Strategic Silence? Mandatory Sustainability Disclosure and the Discipline of Corporate Over‐Claiming Under the European Union Non‐Financial Reporting Directive

This study examines whether mandatory sustainability disclosure under the European Union Non-Financial Reporting Directive (NFRD) reduces corporate greenwashing among listed European firms, with a focus on the 500-employee compliance threshold. We conceptualise greenwashing as strategic decoupling between sustainability communication (talk) and environmental performance (walk). Using merged LSEG Workspace and Orbis data, we estimate a local sharp regression discontinuity design around a predetermined 2016 employment baseline, focusing on 2019–2025 when the key variables are sufficiently observed. Crossing the threshold is associated with a robust decline in a residual-based excess-talk measure. Evidence for a standardised talk–walk gap is directionally similar but less precise. Decomposition tests show that the discontinuity sits on the communication side: firms above the threshold reduce sustainability claims, while emissions-related performance does not exhibit a comparable short-run shift. We do not detect significant local moderation by external monitoring or organisational complexity, nor statistically significant short-horizon discontinuities in ESG controversies, valuation, or cost of capital. The evidence is consistent with a sequencing effect in which disclosure pressure disciplines over-claiming before it produces observable operational change or downstream market consequences.