherence to climate plans [7,8]. Tools like REPORTPARSE can extract sustainability-related information, helping researchers and analysts evaluate corporate commitment and management of sustainability efforts [6]. A pilot study using REPORTPARSE, for example, revealed trends in corporate stances on climate change, indicating increasing positive positions on IPCC and UN policies, which can inform investment decisions by assessing consistency in communication over time [6]. Similarly, NLP can analyze financial reports to identify climate-relevant sections using a question-answering approach, which assists analysts in efficiently extracting information related to climate impact and adaptation [10].

Beyond mere quantification, NLP plays a critical role in assessing and identifying ESG-related risks, particularly greenwashing. Greenwashing, defined as misleading claims about environmental practices or benefits, poses significant threats to financial portfolios and investment strategies by increasing exposure to regulatory, financial, and reputational risks [15]. NLP-driven approaches directly address this by quantifying the discrepancy between a company's predicted and official ESG rankings as a measure of greenwashing, or by developing models to automatically detect greenwashing and quantify sustainability-related messaging [11]. The ultimate goal is to facilitate the rating of companies based on a ‘greenwashing score’, which has direct implications for assessing ESG communication and associated risks for investors [11].

The ability of AI, particularly NLP and Machine Learning (ML), to identify discrepancies between a company's claims and its actual practices is paramount [5]. These tools are effective in detecting inconsistencies and patterns in sustainability reports that may signal greenwashing, thereby enabling more rigorous and efficient verification of claims and contributing to greater transparency and accountability [13]. For example, NLP can compare sentiment scores from internal corporate documents with those from public social media. A significant disconnect between these sentiments can serve as a quantifiable indicator of greenwashing, flagging potential risks for investors and regulators [2]. Furthermore, NLP-enabled tools like the Greenwashing AI (GAI) can be integrated into actuarial frameworks to enhance risk assessment by identifying inconsistencies in sustainability claims and refining environmental risk models [3]. By integrating verifiable emissions data and external ESG assessments, these models can more accurately quantify risks, leading to improved forecasts for carbon pricing, supply chain disruptions, and extreme weather impacts [3].

The impact of these NLP-driven measurements on financial decisions and client responses is substantial. Investors heavily rely on ESG ratings for a transparent understanding of a company's health, risks, and prospects [15]. By providing a more quantitative measure of a company's sustainability claims versus its actual performance or disclosures, NLP supports informed investment strategies, helping ESG portfolios distinguish credible efforts from deceptive practices [3,7]. The detection of greenwashing, in particular, fosters greater corporate accountability and transparency. When companies are aware that their sustainability claims are subject to rigorous, automated scrutiny, it incentivizes them to align their disclosures with measurable actions, thereby reducing greenwashing risks and improving stakeholder trust [3]. The ability to quantitatively assess greenwashing risk in corporate sustainability reports contributes to the broader goal of evaluating corporate environmental accountability and guiding capital towards genuinely sustainable initiatives [1]. This not only benefits investors by safeguarding their portfolios from misleading representations but also empowers clients and the broader public to make more informed decisions based on verified sustainability efforts.

5.2 Tools and Architectures for Sustainability Reporting

The increasing volume and complexity of corporate sustainability reports necessitate sophisticated NLP tools and system architectures to standardize data extraction and bolster greenwashing detection efforts. A key challenge lies in efficiently processing unstructured and semi-structured textual data to identify relevant information and assign semantic meaning, which is crucial for subsequent analysis.

One notable advancement in this domain is REPORTPARSE, a unified, Python-based tool designed specifically for parsing corporate sustainability reports [6]. REPORTPARSE addresses the dual challenge of document structure analysis and semantic annotation. It can identify document elements such as titles, text blocks, and lists, while simultaneously employing NLP models to assign specific semantics like environmental claims or risk indicators. This tool's utility is further enhanced by its provision of both command-line and web interfaces, promoting ease of use and accessibility for researchers. Its integration with established libraries such as deepdoctection for layout analysis and spaCy for text tokenization demonstrates a robust framework. Furthermore, REPORTPARSE's support for various third-party NLP annotators tailored for sustainability analysis underscores its flexibility and potential for broad application in open and reproducible research [6]. The structured output from such a tool is fundamental for feeding downstream greenwashing detection models, as it provides a standardized, semantically rich dataset.

Beyond general parsing tools, specialized architectures have emerged to tackle the nuances of ESG activity detection. ESGQuest, a research prototype, exemplifies this by utilizing a Retrieval-Augmented Generation (RAG) pipeline for annotating Non-Financial Disclosures (NFDs) with ESG-related activities [9]. The ESGQuest pipeline is meticulously structured: it begins by selecting ESG activities based on NACE codes, followed by storing document chunks in a vector database (Pinecone) for efficient retrieval. Subsequently, the database is queried with activity descriptions to pinpoint relevant text chunks. Finally, a Large Language Model (LLM) assesses the alignment of these retrieved chunks with the activity descriptions, generating an annotated PDF that can be refined by human users [9]. This RAG-based approach is particularly advantageous for handling the vast and often ambiguous nature of NFDs, providing a mechanism to ground LLM responses in specific document excerpts, thereby enhancing interpretability and verifiability crucial for greenwashing detection. The concept of RAG systems as an emerging architecture for augmenting LLMs with climate-specific knowledge is also highlighted as a significant trend in the field [7].

