The Impact of Sustainability Audit on Climate Change Performance: The Role of Governance Quality and Greenwashing

ABSTRACT This study investigates how sustainability audit quality influences corporate climate change performance and examines the moderating roles of governance quality and greenwashing. Using panel regressions on 6140 firm‐year observations from 39 countries between 2008 and 2023, the findings reveal that higher sustainability audit quality is associated with lower carbon emission intensity, indicating improved climate change performance through enhanced transparency, monitoring and credibility of sustainability disclosures. The results further show that governance quality weakens the negative relationship between sustainability audit quality and emission intensity. Specifically, the emissions‐reducing effect of sustainability assurance becomes less pronounced in firms operating within stronger governance environments, suggesting that internal governance structures and institutional monitoring mechanisms may partially substitute for the quality role of external sustainability assurance. Similarly, greenwashing weakens the effectiveness of sustainability audit quality, implying that symbolic environmental disclosure practices undermine the credibility and substantive impact of sustainability assurance on climate‐related outcomes. The findings highlight the importance of high‐quality sustainability assurance in improving corporate climate change performance while demonstrating that its effectiveness is conditioned by firms' governance environments and disclosure practices.