The Interplay Between Environmental Performance, Climate Governance, and Biodiversity Disclosure

ABSTRACT This study examines the interplay between environmental performance, climate governance, and biodiversity disclosure in European firms. Using data from STOXX600 companies across 17 countries, we test hypotheses grounded in legitimacy, signaling, and stakeholder theories. The results show that firms with stronger environmental performance are more likely to disclose biodiversity‐related information, signaling a genuine commitment to stakeholders rather than symbolic communications. Climate governance is also positively associated with disclosure, highlighting its role in promoting transparency. Importantly, climate governance amplifies the link between environmental performance and biodiversity disclosure, helping ensure that reporting reflects actual practices and limiting the risk of greenwashing. These findings highlight the need for robust governance structures to support accurate and credible biodiversity‐related disclosures. By jointly examining governance quality, environmental performance outcomes, and biodiversity transparency across a large European cross‐country sample, this study provides novel empirical evidence on how biodiversity disclosure can be used as a tool to promote awareness of biodiversity's importance, thereby constraining opportunities to overstate biodiversity conservation initiatives and overall sustainability performance through extensive biodiversity disclosure. The study contributes to ongoing debates in the sustainability disclosure literature and offers practical implications for policymakers, regulators, and scholars seeking to enhance the reliability and decision‐usefulness of corporate environmental communication as a basis for informed policy formulation and decision‐making.