Reporting Under the <scp>EU</scp> Taxonomy Regulation: The Role of Sustainability Committee and Sustainability‐Related Executive Compensation

ABSTRACT Drawing on the theoretical lenses of stakeholders and agency theories, this study aims to determine sustainable corporate governance's role in adopting the European Union (EU) Taxonomy Regulation. Specifically, the relationship between the sustainability committee and the level of Taxonomy‐related indicators is analysed. Acknowledging the need for integrated strategies to align with the criteria for economic activities supporting a net zero trajectory, this paper also investigates the mediating role of sustainability‐related executive compensation in this relationship. The sample comprises 402 firms from 17 EU countries over 2022–2023, totalling 804 observations. The data are analysed using a Tobit model. According to the findings, the presence of a sustainability committee significantly influences the level of Taxonomy‐related indicators. However, sustainability‐related executive compensation is not relevant. This paper contributes to the literature on corporate governance and sustainability and highlights the critical role of sustainability committees in facilitating the adoption of EU Taxonomy reporting requirements.