Other significant contributions include ClimateQA, a custom NLP tool utilizing a question-answering approach to identify climate-relevant sections within financial reports [10]. This tool aids in navigating the extensive data found in sustainability reports, effectively reducing the manual effort required to locate pertinent information. Similarly, a proposed NLP-driven framework for monitoring ESG greenwashing transforms core ESG data into structured question-and-answer pairs, simplifying the internal validation of ESG claims [2]. This system, leveraging NLP tools like spaCy for sentence-level parsing and AllenNLP for deeper analysis including coreference resolution and textual entailment, allows enterprises to query a database for pre-formulated questions and answers to verify ESG assertions [2].

Furthermore, the development of specialized NLP models specifically designed for assessing corporate disclosures in ESG subdomains contributes significantly to the analytical capabilities for sustainability reports [8]. These models quantify ESG communication, offering a more nuanced understanding of a company's commitments and performance. The application of AI and machine learning, particularly NLP, in sustainability reporting is recognized as a field with extensive and advanced research, reflecting a growing perception of their utility among researchers [13]. The proposal of models based on AI techniques, such as "text and vision transformers," further underscores the push towards more sophisticated analytical tools for processing multimodal sustainability information, aiming for more accurate assessments of corporate claims [11].

Several existing AI tools and platforms are also being leveraged for assessing corporate climate disclosure and detecting greenwashing. These include Ping An in China, Engager by Arcadian (which processes a wide range of documents including sustainability reports, policies, and press releases), Greenifs for social media compliance, and NovA! by the Monetary Authority of Singapore, designed to generate insights on financial risk and environmental impact [5]. ClimateBert is another tool specifically mentioned for analyzing corporate statements and reports [5]. While these tools contribute to the broader ecosystem of greenwashing detection, their specific internal architectures for document structure and semantics extraction are not always detailed in the provided digests. The "Green Authenticity Index" (GAI) also offers a tool for evaluating corporate sustainability claims by applying the Stacey Matrix to quantify sincerity, though it similarly does not detail specific NLP tools for initial document parsing [3].

In summary, the utility of these tools and architectures in standardizing data extraction is paramount. By automating the parsing of complex reports, identifying key structural elements, and assigning semantic tags, they convert vast amounts of unstructured text into a coherent, machine-readable format. This structured data then serves as a clean, reliable input for downstream greenwashing detection algorithms, improving their accuracy and efficiency. The shift towards integrating advanced NLP models, including LLMs and RAG pipelines, highlights a proactive approach to addressing the challenges posed by the evolving landscape of corporate sustainability disclosures. Such advancements are crucial for providing regulators, investors, and the public with the necessary tools to scrutinize corporate claims and promote genuine sustainability efforts.

6. Challenges, Limitations, and Future Directions

This section critically examines the multifaceted challenges and inherent limitations confronting the application of Natural Language Processing (NLP) methods in the identification of greenwashing within ESG disclosures. It delves into the complexities arising from data scarcity and quality, the subjective nature of greenwashing definitions, and the interpretability issues associated with advanced NLP models. Furthermore, the section explores the significant ethical considerations, including the potential for misclassification and the broader societal impacts of automated greenwashing detection, emphasizing the imperative for transparency, fairness, and accountability. Finally, it outlines promising future research avenues, advocating for enhanced NLP model sophistication, the integration of multi-modal data, and robust interdisciplinary collaboration to advance the accuracy and effectiveness of greenwashing detection systems.

The current landscape of greenwashing detection using NLP methods is fraught with challenges, primarily stemming from the ambiguous definition of greenwashing itself, which complicates the establishment of clear ground truth for model training and evaluation [1,7]. This definitional fluidity, coupled with a pervasive scarcity of high-quality, domain-specific, and annotated datasets, forms a significant impediment to developing robust and generalizable models [7,9]. The high cost of expert annotation and the proprietary nature of corporate data exacerbate this scarcity, often confining studies to small sample sizes or specific sectors [2,7]. Beyond data volume, issues of data quality and bias, stemming from external ESG ratings or historical reporting patterns, can systematically skew model interpretations [3,7]. The dynamic evolution of deceptive language further necessitates continuous model adaptation and retraining [3]. A critical technical limitation lies in the interpretability and explainability of deep learning models, where understanding why a model classifies a statement as greenwashing remains challenging, potentially hindering trust and adoption [1,9]. The absence of standardized reporting in ESG disclosures exacerbates these issues, as varied communication criteria complicate the creation of precise metrics and effective policies [7,11]. These interconnected challenges underscore the nascent stage of AI and ML applications in this domain, highlighting a need for significant advancements in data collection, model design, and regulatory alignment [5,13].

