Organizational Commitment to Climate Change and GHG Reductions

Abstract

This study examines whether a stronger commitment to climate change within a company results in reductions in GHG emissions. Utilizing data from the Carbon Disclosure Project (CDP) data base for a sample of 224 companies in the S&P 500 operating in 2009, we construct an overall measure for the level of an organizational commitment based on firm responses to the CDP project survey including a firm having: (1) a board committee or other executive body responsible for climate issues, (2) an emission target in place or recently achieved, (3) 80 percent or more of emissions verified, (4) monetary incentives for reduced emissions by the board/executive board and/or management group, (5) climate change information in annual reports, and (6) climate change information in a Sustainability or CSR report. These constructed variables are correlated with CDP designations of companies as having excellent carbon disclosure and carbon performance. To test the overall hypothesis of a significant relationship between GHG reductions and commitment, we perform regressions on this variable and changes in carbon emissions for future years 2009 to 2011, and 2009 to 2012, as well as individual commitment measures. Our empirical results show that the organizational commitment variables are not significantly related to carbon emission or carbon intensity reductions. However, having board responsibility for sustainability and a previous target or success are significant factors, along with being more profitable. Our results suggest that embedding sustainability, as related to climate change, in companies does not follow a simple prescription.

Keywords: Environmental Performance, GHG Reductions, Carbon Disclosure, Climate Change

JEL Classification: Q54, Q56, Q59, G34