Academic journal article Journal of Business Strategies

Outperforming Peers through a Comprehensive Climate Change Strategy: The Case of Electric Utilities

Academic journal article Journal of Business Strategies

Outperforming Peers through a Comprehensive Climate Change Strategy: The Case of Electric Utilities

Article excerpt

INTRODUCTION

Climate change is considered one of the greatest long-term challenges facing society (Intergovernmental Panel on Climate Change, 2014; Steffen et al., 2015). It is a prominent and much debated ecological issue that challenges many business models, requires urgent action and, thus, is strategically relevant to organizations (Busch, 2011; Kolk & Pinkse, 2004; Whiteman, Walker, & Perego, 2013). Impacts of climate change occur at different spatial and time levels (Hoffmann, Sprengel, Ziegler, Kolb, & Abegg, 2009) and therefore resulting risks are difficult to assess and, in addition, may lie outside of the organization's coping range (Linnenluecke & Griffiths, 2012). Climate change induces complexity, uncertainty, and rapid change, which, in turn, requires organizations to respond proactively (Howard-Grenville, Buckle, Hoskins, & George, 2014). To deal with climate change, a comprehensive climate change strategy, which combines the two response strategies mitigation and adaptation, is required (Intergovernmental Panel on Climate Change, 2014) and represents the focus of this paper.

Until now, mitigation and adaptation has been mainly investigated as two separate response strategies (Dlugolecki, 2008). Mitigation takes an inside-out perspective and represents the companies' efforts to reduce their impacts on the natural environment (Winn & Kirchgeorg, 2005). Here, organizations mainly seek to reduce their greenhouse gas emissions (Weinhofer & Hoffmann, 2010) or to offset them. However, scientists have suggested that even with planned mitigation, the increase in global temperatures and other harmful impacts are irreversible (Intergovernmental Panel on Climate Change, 2014). Therefore, adaptation--which takes the outside-in perspective (Winn & Kirchgeorg, 2005)--represents the second response strategy in dealing with the impacts of climate change (Winn, Kirchgeorg, Griffiths, Linnenluecke, & Guenther, 2011).

While mitigation is highly regulated by legislation (Kolk & Pinkse, 2004), climate change adaptation is only partially in the hands of single states and is not as regulated worldwide (Gasbarro, Rizzi, & Frey, 2016). Hence, mitigation strategies are rather clear for organizations, which is not the case for adaptation. Climate change adaptation represents a relatively new field which lacks clear signals from scientific communities, leading to confusion within organizations about the urgency and high barriers for investments in adaptation strategies (Gasbarro et al., 2016). The agricultural industry represents one example where rising temperatures might not only negatively impact firms, but might also lead to beneficial cases (Tate, Hughes, Temple, Boothby, & Wilkinson, 2010). However, organizations need to realize that they are facing a 'new normal' (Howard-Greenville et al., 2014) and, thus, a climate change strategy that only consists of mitigation is not sufficient. Risks of climate change can only be substantially reduced when mitigation and adaptation efforts are combined (Intergovernmental Panel on Climate Change, 2014). Thus, organizations should strive for comprehensive response strategies that combine actions of mitigation as well as adaptation, as this will, following Beermann (2011) and Fankhauser, Smith, and Tol (1999), be crucial for organizations that aim to develop competitive advantages and reap financial benefits in spite of climate change. Actions to build pro-active response strategies further strengthen the strategic ability to develop necessary organizational skills to deal with a changing environment, which is fundamental for desirable organizational resilience (Limnios, Mazzarol, Ghadouani, & Schilizzi, 2014).

After highlighting the importance of a climate change strategy that combines both mitigation and adaptation, it is rather astonishing that, until now, financial benefits of such a comprehensive climate change strategy have not yet been empirically investigated. …

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