A study of Australian corporate responses to climate change: risks and opportunities

Submission note: A thesis submitted in total fulfilment of the requirements for the degree of Doctor of Philosophy to the Business School, College of Arts, Social Sciences and Commerce, La Trobe University, Bundoora.

This thesis contributes to a better understanding of large Australian organisations’ responses to climate-change-related opportunities. From a practical perspective, the gap identified is that there is growing awareness of climate-change-related opportunities, but limited understanding of how large Australian private-sector organisations are responding to the opportunities. From a theoretical perspective, the motivation and gaps were three-fold. Firstly, this study sought to extend organisational adaptation literature by considering the role of opportunities versus risks in driving organisational adaptation to climate change. Secondly, there is missing knowledge about the definition of opportunities in relation to climate change. Thirdly, there is limited understanding of how organisations combine the Resource-Based View (Barney, 1991; Prahalad and Hamel, 1990) and Neo-Institutional Theory (DiMaggio and Powell, 1983; Orr and Scott, 2008; Rowan and Meyer, 1977) in responding to climate-change opportunities. It is through filling these gaps that this thesis sought to make an empirical and theoretical contribution within the context of strategic management research into organisational responses to climate change. Therefore, the aim of this thesis was to investigate if large Australian private-sector organisations are responding to climate-change-related opportunities and if so, to understand why and how they are responding. In order to address the research aim, a number of theoretical bodies of knowledge were drawn upon. The key epistemological foundations of this research are grounded in strategic management, drawing on the Resource Based View and Neo-Institutional Theory. There is a secondary emphasis on Neo-Institutional, Stakeholder, Resource-Dependence and Legitimacy theories as well as corporate governance and risk-management perspectives. This thesis drew on these theoretical perspectives to develop a conceptual framework that captures how organisations first identify climate change as an issue, the categorisation of risks and opportunities, and the development of an organisational response. Of specific interest was the organisational engagement with the opportunities presented by climate change in each of the three stages of the conceptual model: issue awareness, issue categorisation and issue response. vi The gap in the research into organisational awareness and responses to climate-change related opportunities lent itself to an exploratory research paradigm and the approach taken in this thesis was fundamentally inductive and interpretivist in nature (Miles and Huberman, 1994). A two-stage research methodology was used, which included a content analysis of the 71 Australian corporate responses to the 2010 Carbon Disclosure Project Investor Survey (Stage one) and 26 in-depth interviews with senior managers across a range of Australian organisations and sectors (Stage two). The findings from the research suggest that organisations are responding to the risks, more than the opportunities from climate-change. However, where they are responding to opportunities, a Descriptive Climate Change Opportunity Response-Typology (DCCOR) was developed to illustrate the eight key areas of response; energy efficiency; investment in renewable and alternative energy; measurement and reporting of carbon-related information; supply chain measures; stakeholder engagement; a business case for response; risk management and; collaboration with competitors. However, despite the responses to these opportunities, it was found that the responses are being constrained by a number of internal and external factors, resulting in a threat-rigid response to opportunities (Staw et al., 1981). This has meant that organisations typically pursue a strategy-opportunity-environment-fit, rather than pursue entrepreneurial opportunities with respect to climate change. The findings further suggest that on the issue of climate change, organisations are more aligned with their institutional, rather than competitive environments. As a result, and based on the threat-rigid response, organisations were found to be focusing on the development capabilities aimed at building resilience in the face of climate change. Empirical contributions are made in terms of the development of the DCCOR typology by outlining the main climate-change opportunity-response profiles, and also in furthering the understanding of the concept of opportunity in the context of climate change. From a theoretical perspective, support is offered for Stakeholder, Legitimacy and Resource Dependence Theories. Further, this thesis extends the organisational adaptation literature focused on climate change (For example, Berkhout, et al., 2004; Berkhout, et al., 2006; Nitkin et al., 2009; Eisenack and Stecker, 2012) by considering the role of incentives (and disincentives) created by the institutional environment in the development of organisational vii resilience capabilities to address climate change. Finally, two new points of confluence were identified for Neo-Institutional Theory and the Resource-Based View in terms of how the organisations are combining these two perspectives in their response to climate change. Therefore, this thesis makes an important empirical and theoretical contribution to a set of issues and debates that are of ongoing significance for large Australian organisations.