The Moderating Role of Green Tax on the Relationship Between ESG Performance and Environmental Pollution

Authors

  • Hossein Fakhari a Professor of Accounting in the Department of Accounting, Faculty of Administrative and Economic Sciences, University of Mazandaran, Babolsar, Iran.
  • Amir Mohammad Askari Department of Accounting, Faculty of Administrative and Economic Sciences, University of Mazandaran, Babolsar, Iran.
  • Hani Shirowzhan a Ph.D. graduate in Accounting at the Department of Accounting, Faculty of Administrative and Economic Sciences, University of Mazandaran, Babolsar, Iran.
  • Khadijeh Namvar Vansofla Department of Accounting, Faculty of Administrative and Economic Sciences, University of Mazandaran, Babolsar, Iran.
  • Amirmohammad Esmaeilpour Eshka Department of Accounting, Faculty of Administrative and Economic Sciences, University of Mazandaran, Babolsar, Iran.

DOI:

https://doi.org/10.22452/ajba.vol18no2.7

Keywords:

Environmental Pollutant Emissions, Environmental, Social, Corporate Governance Performance, Green Tax Law, Greenwashing Approach, Legitimacy Theory

Abstract

Manuscript type: Research paper
Research aims: Environmental, social, and governance (ESG) compliance
can enhance business performance and contribute to sustainable
development by reducing pollutants; however, this assertion lacks
substantial evidence in practice. Therefore, this study investigates how
ESG performance affects environmental pollutants and the role of the
Green Tax law in moderating this relationship. The primary contribution of this research is to analyse the impact of ESG performance on pollutants
and investigate the moderating effect of the Green Tax law. The study
specifically examines whether the assertion of compliance with ESG
requirements reduces pollution or if it instead facilitates greenwashing,
thereby masking the true environmental impact..
Design/Methodology/Approach: Using multiple regression and panel
data analysis, data from 91 companies listed on the Tehran Stock
Exchange (TSE) between 2020 and 2022 were analyzed.
Research findings: Higher ESG performance is associated with increased
pollution, and the Green Tax law significantly amplifies this effect.
Theoretical contribution/Originality: The findings suggest that ESG
performance is linked to increased pollution, indicating potential for
greenwashing. ESG reporting legitimises businesses and reduces litigation
risk, with companies exploiting gaps in the law to maintain pollution
levels.
Practitioner/Policy implication: The study highlights greenwashing
in publicly listed companies. Recommendations include implementing
climate policies, promoting renewable energy sources, increasing
employee awareness, encouraging whistleblowing, implementing green
taxes, and training inspectors and other stakeholders.
Research Limitations: The findings are limited by the short threeyear
study period and the restricted sample of TSE-listed firms, which
constrain the generalisability of the results across broader contexts
and longer time horizons. Future studies incorporating extended time
frames, additional industries, and more comprehensive environmental
reporting would provide deeper insight into long-term ESG dynamics
and greenwashing behaviour.

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Published

08-01-2026

How to Cite

Hossein Fakhari, Amir Mohammad Askari, Hani Shirowzhan, Khadijeh Namvar Vansofla, & Amirmohammad Esmaeilpour Eshka. (2026). The Moderating Role of Green Tax on the Relationship Between ESG Performance and Environmental Pollution. Asian Journal of Business and Accounting, 18(2), 173–212. https://doi.org/10.22452/ajba.vol18no2.7

Issue

Volume 18, No 2 (2025)

Section

Articles