From Compliance to Execution: Mandatory ESG Disclosure and Corporate Decarbonization—Evidence from a Difference-in-Differences Analysis

The global regulatory landscape is shifting from voluntary corporate social responsibility (CSR) to mandatory Environmental, Social, and Governance (ESG) disclosure. This study investigates the causal impact of mandatory ESG disclosure on firm value and operational decarbonization using a comprehensive balanced panel of 1,612 listed firms from the EU and the US between 2018 and 2025.Employing a Difference-in-Differences (DiD) design and an event study analysis, our empirical results yield three primary findings. First, consistent with Agency Theory, mandatory disclosure significantly increases firm value (Tobin’s Q) immediately following the 2021 regulatory shock (Post×Treat=0.5212, p< 0.01), indicating that standardized transparency reduces information asymmetry (H1). Second, we document a progressive and cumulative reduction in carbon intensity, providing robust evidence of substantive execution rather than mere ceremonial compliance (H2). The "downward-sloping" trajectory in the event study confirms that the mandate drives real-world operational transitions over time, refuting Decoupling Theory. Third, we find that internal governance mechanisms play a crucial moderating role in this transition (H3); the reduction in carbon intensity is significantly more pronounced in firms with higher board independence and established ESG committees. These findings suggest that "hard-law" transparency mandates effectively align corporate incentives with global climate goals. The synergy between external regulatory pressure and internal governance oversight is essential for bridging the "talk-walk" gap, offering critical implications for global policymakers designing the next generation of climate-related reporting standards.