The impact of religiosity and enforcement on ESG decoupling: an international study

Document Type

Article

Source of Publication

Journal of Applied Accounting Research

Publication Date

8-5-2026

Abstract

Purpose – This paper investigates how religiosity affects environmental, social and governance (ESG) decoupling. It also examines how enforcement quality moderates this relationship. Design/methodology/approach – Using a dataset of 34, 330 firm-year observations from 29 countries (2005–2022), the study applies multivariate regression models. It includes robustness checks using alternative measures, sample splits and instrumental variable (IV-2SLS) estimation to address endogeneity concerns. Findings – We find that religiosity is significantly and negatively associated with ESG decoupling. This association is stronger among firms in countries with low enforcement quality, suggesting a substitution effect between formal (enforcement) and informal (religiosity) institutions. The association is also more pronounced for firms engaged in greenwashing rather than brownwashing and for those operating in controversial industries. Furthermore, during the COVID-19 pandemic, the relationship between religiosity and enforcement shifted from a substitution effect to a complementary effect, thereby reducing ESG decoupling compared to the pre-pandemic period. Research limitations/implications – The findings suggest that efforts to understand and address ESG decoupling may benefit from considering the joint roles of formal institutional conditions, such as enforcement quality, and informal societal influences, such as religiosity. Practical implications – Policymakers and regulators should account for the joint roles of enforcement and religiosity when designing measures to reduce ESG decoupling. Enhancing enforcement may be more effective in low-religiosity countries, while engaging religious institutions may be more beneficial in more religious societies. Social implications – The study highlights that persistent gaps between ESG disclosure and ESG performance may weaken the credibility of sustainability reporting and limit the extent to which firms’ ESG commitments translate into meaningful environmental and social outcomes. Originality/value – This study examines the joint and moderating effects of religiosity and enforcement on ESG decoupling. It also provides timely evidence from the crisis period, highlighting institutional interplay during the COVID-19 pandemic.

ISSN

0967-5426

Publisher

Emerald

First Page

1

Last Page

26

Disciplines

Business | Social and Behavioral Sciences

Keywords

Brownwashing, COVID-19, Enforcement, ESG decoupling, Greenwashing, Religiosity

Scopus ID

105046935479

Indexed in Scopus

yes

Open Access

no

Link to Full Text

Share

COinS