The public debate on climate change is filled with moral claims. However, scientific knowledge about the role that morality, ethics, and values play in this issue is still scarce. Starting from this research gap, we focus on corporations as central decision makers in modern society and analyze how they respond to societal demands to take responsibility for climate change. While relevant literature on business ethics and climate change either places a high premium on morality or presents a strong skeptical bias, (...) our sociological model depicts morality as an indeterminate force: it can lead to both workable solutions or merely reinforce the status quo, depending on what different corporations make of it. We describe, on the one side, the diffusion of moral values in the media discourse on climate change and, on the other side, the specific responses of corporations. While the media discourse generates a pressure on corporations to act responsibly, their moral claims do not provide clear advice for action. As a result, morality becomes available to organizations as a medium that can be re-specified according to their internal dynamics. Corporations transform moral values into something compatible with their own structures through a variety of different responses: introducing formal ethical structures (e.g., codes of conduct), initiating value-oriented projects, or developing informal moral norms, and so on. In some occurrences, morality becomes a mere façade, while in others it serves as a decision-making criterion and deeply influences core activities in firms. (shrink)

Firms worldwide are increasingly required to disclose their carbon emissions due to the environmental damage associated with climate change. Because there has been no previous literature focusing on the determinants of corporate carbon disclosure integrating environmental legitimacy and green innovation, the present study attempted to develop an original framework to fill the research gap. This study explored the influence of environmental legitimacy on corporate carbon disclosure, and investigated the role of green innovation as a mediator. With the samples of Carbon (...) Disclosure Project in China from 2008 to 2012, the results demonstrate that environmental legitimacy significantly negatively influences the likelihood of corporate carbon disclosure, and that green process innovation mediates the relationship, while green product innovation has no significant mediating effect. It means that environmental legitimacy not only directly affects the likelihood of corporate carbon disclosure, but also indirectly affects it via green process innovation. Hence, companies must increase both informal and formal mechanisms, i.e., external environmental legitimacy and internal green process innovation, to engage in carbon information disclosure and ensure sustainability. (shrink)

Drawing on institutional and signaling theories, this study examines how environmental corporate social responsibility affects firm performance in a dysfunctional institutional environment. We extend the ECSR literature by suggesting that ECSR indirectly influences firm performance through the mediating effects of business and political legitimacy. Based on a dataset of 238 firms in China, we find that ECSR affects business and political legitimacy followed by firm performance. Moreover, legal incompleteness weakens and legal inefficiency strengthens the effects of ECSR on business and (...) political legitimacy. (shrink)

We seek insights into potential benefits for firms adopting strategies to improve business sustainability in a carbon-constrained future. We investigate whether lenders incorporate a firm’s exposure to carbon-related risk into lending decisions through the cost of financing, and if so, importantly whether firms can mitigate the penalty by demonstrating an awareness of their carbon risks. We use a sample of 255 firm-year observations from eight industries over the period 2009–2013. We measure carbon-related risk exposure as the firm’s historical carbon emissions (...) and our primary measure of carbon risk awareness is based on the firm’s willingness to respond to the Carbon Disclosure Project survey. We document a positive association between cost of debt and carbon risk for firms failing to respond to the CDP. Further, this association is economically meaningful, with a one standard deviation increase in carbon risk mapping into between a 38 and 62 basis point increase in the cost of debt. Equally, we find that this penalty is effectively negated for firms exhibiting carbon risk awareness. Our results are robust when we consider alternate measures of carbon awareness—disclosure through alternative medium to the CDP and firms’ annual cash investment in new capital assets using “cleaner” technology. Our results highlight not only the importance of carbon awareness as a business strategy for polluting firms, but also its importance to lenders exposed to their clients’ default and reputational risk. The debt market appears to incorporate historical carbon emissions and forward-looking indicators of carbon performance. (shrink)

Addressing climate change is among the most challenging ethical issues facing contemporary business and society. Unsustainable business activities are causing significant distributional and procedural injustices in areas such as public health and vulnerability to extreme weather events, primarily because of a distinction between primary emitters and those already experiencing the impacts of climate change. Business, as a significant contributor to climate change and beneficiary of externalizing environmental costs, has an obligation to address its environmental impacts. In this paper, we explore (...) the role of firms’ climate change targets in shaping their emissions trends in the context of a large multi-country sample of companies. We contrast two intentions for setting emissions reductions targets: symbolic attempts to manage external stakeholder perceptions via “greenwashing” and substantive commitments to reducing environmental impacts. We argue that the attributes of firms’ climate change targets are diagnostic of firms’ underlying intentions. Consistent with our hypotheses, while we find no overall effect of setting climate change targets on emissions, we show that targets characterized by a commitment to more ambitious emissions reductions, a longer target time frame, and absolute reductions in emissions are associated with significant reductions in firms’ emissions. Our evidence suggests the need for vigilance among policy-makers and environmental campaigners regarding the underlying intentions that accompany environmental management practices and shows that these can to some extent be diagnosed analytically. (shrink)

The ability of managers to identify and interpret challenges in the external environment is one of the micro-foundations of dynamic capabilities. The underlying literature on strategic issue interpretation suggests that interpreting environmental challenges as opportunities rather than threats is more likely to lead to proactive and innovative responses, but there are also potentially positive effects of threat interpretation, for instance high levels of commitment and risk-seeking behaviour. In this paper, I use the context of climate change to explore the link (...) between threat interpretation and innovation in more detail. I use exploratory cluster analysis and illustrative case studies to develop a set of propositions to explain when threat interpretation can in fact encourage innovation. I identify two ethical mechanisms that positively mediate the relationship between threat interpretation and innovation: enlarged concept of responsibility to society and moral legitimacy. The paper contributes to the literature by identifying the importance of ethics in linking managerial interpretation to innovation, particularly in the context of global environmental and social challenges. (shrink)

This study utilizes structural equation modeling (SEM) to explore the positive effect of corporate environmental ethics on competitive advantage in the Taiwanese manufacturing industry via the mediator: green innovation performance. This study divides green innovation into green product innovation and green process innovation. The empirical results show that corporate environmental ethics positively affects green product innovation and green process innovation. In addition, this study verifies that green product innovation mediates the positive relationship between corporate environmental ethics and competitive advantage, but (...) green process innovation does not. Therefore, corporate environmental ethics can not only affect competitive advantage directly, but also influence it indirectly via green product innovation in the Taiwanese manufacturing industry. Taiwanese manufacturing companies can increase their corporate environmental ethics and green product innovation to enhance their competitive advantages. (shrink)

The state is a key driver of corporate social responsibility across developed and developing countries. But the existing research provides comparatively little knowledge about: (1) how companies strategically manage the relationship with the state through corporate social responsibility (CSR); (2) how this strategy takes shape under the influence of political institutions. Understanding these questions captures a realistic picture of how a company applies CSR to interacting with the state, particularly in countries where the state relationship is critical to the business (...) operation. This article draws on political legitimacy as a useful concept to directly address both strategic and politically embedded natures of CSR. This work extends the currently under-specified political implication of the strategic view of CSR and provides fresh insights to the political legitimacy research by specifying a typology of CSR-based legitimacy strategies and its contextual variation. China and Russia are the focal settings. A qualitative analysis of business—state interaction cases is done using a database that contains the majority of CSR reports published in Chinese and Russian as the end of 2009. As a result, this paper identifies four qualitatively different types of CSR-based political legitimacy strategies and reveals how the adoption of these strategies differs across Chinese companies, Russian companies, and multinational corporations. (shrink)