Emissions permit allocation and strategic firm behavior: Evidence from the oil sector in the European Union emissions trading scheme

With the growing urgency of climate change, governments around the world are increasingly implementing new regulations for greenhouse gases. This trend elevates the importance of examining how firms engage in strategic efforts to influence regulations before they are in place and how they respond once they are in effect (i.e., their ex‐ante and ex‐post strategic behavior). This paper examines the outcomes of such strategic efforts by multinational and domestic oil companies within the European Union emissions trading scheme. An analysis of a panel dataset of oil firms (2008–2012) shows that on average the outcome of ex‐ante strategies did not differ significantly between multinational companies (MNCs) and domestic firms. However, the findings indicate that among those firms that received positive net benefits from the new climate policy, domestic firms were able to maximize these benefits better than MNCs through their ex‐post strategies. In contrast, among the firms that faced net costs due to the policy, MNCs were able to minimize these costs better than domestic firms, ex‐post. This paper advances our understanding of whether and to what extent MNCs differ from domestic firms in their economic outcomes stemming from strategic behavior related to emissions trading. This question is especially pertinent for regulations related to climate change, which is one of humanity's grand challenges and has important consequences for our economic, social, and political systems.     

Corporate intentions to participate in emission trading

The adoption of the Kyoto Protocol in 1997 has led to increasing business interest in the issue of climate change. It has also created much uncertainty for companies, particularly about the role of trading in realizing emission reductions. This paper investigates what drives multinational corporations to show interest in emission trading and carbon offset projects to deal with climate change. On the basis of an analysis of data of 136 companies derived from a questionnaire, it also examines the role that country of origin, industry affiliation and companies' environmental strategy play in this regard. Findings show that industry pressure and product and process innovations are the main determinants for multinational corporations to participate in the emission market. It appears that climate policy particularly induces energy‐related industries to reduce emissions, which puts them ahead of other industries with regard to their interest in emission trading. Copyright © 2006 John Wiley & Sons, Ltd and ERP Environment.     

Stakeholder pressures and corporate climate change mitigation strategies

Climate change mitigation and its related reduction of greenhouse gas (GHG) emissions is one of the most important challenges facing society. The major cause of the problem and the key to its solution are GHG‐intensive firms that emit vast amounts of anthropogenic GHG emissions. The study reported herein aims to increase our understanding of the climate change mitigation strategies of these firms, in particular their antecedents and effects. A comprehensive conceptual model is proposed and tested empirically based on a survey of 247 firms that participated in the European Union's Emissions Trading Scheme in the first two trading periods. We find that market pressures for reducing GHG emissions, perceived GHG‐related regulatory uncertainty and environmental strategy focus are important determinants of corporate GHG reduction strategies which, in turn, enhance GHG‐related performance. We also show that the results vary depending on the type of emissions.     

Organizational transition management of circular business model innovations

Scholars and practitioners across fields increasingly recognize that business models for the circular economy may be an effective lever for solving ecological persistent problems such as climate change, biodiversity loss, and growing natural resource scarcity. Despite a growing interest in the potential of circular business models, interconnections between the organizational dimensions of firms and their business model innovation processes remain underexplored. Based on problem‐centered expert interviews with business consultants experienced in circular business development, this study creates a conceptual model that offers structured knowledge about why firms steadily reproduce linear BMs and how incumbents manifest themselves as a constant linear‐oriented value creation system. The model also demonstrates organizational conditions and management strategies that frustrate the reproduction of linear BMs and, thus, enable initial moves towards CBM innovation. Building on this, the article provides a set of propositions on how an organizational transition management may be configured and what incumbents require to successfully navigate circular business model innovation. The findings provide a foundation for a contemporary understanding of circular business model transition management, which simultaneously serve as impulses for future research investigations.     