The ethical implications of automated greenwashing detection are profound, centering on the potential for misclassification. False positives can severely damage corporate reputation and financial standing, while false negatives undermine the credibility of sustainable finance and mislead stakeholders [6,7]. The broader societal impact includes the misdirection of capital from genuinely sustainable projects and the erosion of public trust in corporate environmental initiatives. Ethical AI deployment demands transparency, fairness, and accountability, necessitating careful consideration of data diversity to mitigate inherent biases in training data [7]. Human oversight is critical to validate AI outputs and ensure responsible decision-making, with some studies proactively labeling findings as "potential risk of greenwashing" to avoid definitive mislabeling [1]. NLP insights can profoundly inform clearer regulatory guidelines for ESG disclosures by identifying patterns of deceptive language, thereby enhancing the integrity of reporting and guiding policymakers in crafting more precise requirements [1]. Addressing these ethical dilemmas requires interdisciplinary solutions, integrating principles from game theory to model corporate incentives, communication studies to develop transparent reporting standards, behavioral economics to nudge companies towards honest disclosures, and legal frameworks to strengthen enforcement against deceptive claims. Such collaborative efforts are crucial for building a comprehensive defense against greenwashing and fostering genuine corporate accountability.

Future research in greenwashing detection must adopt a multi-faceted approach, prioritizing the systematic collection of diverse, annotated corpora to overcome data scarcity and facilitate rigorous model evaluation [1,7]. Developing more sophisticated NLP models, including advanced deep learning architectures and fine-tuning Large Language Models (LLMs) for specific ESG activities, is paramount to enhance detection precision across diverse industries [2,9]. Research should also explore multimodal data integration, incorporating non-textual operational data and refining text and vision transformer models for comprehensive sustainability messaging analysis [3,11]. Fostering robust interdisciplinary collaboration between NLP experts, domain specialists, and policymakers is essential for creating comprehensive frameworks that integrate symbolic reasoning with statistical learning, aligning with legal definitions and financial auditing principles [7,13]. Crucially, research into Explainable AI (XAI) methods tailored for ESG text analysis is vital to enhance model transparency, build trust, and ensure that detection systems are robust, adaptive, and transparent [3,11]. Finally, the development of novel evaluation frameworks that dynamically account for the evolving nature of greenwashing tactics and ESG regulations, coupled with the integration of psychological frameworks of persuasion and deception detection, will be key to advancing the field [3,7]. This dynamic interplay of advanced NLP techniques, interdisciplinary collaboration, and a commitment to transparency and interpretability will be crucial for ensuring corporate sustainability claims are genuinely aligned with practices.

6.1 Current Challenges and Limitations of NLP Methods

Developing robust greenwashing detection systems using Natural Language Processing (NLP) methods faces several interconnected and significant challenges, primarily stemming from data complexities, the inherent nature of deceptive language, and methodological limitations of current models. A pervasive issue is the ambiguous and subjective definition of greenwashing itself, which directly impedes the establishment of clear ground truth for model training and evaluation [1,4,7,13]. This definitional ambiguity translates into difficulties in achieving fine-grained specificity, particularly for large language models (LLMs) tasked with classifying text against precise ESG activities [7,9]. The consequence is that findings often highlight "potential greenwashing red flags" rather than "unequivocal occurrences" [2].

One of the most critical challenges is the scarcity of high-quality, domain-specific, and annotated datasets for greenwashing detection [2,4,7,9]. This data scarcity is rooted in the high cost of expert annotation and the proprietary nature of much relevant corporate data [7]. For instance, studies are often confined to small sample sizes or specific sectors due to inaccessible internal corporate datasets, limiting the robustness of quantitative analyses [2]. The absence of comprehensive and reliable data on companies' environmental performance further compromises the reliability of AI detection systems [5]. This data limitation directly influences model choices, often necessitating the use of techniques like synthetic data for fine-tuning, as explored by one study attempting to mitigate this scarcity [9].

Beyond data volume, data quality and biases present significant hurdles. External data bias, stemming from ESG ratings or public sentiment, can inadvertently influence model results [3]. Model bias can also arise from historical reporting biases present in training data, potentially leading to systematic misinterpretations of ESG disclosures [7]. Furthermore, the dynamic nature of deceptive language and evolving greenwashing strategies require detection methodologies to be robust, adaptive, and transparent. NLP models need continuous updating and retraining to keep pace with these evolving practices [3,5]. The complexity of greenwashing manifestations and the sheer volume of information in sustainability reports further compound the difficulty of detection [10,12].

Another critical limitation is the challenge of model interpretability and explainability, particularly for deep learning models [1,9,11]. While NLP models can identify patterns and flag potential issues, understanding why a model classifies a statement as greenwashing remains difficult. This lack of transparency can hinder trust and adoption by practitioners and regulators. For instance, intermediate attributes used by models might fail to capture the nuances of expert judgment, as seen where similar attribute values received opposite greenwashing labels [1]. The inability of AI to definitively determine corporate intent, which requires a holistic understanding of ESG risks, further underscores the interpretability challenge [15]. The output from annotator models is not always perfect, emphasizing the continuing crucial role of human analysts in interpreting results and making final judgments [6].

The lack of standardized reporting in ESG disclosures significantly exacerbates these challenges [7,11,13]. The absence of clear and uniform communication standards means that the criteria for misleading communication can vary widely, complicating the creation of precise metrics and the implementation of effective policies [4,13]. This lack of alignment on reported metrics leads to the increased use of "low-quality metrics to influence investors’ perceptions" [11]. Consequently, traditional ESG rating systems become overwhelmed, necessitating advanced multimodal AI techniques to quantify sustainability messaging and improve model explainability [11].

