Navigating Corporate Greenwashing in the Carbon Era: Synergizing Internal Carbon Pricing, ESG Governance, and Regulatory Stringency to Advance Environmental Integrity

ABSTRACT As climate change intensifies global sustainability demands, firms face growing pressure to demonstrate genuine environmental commitment. Internal Carbon Pricing (ICP) has emerged as a pivotal mechanism to internalize the cost of carbon emissions and align business strategies with climate goals. However, ICP embodies a dual function: it can operate as a strategic tool that drives substantive decarbonization or as a reputational device used symbolically to project environmental responsibility without meaningful change. This study examines how ICP influences corporate greenwashing and environmental performance across BRICS nations, incorporating the mediating role of ESG governance and the moderating effect of environmental regulatory stringency. Drawing on Institutional Theory and Stakeholder Theory, the research utilizes firm‐level data from 2010 to 2023 and applies robust econometric instruments and instrumental variable techniques to explore direct, non‐linear, mediating, and moderating relationships. The findings reveal that when ICP is strategically integrated into decision‐making, it reduces greenwashing, whereas excessive or symbolic adoption, particularly in weak regulatory environments, amplifies it. Strong ESG governance enhances ICP's substantive application, while stringent environmental regulations reinforce its effectiveness, ensuring that ICP functions as a transformative rather than symbolic mechanism. The results also uncover heterogeneity across institutional settings, ownership structures, and industries. The study advances Institutional and Stakeholder Theory by demonstrating how internal governance mechanisms interact with external institutional pressures to shape the authenticity of corporate climate actions. Policymakers, investors, and ESG practitioners should strengthen governance and regulatory frameworks to ensure that ICP delivers measurable environmental integrity rather than reputational gains.