The effect of Governance Risk Management and Environmental Performance, Disclosure, and Decoupling

Purpose: This paper aims to examine whether and how risk governance mechanisms mitigate environmental decoupling, i.e., the misalignment between environmental disclosure and performance. While several corporate governance characteristics have already been linked to decoupling, the role of risk governance remains largely overlooked in prior studies. Methodology: The study analyzes a panel of 939 European companies across 19 countries and 18 industries from 2015 to 2024, resulting in 2,293 firm-year observations. Findings: Companies whose boards oversee climate risks and those equipped with crisis management systems are more likely to exhibit environmental decoupling, whereas companies that implement anti-corruption procedures in high-risk operations are less likely to decouple. These findings help discriminate between governance mechanisms that operate as genuine binding controls and those that are merely symbolic. Managerial implications: Boards and managers should move beyond symbolic governance and adopt enforceable risk-management tools that effectively enhance environmental outcomes, transparency, and accountability. Regulators should strengthen governance and reporting frameworks to prevent both greenwashing and greenhushing. Research limitations: The focus on European listed firms may limit the generalizability of the results, and reliance on secondary data may overlook informal governance dynamics. Originality: This paper provides novel evidence on how risk governance shapes environmental decoupling, showing that binding control mechanisms enhance the credibility of sustainability reporting.