These challenges are highly interdependent. Data scarcity, for example, directly impacts the ability to train robust and generalizable models, compelling researchers to explore synthetic data generation or focus on narrow domains [2,9]. This, in turn, can limit the model's ability to capture the dynamic and nuanced nature of deceptive language. The subjectivity of greenwashing definitions makes establishing a reliable ground truth exceedingly difficult, leading to a "high residual" in model formulations and potential data imbalances in test sets [1]. Moreover, the reliance on text alone can lead to misjudgments, as NLP models may miss non-textual factors or inconsistencies between internal and external sentiments, highlighting the need for deeper financial analysis alongside textual analysis [2,3]. The current landscape is further shaped by the fact that AI and ML techniques for greenwashing detection are still in nascent stages of development, implying significant opportunities for future research but also inherent limitations in current capabilities [5,13]. The interplay of data scarcity influencing model choices and interpretability impacting ethical considerations means that without improvements in these areas, NLP approaches risk systematic misinterpretations of ESG disclosures, hindering effective greenwashing identification and accountability.

6.2 Ethical Considerations and Societal Impact

Automated greenwashing detection, while promising, introduces several ethical dilemmas, primarily revolving around the potential for misclassification and its far-reaching consequences. A critical concern is the impact of false positives on corporate reputation, where an erroneous greenwashing accusation can inflict severe financial and reputational damage on a company [6,7]. Conversely, false negatives, where genuine greenwashing goes undetected, can mislead investors and consumers, undermining the credibility of sustainable finance and exacerbating the societal impact of deceptive environmental claims. The ethical use of AI tools mandates transparency, fairness, and accountability in their design and deployment [7].

The broader societal impact of greenwashing is substantial, ranging from misleading sustainable investments to eroding public trust in corporate environmental initiatives. Greenwashing not only diverts capital from genuinely sustainable projects but also fosters consumer skepticism, hindering collective efforts toward environmental protection. AI plays a crucial role in mitigating these negative impacts by fostering greater corporate accountability and transparency. By providing more accurate and verifiable information about corporate sustainability practices, AI can empower stakeholders to make informed decisions and hold companies to higher standards [2,5,9]. The development of a "greenwashing score," for instance, implicitly raises ethical questions regarding fairness and transparency in its application and its potential influence on corporate reputation and investor decisions [11].

Issues of bias are inherently raised by the nature of automated greenwashing detection. AI models, particularly those based on Natural Language Processing (NLP), can inadvertently inherit biases present in their training data, leading to skewed classifications. This necessitates careful consideration of data diversity and model fairness to ensure that the detection mechanisms do not disproportionately affect certain industries or company types. The need for human oversight is paramount; AI outputs must be meticulously investigated and integrated with human expertise to ensure responsible decision-making and mitigate risks associated with AI autonomy and accountability [6,15]. Authors addressing ethical concerns in their work have opted to describe detected instances as "potential risk of greenwashing" rather than definitive labels, thereby avoiding data mistreatment and negative applications [1].

Insights derived from NLP analysis of greenwashing tactics can profoundly inform the development of clearer regulatory guidelines and standards for ESG disclosures. By identifying patterns of deceptive language, vague terminology, and unsubstantiated claims, NLP can pinpoint areas where current regulations are insufficient or easily circumvented. This empirical evidence can guide policymakers in crafting more precise and enforceable disclosure requirements, enhancing the integrity of ESG reporting. For instance, understanding how companies manipulate semantic framing or deploy ambiguous terms can lead to specific prohibitions or mandatory disclosures that address these linguistic tactics. The ability of NLP to analyze large volumes of corporate communication provides a foundation for more sophisticated detection methods, which can, in turn, inform regulations and improve corporate sustainability practices and transparency [1].

To address these ethical dilemmas and enhance the robustness of greenwashing detection, interdisciplinary solutions are crucial. Incorporating principles from game theory, for example, could model corporate incentives for truthful ESG reporting. By understanding the strategic interactions between companies, regulators, and stakeholders, game theory can help design optimal reward and penalty structures that encourage genuine sustainability efforts and penalize deceptive practices. Such models could analyze how different regulatory interventions or public scrutiny levels influence corporate disclosure strategies, leading to more effective policy design.

Furthermore, frameworks from communication studies offer valuable insights into developing more transparent reporting standards that are less susceptible to deceptive framing. Communication scholars have extensively analyzed how language is used to persuade, mislead, and obfuscate. Applying these insights can help identify linguistic vulnerabilities in current ESG reporting and suggest alternative communication strategies that promote clarity and honesty. This could involve developing specific guidelines on language use, promoting the adoption of standardized terminology, and encouraging plain language reporting that minimizes ambiguity. For example, understanding the rhetorical strategies behind vague environmental claims could lead to regulations that require companies to provide quantifiable metrics or specific actions to substantiate their assertions.

