The impact of vertical environmental regulation mechanism on greenwashing

China is vigorously implementing carbon reduction actions, but greenwashing is a severe obstacle to the realization of the "dual-carbon goal". The central environmental protection inspection (CEPI) policy is a typical vertical environmental regulation (VER) system, which directly affects the environmental protection practices of firms and thus may have an impact on greenwashing. This article uses data from China's listed companies from 2012 to 2021 and the generalized difference-in-differences (DID) method to examine the impact of CEPI policy on greenwashing. The main conclusions are: first, the CEPI policy can significantly mitigate greenwashing, and this conclusion still holds after the endogeneity test and parallel trend test. Second, the CEPI policy can mitigate greenwashing by increasing media attention, improving technological innovation ability, and increasing the degree of competition in the industry. Finally, the heterogeneity analysis shows that stronger regulatory intensity mitigates greenwashing and the CEPI policy is effective in reducing the greenwashing of duality firms. Reducing corporate greenwashing is conducive to cleaner production and thus promotes sustainable economic development.