In recent years, sustainability has become a cornerstone of corporate strategy, with firms increasingly integrating environmental initiatives into their operations and marketing. Green marketing, which promotes products as environmentally friendly, has emerged as a key tool to attract eco-conscious consumers. Terms like “eco-friendly,” “green,” and “sustainable” now feature prominently in corporate communications.
In the energy sector, sustainability claims are especially influential because energy products such as electricity, fuels, and energy services are largely intangible and difficult for consumers to evaluate directly. As a result, environmental messaging plays a central role in shaping consumer perceptions within energy markets.
However, the rise of green marketing has also brought a significant challenge: greenwashing, the practice of misleading consumers about the environmental benefits of products or services. While green marketing seeks to build corporate credibility, read on to learn how greenwashing can erode trust and ultimately impact the perceived value of sustainable offerings.
Defining Greenwashing and Green Perceived Value
Greenwashing occurs when companies present products or practices as environmentally responsible without fully meeting these standards. This can include emphasizing minor green attributes, omitting negative environmental impacts, or making vague or unverified claims. The effect is a deceptively favorable corporate image that misleads consumers, creates confusion, and diminishes trust in green initiatives.
Within the energy sector, greenwashing commonly involves overstating the share of renewable energy in electricity portfolios, marketing fossil-fuel-based energy as “clean” through carbon offsets, selectively highlighting renewable pilot projects while core operations remain carbon-intensive, or announcing net-zero targets without transparent or verifiable transition pathways.
In contrast, green perceived value refers to consumers’ assessment of a product’s environmental benefits relative to their sustainability expectations. A high green perceived value reflects a strong, measurable environmental impact, whereas greenwashing can inflate or distort this perception, sometimes leading consumers to overestimate a product’s sustainability.
In energy markets, green perceived value applies to offerings such as green electricity tariffs, renewable energy certificates, electric vehicles, biofuels, hydrogen solutions, and energy-efficient technologies. In these contexts, environmental benefits are typically inferred through corporate claims and labeling rather than being directly observable by consumers.
Understanding the interplay between greenwashing and green perceived value is critical for companies seeking to maintain credibility, foster consumer trust, and deliver meaningful sustainability outcomes.
Psychological Mechanisms: Confusion and Perceived Risk
Research shows that greenwashing influences consumer perceptions primarily through two psychological mechanisms: green consumer confusion and green perceived risk.
These mechanisms are particularly salient in energy markets, which are characterized by technical complexity, limited consumer expertise, and information asymmetry between energy providers and consumers.
Green Consumer Confusion
Green consumer confusion arises when consumers encounter inconsistent, misleading, or overwhelming information about a product’s sustainability attributes (Walsh & Yamin, 2005). This confusion can manifest in three ways:
Lack of clarity: Difficulty understanding the ecological claims due to vague or contradictory messaging.
Similarity: Inability to differentiate between products that appear similarly “green.”
Overload: Cognitive strain from excessive environmental information, making it difficult to make informed choices.
In energy markets, green consumer confusion is amplified by the proliferation of similarly labeled electricity plans, such as “renewable,” “low-carbon,” and “carbon-neutral.” This confusion is further intensified by inconsistent disclosure of energy sources and varying certification standards across regions and providers.
Based on information overload theory, when consumers are presented with too much or conflicting information, their decision-making capacity is exceeded, often leading them to rely on mental shortcuts or heuristics. Firms can inadvertently or deliberately exploit these cognitive limitations, exaggerating environmental benefits and creating inflated green perceived value.
Hypothesis 1: Greenwashing is positively associated with green consumer confusion.
Green Perceived Risk
Perceived risk theory posits that uncertainty about a product’s outcomes increases consumers’ risk perception, affecting their evaluation and purchase decisions (Peter & Ryan, 1976). In the context of green products, greenwashing heightens skepticism regarding the authenticity of environmental claims, which can amplify perceived financial, social, psychological, performance, and physical risks (Kaplan et al., 1974; Chernev, 2025).
For energy consumers, perceived risk is heightened due to long-term contracts, price volatility, regulatory uncertainty, and the strategic importance of energy choices, making misleading green claims particularly damaging.
When consumers doubt the credibility of eco-friendly claims, their perceived risk increases, negatively affecting the perceived value of green products (Roh et al., 2022). This creates a dual effect: confusion may inflate perceived sustainability, but increased risk perception counteracts trust and reduces the product’s overall green perceived value.