Extending the discussion on ethical dilemmas, integrating principles from behavioral economics could inform the design of ESG reporting mechanisms that nudge companies towards more transparent and less manipulative disclosures. Behavioral economics explores how psychological factors influence decision-making, offering insights into why companies might engage in greenwashing (e.g., short-term incentives, fear of negative perception). By designing reporting frameworks that account for these behavioral biases, regulators could create environments where honest reporting is the default, and greenwashing becomes a less appealing option. This could involve simplified reporting formats, clear default options for disclosure, or social norming strategies that emphasize the reputational benefits of transparency.

Finally, legal frameworks for environmental claims could be significantly strengthened based on NLP insights into deceptive language. By providing detailed linguistic evidence of greenwashing, NLP can assist legal professionals in building stronger cases against companies making false or misleading environmental claims. This data-driven approach can lead to more effective litigation and enforcement, creating a stronger deterrent against greenwashing. Moreover, NLP can help in the proactive development of legal standards by identifying new greenwashing tactics as they emerge, allowing regulatory bodies to update their guidelines swiftly and precisely. Such interdisciplinary collaboration—between AI developers, legal experts, economists, and communication specialists—is essential for building a comprehensive and robust defense against greenwashing, fostering genuine corporate accountability, and ensuring the integrity of the sustainable development agenda.

6.3 Future Research Avenues

Future research in greenwashing detection necessitates a multi-faceted approach, focusing on enhancing NLP model sophistication, integrating diverse data modalities, and fostering robust interdisciplinary collaboration. A crucial starting point involves the systematic collection and curation of representative and diverse corpora of real-world greenwashing cases. This will facilitate rigorous empirical analysis and robust model evaluation, addressing a key limitation highlighted in existing literature, particularly the need for expanded ground truth datasets [1,4,7]. Data augmentation techniques are essential for overcoming data scarcity challenges and achieving more valid results, contributing to more balanced and comprehensive datasets [1].

Developing more sophisticated NLP models is paramount. This includes exploring advanced deep learning architectures and refining pre-trained models to enhance detection precision across diverse industries, extending beyond current single-sector studies like pharmaceuticals [2]. Specifically, there is a call for fine-tuning Large Language Models (LLMs) for specific ESG activities and exploring optimal strategies for synthetic data generation and integration to improve performance on domain-specific tasks [9]. The success of smaller open-source models like Llama 7B, when fine-tuned, suggests continued research into efficient fine-tuning techniques for more accessible models [9]. Furthermore, models need to be capable of analyzing longer contexts beyond paragraph-level processing to enhance contextual understanding and improve model awareness of nuanced greenwashing tactics [1].

The integration of multi-modal data represents another critical research direction. Current NLP approaches often miss non-textual factors, suggesting the need for research into multimodal approaches that can incorporate operational data [3]. This includes further developing and refining text and vision transformer models for more accurate quantification of sustainability-related messaging, leading to robust greenwashing scoring mechanisms based on multimodal data analysis [11].

Fostering collaboration between NLP experts, domain specialists (such as those in finance, law, and environmental science), and policymakers is essential for creating comprehensive and effective detection frameworks [7,13,15]. This interdisciplinary approach can lead to novel hybrid models that integrate symbolic reasoning (e.g., rule-based systems for established definitions of greenwashing) with statistical learning, thereby incorporating legal definitions of misleading advertising and financial auditing principles for a more holistic validation framework [7]. Such collaborations are crucial for aligning corporate sustainability practices with sustainable development goals.

Addressing limitations identified in current research, such as data scarcity, requires a concerted effort. Solutions include not only expanding ground truth datasets but also leveraging advanced synthetic data generation techniques informed by linguistic analysis of known greenwashing patterns. Enhancing contextual understanding necessitates methods that can analyze longer texts and incorporate more nuanced definitions of greenwashing, potentially informed by expert insights on subtle deception [1]. Refining risk scoring can be achieved through further hyper-parameter tuning of hedging language detection functions and exploring discrepancies with external data, such as corporate emissions, to refine formulations [1]. Expanding ESG benchmarks to cover more ESG activities and industries is also crucial [9].

Interpretability is a significant ethical consideration in AI applications for greenwashing detection. Research into Explainable AI (XAI) methods tailored for ESG text analysis is critical to enhance the transparency of AI models, build trust, and facilitate understanding of their outputs [6,11]. This will ensure that detection systems remain "robust, adaptive and transparent" [3].

Furthermore, the development of novel evaluation frameworks is necessary to dynamically assess greenwashing. These frameworks must account for the temporal evolution of greenwashing tactics and the dynamic nature of ESG regulations, as greenwashing strategies continuously adapt [3,7]. Mapping diverse textual and visual information onto standardized sustainability axes like the Sustainable Development Goals (SDGs) will also be vital [11]. Integrating psychological frameworks of persuasion and deception detection could further enhance NLP models' ability to identify subtle forms of greenwashing [7]. Ultimately, the future of greenwashing detection lies in a dynamic interplay between advanced NLP techniques, interdisciplinary collaboration, and a commitment to transparency and interpretability in AI systems, ensuring that corporate sustainability claims are genuinely aligned with their practices [5,13,15].

