The report’s author, New York–based investment firm Spruce Point Capital Management, ran readers through a litany of critiques: allegations of revenue inflation and bad accounting, attacks on Oatly’s leadership, and questions about whether Oatly could compete with heavyweight rivals like Nestlé and Chobani in the fast-growing oat-milk market. But its most headline-grabbing attack struck at the core of Oatly’s brand. Spruce Point alleged that Oatly “doesn’t practice what it preaches” when it comes to ESG—environmental, social, and governance measures—and especially to sustainability. The world’s hottest vegan milk, it insinuated, just isn’t that green. 

In a world awash in buzzy, venture capital–backed companies pitching themselves to young, socially conscious customers, Oatly has distinguished itself by building a quirky, off-the-cuff brand that puts its green mission front and center—ceaselessly reminding consumers that oat milk is more earth-friendly than cow’s milk. Oatly quantifies its carbon footprint on its cartons and plasters merchandise with slogans declaring the rise of a “post-milk generation.” “We don’t even look at ourselves as an oat-milk maker,” CEO Toni Petersson told Fortune in June. “We are a people and sustainability company.” 

The Spruce Point report sought to tarnish that green aura. The company had produced abnormally high levels of wastewater at a New Jersey plant, it alleged. And what about the environmental impact of transportation? Oatly, after all, had been shipping oat milk halfway around the world—from Sweden to China, most notably—in a feverish grab for new customers. 

Since July, Oatly has refused to discuss Spruce Point’s allegations with the media. In an August earnings call with analysts, Petersson said an investigation had found the report was “false and misleading.” (The company declined to make anyone available for an interview.) But at least some on Wall Street have been swayed. The stock has fallen 21% since the report was published; the short position against it, as of late September, had risen to just over $300 million, or 3.3% of Oatly’s total float, according to S3 Partners, which tracks short-selling. There are other reasons for investors to be skeptical of the company. Some claim that oat milk is easy to make, for example, so Oatly doesn’t have a competitive “moat.” Still, the claim that Oatly is “greenwashing”—marketing itself as greener than it really is—has struck a chord.

So how can investors decide for themselves whether Oatly—or any company—is truly “green”? That question, it turns out, opens a messy can of free-range organic worms. Even as demand for sustainable mutual funds and “ethical” stocks reaches record heights, the available data for judging companies is wildly inconsistent—with competing ratings firms offering contradictory scores based on opaque criteria. “We don’t have a very good way to measure ethical behavior,” says Roberto Rigobon, a professor at the MIT Sloan School of Management and a member of the Aggregate Confusion Project, which tracks dissonance in ESG ratings. Depending on which lens observers use, and what kind of “ethical” behavior they prioritize, the same company can look like a hero or a villain. 

The stakes are high, especially for green investors. At the end of the second quarter of 2021, assets in “sustainability labeled” funds reached $2.24 trillion, 2.4 times the amount three years earlier, according to Morningstar; there are now a record 4,929 funds in that category. As money pours in, critics warn that greenwashing is becoming endemic, as companies spin their behavior to attract ESG investors’ dollars. Eyebrow-raising corporate maneuvers have helped fan the skepticism, from a deep-sea mining company rebranding itself as “green” to French energy giant TotalEnergies buying carbon credits in Zimbabwe so it could call a tanker of liquefied natural gas “carbon neutral.” 

But regulatory efforts to define sustainability are still in their infancy. The European Union is entangled in a yearslong effort to set clearer standards; in the U.S., the Securities and Exchange Commission has formed a task force to investigate cases where ESG definitions have been abused, but it’s far from imposing uniform rules. 

You take in evidence, and then you make a call. You never know the ultimate truth.

Julian Kölbel, economist, University of Zurich

In the absence of such guidance, investors are left to consult a motley array of ESG ratings agencies. There are roughly 30 major providers around the globe, according to KPMG, among whose products fund managers pick and choose to help shape their investment decisions. And even the most conscientious of those agencies are grappling with an inconsistent patchwork of disclosures from companies. 

