Heterogeneity in organizational responses to legally mandated hybrid practices: the example of the EU Taxonomy Regulation

Purpose Using the EU Taxonomy Regulation as an example, this paper aims to explore how companies respond to regulations that mandate novel hybrid practices, which combine elements of multiple institutional logics, such as environmental and financial. Design/methodology/approach Combining the institutional logics perspective and the attention-based view, the authors analyze how companies process regulatory pressures based on their internal structures and practices. This study draws on 22 semi-structured interviews across seven countries, supported by document analysis of nonfinancial reports and practitioner literature. Findings The authors find that companies allocate attention differently based on the degree of integration between environmental and financial logics in their structures. The perceived compatibility of mandated practices with existing internal structures and practices significantly influences the strategic responses adopted. Practical implications This study emphasizes that early preparedness and the internal integration of sustainability and financial practices facilitate regulatory compliance and enhance competitive positioning. Policymakers should support this through capacity-building measures to promote effective regulation adoption. Social implications The results indicate that the increase in corporate sustainability–related activities depends on the strategic response types chosen in reaction to new reporting laws, such as the EU Taxonomy. Originality/value This study adds to the understanding of heterogeneous response types when companies are confronted with novel legally mandated hybrid practices. Specifically, the authors highlight how established organizational structures and practices shape these corporate responses to new reporting practices.