Business Responses to Climate Change: Identifying Emergent Strategies

Abstract:     
In the absence of sufficient support for the Kyoto Protocol, the international policy arena on climate change is far removed from being a 'level playing field'. Companies thus face much uncertainty about the competitive effects of the Protocol and (upcoming) regulatory measures. This means that the present context offers considerable managerial discretion, with companies exploring different market strategies to address global warming and reduce greenhouse gas emissions. This article examines the strategic options available to companies, focusing on the market responses, and identifies the actual patterns of market-oriented actions currently being taken, using data from 136 large companies that are part of the Global 500. These climate change strategies consist of different combinations of the market components available to managers. Companies turn out to follow distinctive pathways in addressing climate change; the six different market strategies that have emerged are typified. Under a flexible regulatory regime, managers have the possibility to choose between more emphasis on improvements in their business activities through innovation or on compensatory approaches such as emissions trading; and to do this merely on their own or by interacting with external actors, be it other companies in the supply chain or industry, NGOs or (local) governments.

Keywords: Climate change, corporate strategy, environment, multinationals, international policy

JEL Classifications: F23, G38, H7, H79, M1, L1, L2, O33, Q2, Q4

Accepted Paper Series