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Why companies are not responding to the threat of climate change

There are a multitude of research papers about how companies are responding to climate change. But a paper co-authored by Jonatan Pinkse looked at why companies are not taking any action in response to global warming.

Professor Jonatan Pinkse believes the world has grown a little cynical about how companies, organisations and governments are responding to climate change. "Too often today it is all about beautiful initiatives and grand projects, but the stark reality is that global emissions are continuing to increase."

In fact, he says the only time global emissions went down was during the financial crisis ten years ago. "Despite increasing pressure to deal with climate change, firms have been slow to respond with effective action."

He says that governments too have been guilty of setting long term targets which are difficult to achieve. "What is much harder is setting short to medium term targets which enable you to reach that long term target. If you set targets over three or five years you have to deliver on them."


In response to concerns that companies are not acting quick enough to tackle climate change, Prof Pinkse and his co-authors set out to unearth what was stopping businesses from taking action.

As he explains: "Many studies assume that firms address sustainability issues, either to gain a competitive advantage or to maintain legitimacy. What is lacking, however, is a deeper understanding of the reasons many firms simply do not reduce their impact on the natural environment."

Their starting point was to look at how psychology, sociology, and organisation theory can explain this inaction. "What we found time and again was that people, whatever their role, were not prepared to take the necessary big steps to change their business. In many respects we weren’t surprised by what we found. If something is far away from you, whether in time or place, you don’t act on it. People still feel climate change is something far in the future that won’t particularly impact them."


Prof Pinkse says at the organisational level short-termism was found to be the biggest barrier. "It is so difficult to change the mindset of a business, even if you are determined to try to change the status
quo and make an effort to respond to climate change.

"What we also found was the importance of self-preservation. Remember that a lot of businesses, say in the food and drink industry, might not have a financially viable business model in the future because they won’t be able to grow their crops in a warmer climate."

In terms of the institutional angle, he adds that a key issue is regulatory uncertainty, especially given the conflicting signals coming out of the US under the Trump administration. "It remains the case that whatever the US does remains so important in this wider debate, it has a signalling effect for the rest of the world."

Vicious cycle

Prof Pinkse says the fact that the organisational, personal and institutional levels so heavily interact with each other creates a vicious circle which is almost impossible to get out of. "All these factors interact with each other and simply lead to more waiting games in terms of companies taking hard action. Breaking that cycle is extremely difficult and there are no easy answers."

He says sticking to targets and goals is absolutely essential. "Company boards need to be sticking to medium and long term goals and mustn’t be distracted by short term shareholder activism.

Economic growth

How to marry economic growth with a sustainable business model is another aspect of this wider debate. He adds: "If you look at companies which are growing what you find is that although their relative rate of emissions may be falling, their absolute emissions continue to rise. Which begs the question of whether you can decouple business growth and greenhouse gas emissions. Put simply, it is difficult to grow without using more energy, but ultimately tackling climate change requires absolute reductions in greenhouse gas emissions and that requires large transformational change within a business."

Professor Pinkse’s paper The Role of Short-Termism and Uncertainty Avoidance in Organizational Inaction on Climate Change recently won best article published in the journal Business & Society in 2017.

Blog posts give the views of the author, and are not necessarily those of Alliance Manchester Business School and The University of Manchester.

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