The Effect of Profitability and Corporate Governance on Greenwashing in Indonesian Basic Materials Companies

Amy Nurfaizah Apraystia; Putri Sukmawati; Kukuh Panggah Waluya; Hexana Sri Lastanti

doi:10.63922/ijbqr.v4i03.5109

Amy Nurfaizah Apraystia Universitas Trisakti, Indonesia.
Putri Sukmawati Universitas Trisakti, Indonesia.
Kukuh Panggah Waluya Universitas Trisakti, Indonesia.
Hexana Sri Lastanti Universitas Trisakti, Indonesia.

DOI: https://doi.org/10.63922/ijbqr.v4i03.5109

Keywords: Greenwashing, Profit Margin, Board Size, Board Independence, Basic Materials

Abstract

This study examines the effect of profitability and corporate governance mechanisms on greenwashing in Indonesian basic materials companies. Profitability is measured by profit margin, while corporate governance is proxied by board size and board independence. The study uses a quantitative approach with secondary data obtained from annual reports, sustainability reports, ESG reports, financial statements, and official company sources. The sample consists of 55 basic materials companies listed in Indonesia from 2022 to 2025, resulting in 220 firm-year observations. Panel data regression is performed using EViews. The empirical results show that profit margin and board size have negative effects on greenwashing, while board independence has no effect on greenwashing. Firm size and cash flow from operations also show negative effects on greenwashing. This study contributes to the greenwashing literature by providing evidence from an environmentally sensitive sector in an emerging market and by explaining how profitability and board characteristics relate to symbolic sustainability reporting.

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