Natural Disasters and Firms’ Climate Change Mitigation
Open Access DepositedNatural disasters, exacerbated by climate change, disrupt businesses. However, the existing literature on natural disasters and climate change is fragmented in explaining how a firm’s exposure to natural disasters can lead to adopting climate change mitigation strategies. Strategic management literature discovers the consequences of natural disasters in terms of market strategies (i.e., foreign direct investment) and non-market strategies (i.e., corporate philanthropy and community resilience). Still, scholars have not connected climate change and responses to climate change with natural disasters. Thus, scholars have not fully examined the actions that firms may take to adapt their organizations to climate change and/or mitigate contributing factors of climate change. Sustainability scholars discuss firms’ responses to climate change in terms of adaptation and mitigation and focus on external institutional pressures and internal organizational factors like knowledge and innovation as antecedents, but they rarely explore external biophysical conditions as another antecedent of climate change responses by companies. This makes it difficult to understand natural disasters as biophysical conditions that trigger companies to engage in climate change mitigation, such as reducing greenhouse gases, a key contributing factor to climate change and climate change-related natural disasters. Furthermore, scholars have not comprehensively explored how, why, and when natural disasters can lead to climate change mitigation. Through the lenses of the literature on the attention-based view and the behavioral theory of the firm (BTOF), I explore whether the absolute and socially or historically relative number of climate change (CC)-related natural disasters can explain changes in greenhouse gas (GHG) emissions by firms. Exposure to climate change-related natural disasters can increase awareness of climate change issues, and natural disasters as crisis situations can relax the usual cognitive framing and result in organizational change to solve climate change issues. Using data on large GHG emitters in the United States, I test whether a firm’s exposure to CC-related natural disasters can explain its reduction of GHG emissions. After discussing absolute exposure to natural disasters, I further discuss relative exposure. Relative exposure compared to firms’ peers or previous experiences can help firms decide whether to problematize current natural disaster experiences and engage in climate change responses like mitigation. A firm’s greater exposure to natural disasters than others in the same industry (i.e., negative social aspiration feedback) or others in nearby geographical regions (i.e., negative geographical social aspiration feedback), and a firm’s greater exposure to natural disasters than its previous year (i.e., negative historical aspiration feedback) can be negatively associated with changes in GHG emissions. Finally, I elaborate on whether negative social, geographical social, and historical aspiration feedback strengthen the relationship between absolute exposure to CC-related natural disasters and changes in GHG emissions. This study attempts to integrate the literature on natural disasters and climate change by elucidating how exposure to CC-related natural disasters as a biophysical condition may lead to climate change mitigation based on the attention-based view and BTOF. This study also contributes to BTOF by suggesting less exposure to natural disasters as an alternative aspiration and the geographical neighborhood as another reference point. Additionally, it contributes to the attention-based view by examining the relationships between top-down and bottom-up attentional processes at headquarters and facilities.
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