Stakeholders' Engagement in Promoting Sustainable Development: Businesses and Urban Forest Carbon

To better understand how businesses' motivation and support for green projects varies by their organizational objectives and characteristics, this study investigates a case of urban forestry carbon credits in a broader context of climate change mitigation efforts. Companies and organizations currently participating in the Chicago Climate Exchange (CCX) were surveyed regarding their perception of consumers' concerns with climate change, attitudes toward government regulations, factors important to their emission management decisions, and their interest in buying and paying premiums for carbon credits sourced from urban forestry. Statistical analysis of the responses reveals noticeable differences among various types of business organizations. The findings are useful for understanding how businesses respond to different kinds of green products and will help in the development of green product markets. Finally, the results will help in developing effective environmental policies that respond well to businesses' objectives and preferences. Copyright © 2011 John Wiley & Sons, Ltd and ERP Environment.     

Adaptation Measures of Energy and Utility Companies to Cope with Water Scarcity Induced by Climate Change

Resource‐intensive business plays a fundamental role in causing climate change through the emission of large amounts of GHGs (greenhouse gases), and, in turn, climate‐induced physical changes affect companies. The IPCC (Intergovernmental Panel on Climate Change) reports an increase in the frequency and severity of extreme weather and climate events (IPCC, 2012). Droughts represent a major challenge for energy and water businesses, in terms of both exacerbation of dry climates and increase in the number of territories that experience water shortage. On the basis of an analysis of the energy and utility companies operating in different continents, the objective of this empirical research is twofold: on the one hand, it examines how these companies perceive the changes in water availability induced by climate change (as well as the potential impacts on business); on the other hand, it analyses the corresponding measures that these companies adopt to cope with changes in hydrology and water resources driven by climate change. Data from the Carbon Disclosure Project (CDP) provide valuable information about business climate‐related responses of several of the world's largest firms. Our results show that, in the energy and water sectors, some adaptive measures are starting to be implemented to deal not only with the risks but also with the opportunities related to climate‐induced physical changes, thus leading to interesting innovation. The paper concludes that anticipated positive effects could drive energy and utility companies towards a proactive stance to achieve a competitive advantage and trigger innovative trajectories. Copyright © 2014 John Wiley & Sons, Ltd and ERP Environment     

Carbon management accounting and financial performance: Evidence from the European Union emission trading system

Companies are responding to the effects of climate change by reducing CO₂ emissions as a way of managing stakeholder interests and complying with legal and regulatory requirements. In Europe, the emissions trading system is consolidated as a limiting market and control scheme to support business climate change management through a collaborative relationship between government and industry. This work focuses on the economic accounting field, analysing carbon management accounting and its impact on financial performance in scenarios attached to that trading system. The methodological approach used is quantitative, empirically testing the hypotheses through a multiple regression analysis with a sample of 350 European companies. The results attest to the importance of carbon management accounting (CMA) control and its effects on financial performance. Compared with European emission trading, the results failed to display significant differences in the relationship studied between those that make up this type of market and those that do not.     

The Impact of Carbon Performance on Climate Change Disclosure

In the light of the significant role of environmental accounting in sustainable development, this study examines whether climate change disclosure reflects a firm's environmental performance. The novelty of the study stands on the approaches adopted to describe environmental performance. The first approach concerns performance in terms of output, direct and indirect greenhouse gas emissions, while the second one is based on environmental intention of mitigating climate change, including climate change policy and emission reduction initiatives. The Climate Performance Leadership Index is employed as a measure for climate change disclosure level, incorporating initiatives contributing to climate change mitigation, adaptation and transparency. Ordered logit regression is the appropriate methodology for the data employed concerning firms listed on FTSE 350. According to our findings, environmental performance for both adopted approaches entails a positive effect on climate change disclosure, a result that is consistent with voluntary disclosure theory. It is inferred that firms cannot manipulate their information reflecting their actual environmental performance and adopting a forthright and factual attitude towards sustainable development. Finally, findings provide an insight into managers' strategic behavior towards climate change issues. Copyright © 2017 John Wiley & Sons, Ltd and ERP Environment     

