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Greench-v1: distilling SLMs on Greenwashing Detection

Validating greenwashing claims in environmental, social, and governance (ESG) reports relies heavily on costly and inconsistent manual review. To address this, this paper introduces Greench-v1, a low-latency small language model (based on Qwen3-4B) that screens ESG text at the paragraph level. The model outputs a three-way classification (Greenwashing Alert, No Greenwashing, Not Relevant) paired with a concise, paragraph-grounded rationale to assist human auditors in triage and validation. The system was trained on a custom dataset of roughly 2,000 paragraphs, adapted from the ClimateBERT corpus. This dataset mitigates class imbalance through controlled paraphrasing of rare positive instances and uses GPT-4o to generate evidence-based justifications. Four training regimes were evaluated: (i) Hard distillation: Supervised fine-tuning on teacher-generated outputs. (ii) Soft distillation: Training the student to match the temperature-scaled logits of a domain-specialized Qwen3-14B teacher. (iii) Group Relative Policy Optimization (GRPO): Reward-based updates driven by exact-match alert generation. (iv) Hybrid GRPO: GRPO initialized from the hard-distilled checkpoint. Distillation and efficient policy optimization significantly improved performance over untuned baselines. Soft distillation and GRPO achieved the strongest results, increasing the "Greenwashing Alert" weighted F1-score by 36.7% and 49.0%, respectively, resulting in a deployable tool for screening large volumes of ESG narratives.