The benefit of virtue signaling: Corporate sleight-of-hand positively influences consumers’ judgments about “social license to operate”

Abstract When confronted with concerns or backlash as a result of their environmental or sustainability performance, companies may elect to address them head-on by directly correcting their real or perceived misdeeds. However, it is often the case that businesses are unwilling or unable to address their transgressions directly; in these cases, they may elect to draw attention to indirect substantiality benefits unfolding in areas unrelated to where the concerns or backlash initially arose. In this study, we sought to test the effect of these indirect and direct responses to sustainability challenges on two dependent variables: public perception of company reputation, and their willingness to grant a company “social license” for future business activities. Compared to a business-as-usual control condition, and across three company contexts, consumers provided favorable ratings of reputation, and were willing to grant social license, when companies responded indirectly to a sustainability challenge. These results highlight the powerful effect of indirect responses, which may be perceived as “greenwash”, and the importance of intuitive judgmental heuristics and individual value orientations when consumers form impressions about corporate sustainability.