Economic Review, Vol. 77 No. 5, 2026.
Original scientific paper
https://doi.org/10.32910/ep.77.5.4
Strategic Responses to Sustainability Regulatory Uncertainty: Implications for Reporting and Investment
Darko Tipurić
Zlatko Žuro
Anita Knezović
Abstract
This paper examines how sustainability-related regulatory uncertainty influences corporate management boards’ decision-making, regarding investment decisions and their propensity to engage in greenwashing practices. Our objective is to examine key factors influencing how boards respond to sustainability-related regulatory uncertainty and to understand why different companies pursue different strategies in response to the same regulatory challenge. The study employs qualitative methodology, with grounded theory applied to analyze 15 semi-structured interviews with members of Croatian management boards. Three main findings emerge from the analysis. First, the current level of sustainability-related investments seems not to be influenced by regulatory uncertainty. Second, management board ethics and client expectations appear to be key drivers of these investments going forward, regardless of changes in the regulatory landscape. Third, while interviewees are divided on the exact outcome, there is a substantial concern that regulatory uncertainty might encourage some companies to engage in greenwashing practices as a virtue-signaling mechanism. Results of this study carry practical implications for regulators in shaping sustainability regulatory frameworks, and for executives and directors in the assessment of sustainability investments and appropriate sustainability reporting practices. Qualitative methodology, chosen for its ability to answer the how and the why, potentially suffers from researchers’ bias skewing data and influencing outcomes, issues of generalizability of findings to other contexts, and replicability of research. Further research into this phenomenon in other institutional and cultural environments is therefore highly warranted.
Keywords
corporate sustainability; corporate governance; regulatory uncertainty; sustainability investments; sustainability reporting.
Hrčak ID:
353001
URI
Publication date:
3.11.2026.
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