7. Conclusion

This survey comprehensively reviewed the evolving landscape of Natural Language Processing (NLP) methods applied to identifying "greenwashing" in ESG disclosures, a critical area given the rising prominence of sustainable finance and the concurrent need for transparency and accountability [11,12,13]. The synthesis of key findings reveals that NLP and AI are instrumental in transforming ESG reporting and analysis by enabling automated data interpretation, extracting actionable insights, and bolstering overall transparency [14].

Initial applications demonstrate the utility of custom NLP models, such as ClimateQA and those designed for assessing corporate ESG disclosures, in managing information overload and bridging measurement gaps in precise ESG communication [8,10]. Tools like REPORTPARSE further streamline the extraction of sustainability-related information, enhancing the efficiency and robustness of research [6].

A significant stride in this domain involves the application and fine-tuning of Large Language Models (LLMs). Specialized models like ClimateBERT, when fine-tuned with multi-attribute ground truth labels, show promising accuracy in identifying greenwashing [1]. The optimization of open-source LLMs like Llama 7B and Gemma 7B, augmented with synthetic data, also demonstrates competitive performance in classifying ESG activities, validating synthetic data as a valuable resource for limited domain-specific datasets [9]. Beyond textual analysis, multimodal deep learning approaches integrating text and vision transformers are emerging to quantify sustainability messaging and develop a "greenwashing score," enhancing model explainability and mapping information to established frameworks like the SDGs [11]. The observed discrepancies between internal corporate ESG sentiments and public perception underscore the vital role of NLP-driven tools in scrutinizing greenwashing practices [2].

Key_Takeaways__NLP_for_Greenwashing_Detection

Despite these advancements, the field grapples with challenges, including a scarcity of high-quality, standardized datasets and the inherent ambiguity in defining greenwashing itself, which often leads to research focusing on intermediate tasks rather than direct detection [4,7]. Limitations such as missing non-textual factors and potential data bias further necessitate adaptive methodologies and human oversight [3,5,6].

This survey significantly contributes by systematically synthesizing diverse methodologies and tools, offering a comprehensive analytical framework that bridges existing NLP advancements with the critical need for transparent sustainability reporting. It highlights the transformative potential of AI and NLP in combating greenwashing [5,12], identifies practical tools like REPORTPARSE for standardizing analysis [6], and emphasizes methodological advancements such as multimodal deep learning for quantifiable assessments [11]. It also underscores the critical role of LLMs, including benchmark datasets and fine-tuning strategies, in enhancing ESG transparency [1,9]. The survey identifies persistent gaps in datasets and evaluation methodologies [4,7], and provides actionable insights for practitioners and policymakers, highlighting AI's role in risk assessment and regulatory efforts [2,3,13,15].

In conclusion, this survey consolidates fragmented knowledge, providing a holistic view of how NLP can be harnessed to identify and combat greenwashing. It highlights advancements, critically assesses limitations, and outlines future research avenues, particularly in robust dataset creation, model evaluation, and the integration of diverse data modalities. This structured overview aims to empower researchers, equip practitioners, and inform policymakers to foster greater transparency and accountability in corporate sustainability disclosures, recognizing the paramount imperative for continued research in this dynamic field.

7.1 Summary of Key Findings

The increasing prominence of Environmental, Social, and Governance (ESG) considerations in corporate strategy and investment decisions has concurrently heightened the risk of "greenwashing," a deceptive practice where companies misrepresent their environmental credentials [12]. This survey highlights significant progress in leveraging Natural Language Processing (NLP) and Artificial Intelligence (AI) to identify and mitigate such misleading claims, a necessity driven by inconsistent ESG reporting and the growing demand for transparency [11,13].

A central finding is that NLP is emerging as a vital technology for enhancing ESG marketing and reporting by enabling automated data analysis, providing actionable insights for sustainable business practices, and improving overall transparency and accountability [14]. Early applications of NLP in this domain include the development of custom models like ClimateQA, which utilizes a question-answering methodology to analyze financial reports and pinpoint climate-relevant sections, thereby addressing the challenge of information overload for sustainability analysts [10]. Similarly, novel NLP models have been introduced to assess corporate ESG disclosures by pre-training specific E, S, and G models on extensive text corpora, effectively explaining variations in ESG ratings and bridging the gap in precise and transparent ESG measurement [8]. Tools like REPORTPARSE further exemplify this trend, combining document structure analysis with NLP to extract sustainability-related information, thereby improving the efficiency, reproducibility, and robustness of research in this area [6].

Despite these advancements, the field faces notable challenges, particularly the lack of high-quality, standardized datasets and the inherent ambiguity in defining greenwashing itself [4,7]. Many existing NLP works focus on intermediate tasks rather than direct greenwashing detection due to these limitations, highlighting the need for domain-specific models and reliance on regulatory texts for robust evaluation [7].

A significant advancement in greenwashing detection involves the leveraging of Large Language Models (LLMs). One study presented a novel method for quantitatively defining greenwashing risk and applied it to fine-tune ClimateBERT, a specialized climate model. This approach, which involved a multi-attribute methodology for generating ground truth labels, demonstrated promising accuracy and F1 scores in identifying potential greenwashing in corporate sustainability reports, even when comparing model performance between frozen and unfrozen layers [1]. This underscores the efficacy of fine-tuning specialized LLMs for domain-specific tasks in ESG analysis. Furthermore, the optimization of LLMs for ESG activity detection has shown that fine-tuning open-source models such as Llama 7B and Gemma 7B on the ESG-Activities benchmark, augmented with synthetic data, can significantly improve their ability to classify text segments against specific environmental activities. This strategy enables these models to achieve competitive performance, in some cases even outperforming larger proprietary models, validating the utility of synthetic data for augmenting limited domain-specific datasets in the ESG context [9].

