Three Essays on Firm Responses to Climate Change

Evidence is mounting to address and reverse the effects of environmental neglect. Perhaps the greatest evidence for needing environmental stewardship originates from the ever-increasing extreme weather events ranging from the deadly wildfires scorching Greece and California to the extreme heatwaves in Japan. Scientists have concluded that the probability and severity for about two thirds of such extreme natural events that occurred between 2004 and 2018 is contributed by rising global temperatures.

Operations management literature regarding environmental issues have typically focused on the “win-win” approach with a multitude of papers investigating a link between sustainability and firm performance. This dissertation seeks to take a different approach by investigating firm responses to climate change. The first two essays explore firm emissions goals and the last essay investigates firm emissions performance.

The first essay identifies firm determinants of greenhouse gas (GHG) reduction targets. The essay leverages Behavioral Theory of the Firm (BTOF) and argues for two additional determinants, Data Stratification and Science-Based Targets, unique to GHG emissions. Utilizing system generalized method of moments on a dataset from Carbon Disclosure Project for years 2011-2017, the paper finds partial confirmation for BTOF and support for the two additional determinants of firm GHG emission goals.

The second essay is an exploratory study that seeks to understand factors for firm participation in the Science-Based Targets (SBT) initiative by combining both primary and secondary data analysis. The study is a working paper with primary data still needing to be completed. Secondary data analysis begins with a review of the literature which suggested four potential factors: ISO 14001 certification, Customer Engagement, Emission Credit Purchases, and presence of Absolute Emissions Targets. Preliminary results using panel logistic regression suggest that Emissions Credit Purchases and Absolute Emissions Targets influence SBT participation.

The third essay seeks to understand whether stakeholder pressure drives firm GHG emissions reductions. This relies on Stakeholder Theory and classification schemes proposed in Management literature to divide stakeholders, based on their relationship with the firm, into three groups: primary, secondary, and public. Random effects estimation results provide evidence for primary and public stakeholder pressure impacting firm GHG emissions.