Firm Responses to Climate Change are Inconsistent

Businesses are increasing responses to climate change, yet CO2 emissions continue to rise. Your firm doesn’t need to follow this trend.

Many businesses are proactive. Why are carbon dioxide emissions rising?

Businesses are increasingly framing climate change as an opportunity rather than a threat. In recent years, corporations and industry groups have started to take proactive approaches towards the reduction of greenhouse gases (GHGs). Notable examples are the Pew Centre on Global Climate Change and GE’s “Ecoimagination”.

In spite of proactive initiatives, the upward trend in CO2 emissions remains strong. Global carbon emissions in 2005 were 28 percent greater than in 1990. Charles Jones and David Levy set out to explain the discrepancy between increasing business responses to climate change and the persistence of high CO2 emissions. The researchers analyzed three indicators of business responses to climate change – reports by external organizations, commitments regarding carbon trading, and joint political action – to understand the trend.

Firm responses are marked by inconsistency, ambiguity, and limited scope.

Some companies support carbon reduction practices, yet are members of an association that promotes coal power and opposes emissions caps. Given the scale of actions needed to combat climate change, business will need to play a much stronger role in the global system of greenhouse gases governance.

Business responses to climate change are limited in scope. Companies have been emphasizing organizational changes rather than emissions reductions. External reports are also inconsistent. Many companies simultaneously achieve high and low ratings for their carbon management practices from different reports. Voluntary emission trading is at the heart of business responses, but investments in trading infrastructure seem more popular than investments in emissions reduction.

Business will need to demonstrate leadership by implementing more effective and consistent actions towards reducing carbon emissions. With global markets for wind, solar, photovoltaics, and fuel cell power growing at an annual rate of about 20 percent, businesses can increasingly investment opportunities in the booming market for renewable energy.

Further research is needed to evaluate corporate efforts.

The paper used literature reviews of three indicators of business response to climate change: reports by external organizations, commitments regarding carbon trading, and joint political action. The analysis was undertaken in the context of a broader global GHG governance regime. The four external reports analyzed were published between 2005 and 2006 by Ceres, The Climate Group, the Pew Center on Global Climate Change and Deloitte.

Several dimensions (e.g. political, technological, organizational and financial) related to business responses could be evaluated in further detail to build upon the overall picture provided by Jones and Levy. A limitation in this study is that it may be too early to evaluate the impact of corporate efforts; companies are only now beginning to implement carbon policies. Further research should continue to investigate the effectiveness of business responses to climate change.

Jones, Charles, & Levy, David. (2007). North American Business Strategies Towards Climate Change. European Management Journal, 25(6), 428-440.