From Disclosure Controls to Statutory Enforcement: Regulating Corporate Greenwashing through Forensic Accounting and a Comparative Analysis of HK SFC and UK FCA Regimes

Abstract

As corporate sustainability disclosures transition from voluntary reporting to statutory mandates, corporate greenwashing presents a structural threat to financial market integrity and sustainable capital allocation. Utilizing a desk-based qualitative framework combining doctrinal legal research, comparative institutional analysis, and secondary literature synthesis. This study examines the regulatory enforcement gaps governing corporate greenwashing and evaluates the operational role of forensic accounting in verifying non-financial ESG claims. The findings reveal a distinct enforcement void in Hong Kong. The current oversight relies either on low-level consumer protection under the Trade Descriptions Ordinance (Cap. 362) yielding minor administrative fines or generalist anti-fraud provisions under Sections 107 and 300 of the Securities and Futures Ordinance (Cap. 571), which impose prohibitive legal thresholds (mens rea and direct financial loss) without defining deceptive ESG terminology. In contrast, the UK Financial Conduct Authority (FCA) has established a targeted regulatory regime incorporating the Anti-Greenwashing Rule (FG24/3), Sustainability Disclosure Requirements (SDR), and ESG 4.3 naming and marketing restrictions. This paper advocates that Hong Kong establishes dedicated statutory anti-greenwashing regulations by adapting the UK FCA’s ESG 4.3 framework to local market circumstances. Within the Hong Kong government hierarchy, policy leadership should originate from the Financial Services and the Treasury Bureau (FSTB), designating the Securities and Futures Commission (SFC) as the primary statutory enforcement authority. To operationalize regulatory oversight, forensic accountants must be embedded within enforcement mechanisms to deploy AI-driven anomaly detection, blockchain audit trails and Scope 1–3 emissions reconciliations, converting raw corporate claims into courtroomadmissible evidence. Finally, to mitigate compliance cost barriers for Small and Medium-Sized Enterprises (SMEs), regulators should institute phased compliance timelines alongside standardized public digital verification infrastructure.