Conceptual model for corporate climate change strategy development: Empirical evidence from the energy sector
Introduction
Climate change is challenging the sustainability of current production and consumption systems. The impact is global, the problem is long-term, and the harm is substantially irreversible. Companies face major uncertainties about the magnitude and timing of climate change effects and what risks they are likely to have to address (Lash and Wellington, 2007). These uncertainties make it difficult to consider an adequate strategy to reduce greenhouse gas (GHG) emissions (Lee, 2012). In this context, global CO2 emissions are likely to increase.
The main reasons for this inertia by companies involve an unclear regulatory framework; short-termism and uncertainty avoidance behavior at individual, organizational and institutional levels; and a dearth of radical low carbon innovations (Engau and Hoffmann, 2011, Slawinski et al., 2017, Tavoni et al., 2012). Notwithstanding the necessity for firms to take action, there is limited progress in offering insights into firm adaptation mechanism to climate change (Gasbarro and Pinkse, 2016). There is also a gap in frameworks able to assess or consider the implications and consequences of carbon responses (Linnenluecke et al., 2013).
Empirical studies have been carried out to describe corporate climate change options (Weinhofer and Hoffmann, 2010, Sprengel and Busch, 2011, Weinhofer and Bush, 2013, Lee, 2012, Jeswani et al., 2008). Reviews of these models shows a need for more elements or criteria to operationalize them. Other studies have been developed to describe factors influencing corporate climate change strategy, including regulatory framework, societal demand, market positioning and technology availability. However, these studies have provided that some factors seem to be playing a role in driving responses for some firms, but not for others (Gasbarro and Pinkse, 2016, Cadez and Czerny, 2016, Jeswani et al., 2008).
To shed more light on these mixed results, we propose a conceptual model for corporate climate change strategy development to address two questions: (1) Do climate change risks and stakeholder requirements act as driving forces of carbon management practices? and (2) What effect do carbon management practices have on performance perception of managers? We adopt a resource dependence theory (RDT) to explain how climate change risks drive companies to implement carbon management practices and use institutional theory to explain how stakeholders influence firm reactions. If a carbon strategy is properly developed managers will perceive a better performance.
Empirical evidences confirm our structural equation model (SEM) and we make contributions to the carbon strategy literature. First, few studies had simultaneously included climate change risks and stakeholder pressures to impact on carbon management practices and in turn influence on performance perception of managers. And, there is a limited body of knowledge about energy firms in emerging countries and their attitudes towards climate change. Brazil is particularly interesting because about 45% of its total energy supply and 85% of its electricity is produced from renewable sources (Lucena et al., 2009).
Findings are based on survey data from a sample of 105 general managers. Firms were grouped into the four strategic orientations, the same as those established by Sprengel and Busch (2011), and labeled as “minimalist,” “regulation shaper,” “pressure manager” and “greenhouse gas emission avoiders.” Pressure managers and emission avoiders constitute the bulk of the Brazilian energy firms surveyed. Their proactive approaches reflect the Brazilian clean energy matrix. Nevertheless, more recently the country has failed to continue a determinant role in global climate change policy.
The remainder of this article is organized as follows. First, we describe corporate climate change options and interlink the field of analysis with the RDT and institutional theory. Second, we develop hypotheses linking the four elements of our model. Then, we present the methodology and the results. To finish, we discuss the relationships established at SEM model and suggest directions for coping with climate change.
Section snippets
Corporate climate change options
There are several definitions commonly used to express the combination of climate change with the business strategy. Lee (2012) defined corporate climate change strategy as a selection of the scope and level of carbon management activity. Weinhofer and Hoffmann (2010) defined it as a pattern of activities associated with the management of direct and indirect GHG emissions. It can also be seen as a set of goals and plans aimed at reducing GHG emissions and addressing changes in processes,
Data sample
We carefully chose our research context to include the Brazilian energy industry because that sector has a directly or indirectly effect on climate change. The Brazilian energy matrix has a renewable resource base as well as is both dependents on non-renewable and extractive resources. Second, this industry was suitable for an examination because it presents high climate change risks and multiplicity and (often conflicting) stakeholder pressure on strategy (Pereira et al., 2011).
The survey was
Factorial analyses and structural equation model
Table 2 presents the results of the exploratory and confirmatory factorial analysis. It can be seen that all constructs had KMO values higher than 0.8 and correlation matrices significantly different from the identity matrix (p values of Bartlett ’s sphericity test less than 0.001), proving the adequacy of the EFA to these data.
The EFA grouped climate change risks under three factors named as “physical” (Phy), “regulatory” (Reg) and “technological” (Tech) with eigenvalues >1. These factors
Discussion
The development and validation of a SEM made it possible to examine important relationships. Our conceptual model indicates that managers are driven by their perception of the intensity of risks and stakeholder pressures in decisions about what practices should be adopted to deal with GHG emissions. Energy companies surveyed all agree that climate change events are real and natural disasters will occur. Cadez and Czerny (2016) confirm that despite institutional pressures, carbon-intensive firms
Conclusion
This study proposes a conceptual model for corporate climate change strategy development. Empirical results show that most energy companies face considerable ecological uncertainty in addressing climate change issues and resource to be committed. They need to have a clear regulatory framework outlining government expectations on GHG emissions. It is necessary to have sufficient information and technology on changing climate patterns to secure stakeholder mobilization.
Orchestrating the role of
Acknowledgments
The authors express sincere thanks to Prof. Rodrigo Lozano and the three anonymous reviewers for their constructive and detailed comments on earlier drafts of this paper. Grateful for the financial support provided by CNPq - Project # 401131/2010-6.
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