Hypothesis 2: Greenwashing is positively associated with green perceived risk.
Hypothesis 3: Green perceived risk is negatively associated with green perceived value.
The Impact of Greenwashing on Consumer Perceptions
Greenwashing affects perceived value through two contrasting paths. On one hand, misleading claims can create temporary green consumer confusion, leading consumers to overestimate the sustainability of a product. On the other hand, greenwashing undermines consumer trust and increases green perceived risk, reducing the perceived value of a product or brand.
In energy markets, where trust underpins consumer adoption of renewable energy and low-carbon technologies, the erosion of credibility can slow the energy transition and distort investment signals.
Consumer trust is central to the perceived value of eco-friendly products. When brands are recognized as environmentally credible, trust fosters higher green perceived value and reinforces positive attitudes toward green initiatives. Conversely, deceptive practices diminish trust, triggering negative word-of-mouth and further eroding perceived value.
Hypothesis 4: Greenwashing is negatively associated with green perceived value.
The Role of Bounded Rationality and Cognitive Bias
Bounded rationality theory provides additional insight into how greenwashing affects consumer perception. Consumers have limited cognitive capacity, time, and access to information, so they rely on heuristics or mental shortcuts to simplify decision-making. While heuristics can help process information efficiently, they also increase susceptibility to cognitive biases such as confirmation bias, anchoring, and availability bias.
In green energy marketing, these biases can be exploited through selective disclosure of emissions data, strategic framing of renewable shares, or omission of lifecycle environmental impacts.
In green marketing, these biases can be manipulated through selective highlighting of environmental claims and strategic omission of negative information (Forliano et al., 2025). As a result, consumers may overestimate a product’s green value despite potential environmental shortcomings, highlighting the subtle, indirect ways greenwashing influences perception.
Hypothesis 5: Green consumer confusion is positively associated with green perceived value.
Methodology of Recent Studies
To empirically test these mechanisms, recent studies have employed quantitative surveys targeting consumers of green products. For example, a study in China collected data from 299 valid responses across online green product shoppers. Participants evaluated four primary constructs: greenwashing, green consumer confusion, green perceived risk, and green perceived value, using a seven-point Likert scale. This approach allowed researchers to explore the direct and indirect effects of greenwashing on perceived value, with a focus on psychological mediators such as confusion and perceived risk.
This methodological approach is particularly relevant for examining sustainability claims in energy-related products and services, where consumer perceptions play a critical role in adoption and market outcomes.
Findings from such studies reinforce the dual-mediation model: greenwashing increases both confusion and perceived risk, which jointly influence green perceived value, either inflating or diminishing it depending on the balance between these cognitive effects.
Implications for Businesses and Policy
For firms, the implications are clear. Green marketing must go beyond surface-level claims and ensure transparency, authenticity, and verifiability. Practical steps include:
Third-Party Verification: Certifications and audits (e.g., ISO 14001, SBTi) strengthen credibility.
Clear, Evidence-Based Communication: Avoid ambiguous or selective messaging that could mislead consumers.
Consumer Education: Empower buyers to understand environmental attributes and product comparisons.
Monitoring and Feedback: Regularly assess consumer perceptions and market reactions to sustainability claims.
From an energy policy perspective, regulators play a critical role in standardizing sustainability claims, enforcing disclosure requirements, and preventing greenwashing within energy markets to protect consumers and ensure fair competition.
From a policy perspective, regulators can play a critical role in standardizing green marketing, providing guidelines, and enforcing penalties for misleading claims. This protects consumers, maintains market integrity, and incentivizes genuine sustainability initiatives.
Conclusion
Greenwashing presents a significant challenge in the era of sustainability-driven marketing. By manipulating information and exploiting cognitive biases, companies can create temporary perceptions of green value while undermining trust. Psychological mechanisms such as green consumer confusion and perceived risk mediate this process, influencing how consumers assess the environmental benefits of products.
In the context of the global energy transition, addressing greenwashing in energy markets is essential for aligning consumer perceptions with genuine decarbonization outcomes and maintaining trust in sustainable energy systems.
For businesses aiming to maintain credibility and maximize the perceived value of sustainable offerings, transparency, authenticity, and verifiable claims are essential. Future research and industry efforts should focus on refining green marketing standards, educating consumers, and designing strategies that create real green value rather than superficial perceptions. In doing so, firms can foster trust, drive informed sustainable consumption, and secure a competitive advantage in the growing green marketplace.
