Strategic Blockchain Adoption for Anti-Greenwashing

Problem definition: This study investigates how green companies can strategically implement blockchain to effectively balance product pricing and greenness levels against brown competitors. We bring in the critical parameters of the blockchain adoption cost, platform greenness penalty, blockchain environmental negatives, greenwashing penalty, and customers' skepticism. Methodology: We develop a game-theoretic model to study the price and greenness competition between a green and a brown company when the latter greenwashes and the former uses blockchain to combat it. Key findings: 1) When blockchain is not adopted, investing in product greenness is an effective defence against greenwashing, but only when market skepticism is relatively high and penalty cost is moderate; 2) When blockchain is adopted, such effectiveness remains viable only if market scepticism is relatively low and penalty cost is moderate; 3) Regardless the adoption of blockchain, higher penalty costs benefit both green and brown company’s profits when the former successfully deters greenwashing; 4) Market greenness level will initially increase and then decrease as penalty level rises if blockchain is not adopted; 5) Intriguingly, blockchain use does not consistently improve customer surplus, environmental, or social welfare. Managerial insights: Adopting blockchain is always beneficial for green companies when the corresponding adoption cost is low. However, as such costs rise, the decision to adopt blockchain hinges on the severity of government penalties for non-compliance. Governments and legislative bodies are advised to implement a balanced approach in enforcing greenwashing penalties with respect to green companies’ blockchain adoption strategy. When no blockchain is adopted in market, this approach should permit a limited degree of greenwashing, recognizing its potential to contribute positively to the expansion of the green market and the broader welfare of society.