Corporate Biodiversity Governance and Firm Environmental Performance: The Roles of Biodiversity Disclosure, CSR-Linked Executive Compensation, and Environmental Innovation

Abstract

Whether corporate environmental performance reflects what firms disclose, how executives are rewarded or the capabilities firms build remains an open empirical question. Drawing on stakeholder theory, this study examines the joint association of biodiversity disclosure (an information mechanism), CSR-linked executive compensation (an incentive mechanism) and environmental innovation (a capability mechanism) with the environmental pillar score of 664 firms from 20 countries and economies over 2015–2025. Pooled, random-effects and firm fixed-effects estimates show positive associations for all three variables. Within firms, biodiversity disclosure is associated with a 5.743-point higher score and CSR-linked compensation with a 2.781-point higher score, while a one-standard-deviation increase in environmental innovation corresponds to a 14.0-point higher score (0.60 standard deviations). Innovation is the most robust association, remaining stable when year effects are introduced, whereas the disclosure and compensation associations are sensitive to common time trends. All estimates are conditional associations. The findings imply that boards and investors should give weight to innovation capability and complement disclosure and pay-linkage practices with measurable targets and verification, while regulators should specify the content and quality of biodiversity disclosure.

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