Beyond textual analysis, multimodal deep learning is emerging as a powerful approach. Research has proposed using text and vision transformers to quantify sustainability-related messaging and develop a "greenwashing score" for companies [11]. This multimodal approach aims to enhance model explainability and map information onto established sustainability frameworks like the Sustainable Development Goals (SDGs), addressing the complexity of greenwashing detection which often requires complementary AI/ML tools [11,13].

The discrepancy between internal corporate ESG sentiments and public perception, as observed in a study of pharmaceutical companies where internal sentiments were consistently positive while external Twitter sentiments fluctuated and showed incongruity in the "pollution and waste" sector, further highlights the critical need for advanced scrutiny of greenwashing practices [2]. This disparity underscores the value of NLP-driven question-and-answer systems and similar tools in monitoring greenwashing.

The application of AI, including ML and NLP, is clearly demonstrating its potential to analyze extensive data and identify patterns indicative of greenwashing in corporate sustainability claims [5]. Tools like the Green Authenticity Index (GAI) leverage various NLP techniques to quantify corporate sincerity by evaluating the Certainty and Agreement of sustainability claims, thereby identifying inconsistencies and promoting accountability for risk assessment in investment decisions [3]. However, the field remains in its early stages, with challenges pertaining to data availability, accurate measurement of environmental progress, and limitations such as missing non-textual factors and potential data bias, necessitating adaptive methodologies and human oversight [3,5,6]. Despite these challenges, the increasing academic production on greenwashing and the growing concern over its implications for investors underline the importance and continued evolution of AI and ML techniques for its detection [13,15].

7.2 Overall Contribution to the Field

This survey significantly contributes to the evolving discourse on greenwashing and Natural Language Processing (NLP) by systematically synthesizing the diverse methodologies and tools employed for detecting misleading environmental claims in corporate disclosures. It offers a comprehensive analytical framework that bridges the gap between nascent NLP advancements and the critical need for transparent sustainability reporting, thereby serving as an indispensable resource for researchers, practitioners, and policymakers.

The existing literature highlights the transformative potential of AI and NLP in combating greenwashing and fostering greater transparency and accountability in corporate sustainability reporting [5,12]. Several studies underscore the importance of leveraging advanced analytical techniques to identify the multifaceted manifestations of greenwashing. For instance, the concept of AI-driven detection, while still in its nascent stages, promises a new frontier for monitoring and verifying corporate eco-claims [5]. This survey articulates how various NLP techniques, from traditional rule-based systems to sophisticated deep learning models, can be applied to dissect complex corporate narratives and expose deceptive practices.

A key utility of this survey lies in its identification and categorization of practical tools and methodologies developed to standardize and streamline the analysis of sustainability reports. Tools such as REPORTPARSE [6] exemplify efforts to lower the barrier for researchers and analysts by integrating document structure parsing with domain-specific NLP models. This standardization is crucial given the unstructured and varied nature of corporate sustainability reports, ensuring reproducibility and facilitating a deeper understanding of genuine commitments versus mere assertions [6]. Similarly, other NLP tools have been developed for efficiently extracting climate-related information from extensive corporate sustainability reports, directly assisting analysts in their tasks [10]. These advancements collectively enhance the efficiency and effectiveness of ESG communication and strategy, enabling organizations to integrate ESG principles more deeply [14].

Furthermore, the survey emphasizes methodological advancements that enable quantifiable assessments of greenwashing. Approaches like multimodal deep learning, which integrate text and vision analysis, offer a more comprehensive and accurate assessment of corporate sustainability claims, moving beyond traditional text-based methods to provide a quantifiable "greenwashing score" for improved investor decision-making [11]. The emphasis on explainability within these AI-driven financial analyses addresses a critical need for transparency in automated decision-making processes [11]. Another significant contribution is the development of NLP-based approaches to ESG communication assessment, enhancing transparency and accuracy in evaluating corporate sustainability by leveraging large-scale text data [8]. Such methods contribute directly to the measurement of corporate sustainability performance and are vital for investors seeking to make informed decisions.

The survey also addresses the critical role of Large Language Models (LLMs) in greenwashing detection. The introduction of novel benchmark datasets, such as ESG-Activities, for evaluating LLMs on granular ESG activity classification, is pivotal [9]. Empirical evidence demonstrates the effectiveness of fine-tuning LLMs, particularly with synthetic data augmentation, for domain-specific tasks in sustainable finance. These findings have profound implications for financial analysts, policymakers, and AI researchers aiming to enhance ESG transparency and compliance through advanced NLP techniques [9]. Moreover, preliminary methodologies for quantitatively defining and detecting greenwashing risk using NLP, specifically by fine-tuning climate-specialized language models, lay the groundwork for more sophisticated systems, benefiting academic research, policymaking, and corporate accountability [1].