Disentangling economic crisis effects from environmental regulation effects: Implications for sustainable development

With climate change becoming more severe, policy makers must impose environmental regulations that will lead firms to adopt sustainable corporate models. According to the Porter hypothesis, environmental regulation can favour the implementation of business strategies that improve economic and environmental performances. In this study, we examine how one such form of regulation, the European Union Emission Trading Scheme (EU ETS), impacts firm performance, and we subsequently widen the examination beyond the regulation to evaluate an economic crisis which could potentially confound regulation effects. We estimate a panel model with time- and firm-fixed effects for different subsamples that disentangle the effect of the EU ETS policy from the 2008 economic crisis. The results indicate that the EU ETS policy in its third phase can activate the Porter hypothesis and is effective in fuelling the implementation of sustainable corporate models by firms. However, we also find that the economic crisis neutralises the effects of the regulation on firm performance, precluding the triggering of the Porter hypothesis in severely affected firms.     

Business strategy and firm efforts on environmental protection: Evidence from China

Although business strategy plays a fundamental role in firm operations, whether and how business strategy affects firms' environmental protection behaviors remain unclear. On the basis of a typical emerging market, we show that firms following prospector strategies take more environmental protection actions than do those following defender strategies. Our findings are robust to endogeneity checks and alternative measures of business strategy. We further find that prospectors engage in more environmental activities than do defenders when the degree of financial constraint or earning management is high. Our results are particularly pronounced in state‐owned enterprises, heavy‐polluting industries, and firms located in regions with strict environmental regulations. Overall, this study provides clear policy implications for regulators concerned with environmental protection.     

A relational view of climate adaptation in the private sector: How do value chain interactions shape business perceptions of climate risk and adaptive behaviours?

Studies exploring climate change adaptation in the private sector have seldom investigated the effect of business network interactions on climate vulnerability and adaptation outcomes. This paper proposes a novel theoretical framework to explore how business–network dynamics affect risk perceptions and adaptive behaviours in business firms. The framework is empirically grounded in a comparative analysis of business–network dynamics from three agricultural value chains in Jamaica that are vulnerable to climate change impacts. The results illustrate how the exposure, sensitivity, and adaptive capacity of value chain actors are influenced by business interdependencies and interfirm relationships. We find that the level of formality of business exchanges (contractual or noncontractual), the level of resource interdependency, and the ability to diversify access channels to critical resources can influence the propagation of climate‐related risks and influence actors' exposure and sensitivity to those risks. The study also offers evidence of the role played by bonding and bridging relational ties on adaptive capacity. The framework and findings provide a foundation for a new research agenda exploring a relational view of firm adaptation strategy in response to climate risks.     

Opening up the firm: What explains participation and effort in voluntary carbon disclosure by global businesses? An analysis of internal firm factors and dynamics

A voluntary climate initiative that has emerged over the past two decades as an institutional arrangement for corporations around the globe to signal and demonstrate their proactive climate leadership is the CDP (formerly known as the Carbon Disclosure Project). Unlike the extant literature that has emphasized stakeholder and regulatory pressures, this paper argues that voluntary carbon disclosure is both beneficial and costly for corporations with respect to the existence of supportive management structures, explicit CSR practices, and the existence of complementary assets. Moreover, there is variation between European firms and other global businesses because of Europe's distinctive national business systems framework in conjunction with global supply chain imperatives. Empirically, this study employs a novel discrete‐continuous modeling approach to distinguish between a corporation's decision to disclose and the linked but subsequent decision of how much to disclose climate change information. Results indicate that the main drivers of participation in voluntary carbon disclosure by the Global 500 firms is the existence of senior managers and executive‐level officers and the adoption of ESG principles by global businesses. Conditional on participation, European Union‐based and other global businesses that articulate a corporate vision for environmental sustainability, adopt ESG principles, and invest in complementary assets disclose climate change strategies and emissions at higher levels than companies without these internal firm capabilities. This study has implications for national climate policy and global climate change governance more generally, both of which increasingly focus on concrete climate solutions by corporations.     

