Transcript The Evolution of Multinationals` Responses to Climate Change

Integrating Climate Change with Core
Business Activities
Jonatan Pinkse & Ans Kolk
University of Amsterdam Business School
The Netherlands
Introducing business and climate change
• Initial business responses merely political:
– At first most large firms opposed policy initiatives to cut
greenhouse gas emissions, but since the inception of the
1997 Kyoto Protocol increasingly more firms are in favor
• Gradual emergence of market responses:
– Firms are starting to develop ‘climate-friendly’ technologies
– Firms start to engage in emissions trading and other Kyoto
mechanisms
• Aim of our paper:
– Analyze to what extent firms integrate climate
change with their core business activities
Integration of climate change
• Commonly business response understood in terms of
mitigation: reducing greenhouse gas emissions, e.g.
improving energy efficiency
– Usually only minor changes in the production process
• But, do firms also choose for integration of their concern
for climate change into their mainstream business activities?
• And, to what extent does climate change motivate firms to
modify their core business activities?
A dynamic capabilities framework
• Dynamic capabilities: competence to renew existing
capabilities to maintain a fit with changing environment
• Whether firms appear to integrate climate change with
their core business depends on:
– Nature of climate-induced dynamic capabilities
• Green or conventional?
– Origin of climate-induced dynamic capabilities
• Geographic spread: global, regional, domestic?
– Spillover effects throughout value chain
• Aimed at upstream (suppliers) and/or downstream
(sales) activities
Data & Method
• Analysis of Carbon Disclosure Project (CDP) 2004
questionnaire data of Global 500 firms
• 218 multinationals publicly responded to CDP
• Using content analysis with inductive coding, the data
were scrutinized for activities that:
– Form a response to the climate change issue
– Fundamentally change current business practices
– Are likely to have a significant impact on firm
competitiveness
Findings (1)
• Firms follow distinctive pathways towards:
– Technological (conventional) capabilities
• Towards similar technologies (automotive)
• Towards different technologies (oil & gas)
– Organizational (green) capabilities
• Exploitation of existing capabilities (utilities, finance)
• New capabilities (emissions trading; in some cases only)
• Activities undertaken by multinationals from all three
regions of the Triad – US/EU/Japan (regulation not decisive)
• Much cooperation for technological development:
particularly with firms and research institutes in home
country
Findings (2)
• Organizational capabilities potentially more locationbound than technological capabilities
– E.g. emissions trading only where such systems exist and
firms/sectors are included
– Technology usually incorporated in products so better
transferable
• More opportunities in downstream activities, but
• Worldwide marketing of technology-based products
problematic
– E.g. when an infrastructure is required (case of marketable
hydrogen car)
Conclusions
• Integration still limited, some first steps for the long run
in a few industries only
• A strategic reorientation towards sustainability still utopia
• But, quite some firms are developing different kinds of
technological and/or organizational capabilities, mostly
green sometimes conventional
• In doing so, multinationals mainly rely on existing
capabilities in making incremental changes