This survey also highlights the ongoing need for robust models that can effectively identify misleading climate communications to enhance corporate accountability and transparency. Several works systematically review NLP methodologies for greenwashing detection, underscoring the importance of domain-specific pretraining and the persistent need for better datasets and clearer definitions [4,7]. It identifies existing gaps in datasets and evaluation methodologies, proposing future research directions to foster transparency and accountability in climate communication [7]. Progress in this area necessitates building robust datasets and refining evaluation methodologies to ensure the reliability of greenwashing detection systems.

For practitioners, the survey offers actionable insights into applying NLP and AI for greenwashing detection within various professional contexts, including the actuarial profession, by proposing frameworks that quantify corporate sustainability sincerity and provide actionable insights [3]. It also frames greenwashing as a critical risk factor for ESG raters and investors, emphasizing how AI, particularly NLP, can significantly enhance the capabilities of ESG raters when used in conjunction with human expertise, thereby impacting investment decisions and corporate accountability [15]. The plausibility of greenwashing detection in the ESG domain using NLP, through analyzing sentiment correlation between internal corporate data and social media, further reinforces its practical applicability. Innovative NLP-based Q&A systems are proposed as tools for monitoring and validating ESG claims, contributing to enhanced transparency and accountability, particularly in sectors like the pharmaceutical industry where such applications address a specific research gap [2].

Finally, for policymakers, this survey provides a comprehensive overview of current research on AI and Machine Learning for greenwashing detection, identifying trends, gaps, and future opportunities [13]. The quantitative perspective offered by bibliometric analysis on the relationships between greenwashing, sustainability reporting, and emerging technologies is invaluable for guiding regulatory efforts. The study serves as a roadmap for methodological development to improve the accuracy and transparency of corporate sustainability disclosures, crucial for establishing robust regulatory frameworks and fostering a more accountable corporate landscape [13].

In conclusion, this survey consolidates fragmented knowledge, presenting a holistic view of how NLP can be harnessed to identify and combat greenwashing. It not only highlights existing advancements but also critically assesses the limitations and outlines future research avenues, particularly in robust dataset creation, model evaluation, and the integration of diverse data modalities. By providing this structured overview, the survey aims to empower researchers to develop more sophisticated detection methods, equip practitioners with practical tools, and inform policymakers in crafting effective regulations, thereby fostering greater transparency and accountability in corporate sustainability disclosures. The imperative for continued research in this dynamic field remains paramount to counteract increasingly sophisticated greenwashing tactics and ensure the integrity of sustainable finance.

References

[1] Leveraging Language Models to Detect Greenwashing - arXiv https://arxiv.org/html/2311.01469

[2] Detecting Greenwashing in the Environmental, Social, and Governance Domains Using Natural Language Processing - SciTePress https://www.scitepress.org/Papers/2023/121554/121554.pdf

[3] Unmasking Greenwashing with AI - Actuaries Digital https://www.actuaries.asn.au/research-analysis/unmasking-greenwashing-with-ai

[4] [Literature Review] Corporate Greenwashing Detection in Text -- a Survey https://www.themoonlight.io/en/review/corporate-greenwashing-detection-in-text-a-survey

[5] Unmasking Greenwashing: The Power of AI in Detecting False Eco-Claims https://theinspireandcreate.com/sustainability/how-ai-tools-are-being-used-to-detect-greenwashing/

[6] ReportParse: A Unified NLP Tool for Extracting Document Structure and Semantics of Corporate Sustainability Reporting - IJCAI https://www.ijcai.org/proceedings/2024/1024.pdf

[7] Corporate Greenwashing Detection in Text - a Survey - arXiv https://arxiv.org/html/2502.07541v1

[8] Bridging the gap in ESG measurement: Using NLP to quantify environmental, social, and governance communication - ZORA (Zurich Open Repository and Archive) https://www.zora.uzh.ch/252625

[9] Optimizing Large Language Models for ESG Activity Detection in Financial Texts - arXiv https://arxiv.org/html/2502.21112v1

[10] Analyzing Sustainability Reports Using Natural Language Processing - Climate Change AI https://www.climatechange.ai/papers/neurips2020/31

[11] Greenwashing detection using multimodal deep learning - RCSII https://rcsii.nl/greenwashing-detection-using-multimodal-deep-learning/

[12] What Greenwashing Is, and How We Can Use Analytics to Detect It - Medium https://medium.com/data-science/what-is-greenwashing-and-how-to-use-analytics-to-detect-it-15b8118031

[13] Greenwashing and Corporate Sustainability: A Systematic Literature Review Focusing on AI and Machine Learning Applications - SEMEAD LOGIN https://login.semead.com.br/27semead/anais/download.php?cod\_trabalho=312

[14] Natural Language Processing and ESG: Sustainable Communication - Elite Asia https://www.eliteasia.co/natural-language-processing-and-esg-sustainability-communication/

[15] Paint it Green: Strategies for Detecting and Combatting Greenwashing in ESG Ratings https://www.erm.com/insights/paint-it-green-strategies-for-detecting-and-combatting-greenwashing-in-esg-ratings/

Notice: Some reference links are from Google Scholar. If you cannot access them, please use a VPN or contact customer service for assistance.