Knowledge combination in networks: evidence from the international venturing of four small biotech firms

Although international forms of venturing are critical for the sustained economic growth of small firms, this phenomenon remains surprisingly unexplored in international small business research. This study aims to contribute to this field by shedding light on the underlying factors of the international venturing of these firms. In this endeavor, the study rests on the assumption that knowledge combination in networks is a critical requisite for seizing business opportunities in foreign markets. Hence, the specific purpose of this study is to investigate how knowledge combination in networks underlies the international venturing of four small biotech firms. The findings demonstrate that international venturings are strongly shaped by proactive strategies of identifying and implementing knowledge combinations that span across internationally dispersed network relationships. The findings also reveal that different strategies of knowledge combination in networks are pursued depending on the nature of the venture (namely, international product ventures and international market ventures).     

Corporate Carbon Strategies and Greenhouse Gas Emission Assessments: The Implications of Scope 3 Emission Factor Selection

Scholars and practitioners acknowledge the benefits of organizations understanding their contribution to global warming and implementing carbon management strategies to address climate change concerns. A key element of a carbon management strategy is to reduce emissions, which requires an assessment of a firm's greenhouse gas emissions. For most organizations the indirect (scope 3) emissions represent the largest portion of their total carbon footprint. When facility‐specific data are not available, firms are encouraged to use standard emission factors to calculate scope 3 emissions. This paper investigates how sampled Australian organizations assess their scope 3 emissions with respect to the emission factors they are using to convert activity data into units of carbon dioxide equivalent emission (CO₂‐e), and the implications for producing an accurate emission assessment. The research study found that, where conversion information was not available in a recognized government publication, the use of varying conversion value sources resulted in wide discrepancies in reported emissions for like activities. This undermines the assessment quality, makes comparison of results across organizations difficult and can lead to inappropriate carbon management strategy choices and misallocation of resources. Copyright © 2012 John Wiley & Sons, Ltd and ERP Environment     

Business model innovation and third-party alliance on the survival of new firms

In this study, we address the question of how the degree of business model innovation affects the survival of new firms. We present a newly constructed data set of 129 new firms that launched electronic trading platforms in the US bond market between 1995 and 2004 following the advent of Internet technology. We analyze the founding and survival of these new firms during the period of our study. We find that new firms with a high or low degree of business model innovation are more likely to survive for longer than new firms with a moderate degree of business model innovation. We show that partnering with third-party firms with complementary assets reduces the survival of new firms as the degree of business model innovation increases. We discuss the implications of our findings for managers, policy-makers and researchers.     

Adoption of cleaner technology for climate proactivity: a technology–firm–stakeholder framework

The adoption of cleaner technology (CT) has the potential to play an important role in tackling the impacts of business on climate change on business. It is therefore important to understand the factors motivating the adoption of CT in business. Using a technology–firm–stakeholder framework, this study proposes a perception‐based model for the adoption of CT for climate proactivity that is tested against data collected from 106 firms in India. Six factors are tested using a logistic regression and five are found to be significant in distinguishing adopter firms from non‐adopter firms. The results suggest that the perception‐based model using a technology–firm–stakeholder framework is a useful approach for examining factors affecting the adoption decision. While techno‐economic benefits are perceived to be higher by adopter firms than by non‐adopter firms, other benefits are not perceived differently by either adopter or non‐adopter firms. In addition, adopter firms perceive lower financial costs and higher technical capability than non‐adopter firms do. Also, adopter firms perceive higher regulatory pressure but lower stakeholder pressure than non‐adopter firms do. Implications of the findings and future research areas are discussed. Copyright © 2010 John Wiley & Sons, Ltd and ERP Environment.     