In 2019, Rigobon and two other researchers at MIT released a paper that found that agencies’ ratings varied enormously depending on what was measured, the weight of those measurements, and how they were measured in the first place. As an example, Rigobon describes ratings of companies’ treatment of female employees. Depending on who was scoring, that might be measured by employee turnover, by gender diversity in upper management, or by official labor complaints—all with potentially different results. Competing ratings thus could show bizarre divergences, with the same company getting a score in the top 10% from one agency, and the bottom 20% from another. 

Adding to the confusion, many agencies score companies within industries, rather than across sectors. That’s one reason some ratings bodies give BP, one of the world’s biggest producers of petroleum, higher ESG scores than Tesla, whose mission is to make petroleum obsolete.

Julian Kölbel, one of Rigobon’s coauthors and now a postdoc at the University of Zurich, frames the ratings conundrum a different way. If an analyst says that Tesla’s stock will rise or fall, it will eventually become clear whether that prediction was correct. By contrast, “ESG ratings are more in the nature of a court proceeding, where there’s a deliberation, where you can take in various forms of evidence, and then you make a call,” he says. “You never know the ultimate truth.” 

For Oatly, there aren’t even any scores to appeal to: Because it only recently went public, the company doesn’t yet have published ESG ratings from major agencies. More so than for better-established companies, its greenness is in the eye of the beholder. 

The company’s central claim—that oat milk is less emissions-intensive than cow’s milk—isn’t in doubt. Dairy is a tough industry to decarbonize, in part because cows emit—as in, fart—methane, a greenhouse gas many times more potent than CO2. An analysis created for the BBC found that oat milk ounce-for-ounce accounts for around one-third as many greenhouse gas emissions as dairy milk. “The more people we can help make the switch from cow’s dairy … the more we can drive down greenhouse gas emissions,” Oatly CEO Petersson said in a written statement to Fortune.

Even Ben Axler, the founder and chief investment officer of Spruce Point, admits that he has no quibble with oat milk. His critique focuses on Oatly’s operations—particularly on the environmental strains of shipping. Axler argues that in rushing products and ingredients around the world to chase new markets, Oatly has put the pursuit of growth ahead of its values: “Do I think Oatly’s veered a little bit from its mission while it’s grown rapidly? I do.” 

Another high-profile critic of Oatly’s climate impact: Oatly itself. The company has been transparent about the downsides of growth—it called its 2020 sustainability report Confessions of an Oat Company. From 2019 to 2020, it says, its carbon emissions jumped 111%, outstripping its 81% increase in production over the same period. Oatly attributed the jump partly to better carbon accounting, but also to having to ship oats from Europe to Asia; it also struggled to source renewable energy in some new markets. Both those problems will dissipate, Oatly expects, as it builds more regional factories, including one opening in China this year.

Oatly’s self-assessment highlights an irony that other ESG-minded companies may soon grapple with. Some watchdogs and regulators want to improve ESG standards in part by urging companies to be more forthcoming with details about their emissions and supply chains. Oatly seems to have done just that—indeed, doing so is part of its ethical brand. But its candor has given ammunition to Spruce Point and other critics (including plaintiffs’ attorneys: As often happens after a short-seller report, multiple law firms have filed class-action suits against Oatly).

For now, the oat-milk maker expects its rapid growth to continue. By 2023, it plans to have nine plants worldwide, more than tripling its production capacity. Its carbon footprint will presumably also grow, at least in absolute terms. Whether that makes Oatly a success story or an ESG cautionary tale may depend on who’s keeping score. 

A version of this article appears in the October/November 2021 issue of Fortune with the headline, “Shaky foundations for eco-investors.”

Dive into stories from Fortune’s print edition:

• Roz Brewer on what it feels like to be 1 of 2 Black female CEOs in the Fortune 500
• Can new CEO Fidji Simo turn Instacart into more than just a delivery company?
• Are women on a collision course with the COVID ceiling?
• Hard right turn: Companies are toeing the political line in business-friendly red states
• These 9 powerful women are ones to watch