From Greenwashing to Sustainability: The Mediating Effect of Green Innovation in the Agribusiness Sector on Financial Performance

This study analyses the impact of agricultural greenwashing on financial performance via green innovation. To this end, it employs data from Chinese A-share agribusinesses from 2012 to 2022. The study indicates the following results: (1) the practice of greenwashing (ESG disclosure–performance gap, GW) has a significant negative impact on ROA, particularly in non-state firms; (2) green innovation (patents, GI) partially mediates this relationship, with a percentage of 9.09%, as GW diverts research and development resources toward image management. Robustness checks are employed to confirm the results obtained using ROE and lagged models. Property rights moderate the effects: non-state firms are more adversely affected by innovation dependency, while state firms are protected by policies. The “double-edged” mechanism elucidates GW’s short-term legitimacy gains in contrast to long-term innovation suppression and financial decline. The report calls for the establishment of standardised ESG metrics (for example, the disclosure of pesticide residue) and targeted green incentives (for example, SME R&D subsidies) to be aligned with UN SDGs 9.4 (green tech) and 12.6 (responsible production). The present study offers insights into the governance of environmental, social, and governance (ESG) matters within the context of agriculture in China.