Identifying critical success factors for the agri-food cold chain's sustainable development: When the strategy system comes into play

With serious environmental, cost, and social concerns arising from emerging countries' rapid growth in agricultural food cold chain (AFCC), AFCC firms urgently require a set of comprehensive sustainable strategic solutions. Therefore, this research identified and modeled the critical success factors (CSFs) that support the sustainable development of AFCCs. The study integrated institutional theory, stakeholder theory, and the triple bottom line model; it also surveyed cold chain experts from 16 different organizations in China and applied the adversarial interpretation structure model (AISM). This comprehensive analysis indicates that managing stakeholder pressure is the most motivating CSF of all strategies. This strategy eventually contributes to the sustainability of AFCC in China by driving other CSFs. Additionally, the study determined the degree of interdependence and dominance of different strategies. Thus, this study establishes a theoretical foundation for the sustainable improvement of AFCC organizations' business strategies and environmental policies.     

Small and Medium‐Sized Enterprises and Sustainability: Managers' Values and Engagement with Environmental and Climate Change Issues

This article reports on an in‐depth, qualitative study into the pro‐environmental engagement of small businesses in the east of England, with respect to climate change in particular. Managers of environmentally pro‐active small businesses were asked about the pro‐environmental measures they had implemented in their firms, their motivations for doing so, and their understanding of climate change. The managers in this study had a relatively good understanding of environmental issues in general and climate change in particular, and had implemented a range of pro‐environmental measures in their firms. Their understanding of climate change was a holistic one, which sat within their overall understanding of environmental and social issues. While economic arguments and external pressure played a role in their pro‐environmental engagement, perhaps the most notable motivation for managers in this study to engage with environmental and climate change issues was personal values and beliefs. Environmentally engaged managers exhibited an internal locus of control. Some of these findings contrast with the views of key informants in local government and business advice organisations, who tend to emphasise the business case and cost arguments when trying to encourage small businesses towards greater environmental engagement. These findings suggest that public policy and business advice in this area should perhaps focus more strongly on personal values and a sense of being able to contribute to environmental protection in their engagement with small businesses. Copyright © 2012 John Wiley & Sons, Ltd and ERP Environment.     

Carbon risk management and corporate competitive advantages: “Differential promotion” or “cost hindrance”?

Given the strengthening of carbon regulations and the launch of emission trading scheme in China, companies are facing tremendous pressure to reduce carbon emissions, suggesting the necessity of understanding whether carbon risk management may affect corporate financial benefits. Therefore, this paper empirically demonstrates the influence of carbon risk management on corporate competitive advantages. We find that the relationship between carbon risk management and corporate competitive advantages is a “kuznets curve” that exists only among firms with weak product competition. And this relationship tends to be weakened in firms with a distant administrative hierarchy. We conclude that the influence of low carbon management on corporate competitive advantages is complicated and subject to the firm's political relevance.     

Environmental Management of End‐of‐Life Products: Nine Factors of Sustainability in Collaborative Networks

The paradigm of the green economy has contributed to raising the attention paid to developing sustainability‐oriented strategies for supply chain (SC) management. The responsibility of producers to extend and reverse SCs is a critical and timely topic that captures increasing concerns over the way firms can adapt their business models to interlinking technical, socio‐economic and environmental frameworks. This is particularly true when producers are not also reuse/recycle actors. By performing a critical review of the scientific literature on this field, this article develops nine elemental factors that can be considered for assessing the impacts of collaborative strategies as a means to implement extended producer responsibility (EPR) in open‐loop SCs. The resulting conceptual framework provides EPR implementation guidance under different market conditions. Inter‐organizational relationships are found to present both opportunities and threats that can be profitably managed under a systemic perspective. Implications for management and needs for further research are discussed. Copyright © 2012 John Wiley & Sons, Ltd and ERP Environment.