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Market News

 July 08, 2010
Is your firm "indifferent" or "active" about greenhouse gases?

 Executive Summary

This study compares corporate responses to climate change by firms in the UK and Pakistan. Companies in developing and developed countries face some common barriers in responding to climate change (e.g. lack of financial resources).

But, they have distinct strategies due to differences in acceptance of and support for those initiatives by government and other stakeholders, and regulatory influence specific to their sector.

Pressure from owners, managers and regulators may be needed for firms in developing countries to adopt climate strategies.

Background

Research on how companies respond to pressure to reduce GHG emissions has focused mainly on large multinationals. This study examines the climate change strategies of firms residing in the UK and Pakistan. It classifies firms as indifferent, beginner, emerging, or active based on their climate strategies and identifies the drivers and barriers for their GHG reduction activities.

Findings

Country differences: More than 75% of Pakistani companies were classified as either indifferent or beginner, compared with just 30% of UK companies.
 
Sector differences: Most UK firms in indifferent or beginner clusters were small and not regulated under the EU trading scheme. In both countries, few multinationals were indifferent. Indifferent and beginner companies in Pakistan belonged to textile, cement, paper, food & drink and chemical sectors; firms in oil & gas, power and automotive sectors were distributed across indifferent, beginner and emerging.

Strategies for GHG reduction:

  • Firm owners, management and regulators were perceived to have high influence on firms' climate change responses in contrast to employees, competitors and other stakeholders.

  • Drivers included cost savings, management commitment, or targets and regulatory compliance.

  • The high cost of initiatives and lack of capital were perceived as barriers in both countries.

  • Developing countries had added challenges like overall lack of awareness, non-availability of technologies and an absence of government policies.

Implications for Managers

  • In the face of regulatory uncertainty or lack of awareness, managers and owners may need to take the initial steps towards mitigating climate change risk. This is especially true if your sector has not yet fully engaged in the climate change issue.

  • To achieve meaningful global emissions reductions, emerging and active industries need to become proactive and innovative, and help those in indifferent and beginner industries. You might achieve this through tech transfer, alliances or partnerships.

Implications for Researchers

More research is needed to better understand the role of factors including stakeholder influence, management objectives, institutional support and awareness in different countries (especially developing countries) and across business sectors.

Methods

Authors compared strategies for climate change using survey responses from 180 companies from 9 high-emissions sectors in the UK and Pakistan.  They conducted factor analysis on operational and managerial activities followed by cluster analysis to group companies based on factor scores for activities.

Citation

Jeswani, Harish Kumar, Wehrmeyer, Walter, & Mulugetta, Yacob. (2008). How warm is the corporate response to climate change? Evidence from Pakistan and the UK. Business Strategy and the Environment, 17(1): 46-60.

The Network for Business Sustainability produces practical insights for sustainability professionals based on the most rigorous academic research. Research topics include: climate change, socially conscious consumers, community engagement, and valuing sustainability. 

Source: www.nbs.net