Internal governance, external pressure, and biodiversity disclosure

Abstract

The declining rate of biodiversity due to land, water, and air pollution is alarming. Thus, stakeholders expect firms to engage with cleaner operational processes to preserve biodiversity and share their practices with biodiversity disclosure. To provide a catalyst for biodiversity engagement and disclosure, we explore two important mechanisms: the internal by examining board structure; and the external governance mechanisms by signing the United Nations Global Compact (UNGC) commitment and by checking individual country’s public governance quality measured by Worldwide Governance Indicators (WGI). Our initial empirical analysis assesses their association with biodiversity disclosure, followed by an assessment of the substitutive or complementary role of these two governance mechanisms in spurring biodiversity disclosure. Analyzing 46,564 observations affiliated with nine sectors and 47 countries, we find that directors with other corporate affiliations as well as independent and female directors spur biodiversity disclosure. Furthermore, the UNGC signatory commitment and WGI stimulate firms’ biodiversity disclosure. Although UNGC signatory status and board structure are substitutes for driving biodiversity disclosure, the interaction effect of WGI with boards of directors is not uniform. For example, WGI and directors affiliated with other corporations are substitutes, but WGI and independent directors are complements in spurring biodiversity disclosure.