Evidence is mounting to address and reverse the effects of environmental neglect. Perhaps the greatest evidence for needing environmental stewardship originates from the ever-increasing extreme weather events ranging from the deadly wildfires scorching Greece and California to the extreme heatwaves in Japan. Scientists have concluded that the probability and severity for about two thirds of such extreme natural events that occurred between 2004 and 2018 is contributed by rising global temperatures.
Operations management literature regarding environmental issues have typically focused on the “win-win” approach with a multitude of papers investigating a link between sustainability and firm performance. This dissertation seeks to take a different approach by investigating firm responses to climate change. The first two essays explore firm emissions goals and the last essay investigates firm emissions performance.
The first essay identifies firm determinants of greenhouse gas (GHG) reduction targets. The essay leverages Behavioral Theory of the Firm (BTOF) and argues for two additional determinants, Data Stratification and Science-Based Targets, unique to GHG emissions. Utilizing system generalized method of moments on a dataset from Carbon Disclosure Project for years 2011-2017, the paper finds partial confirmation for BTOF and support for the two additional determinants of firm GHG emission goals.
The second essay is an exploratory study that seeks to understand factors for firm participation in the Science-Based Targets (SBT) initiative by combining both primary and secondary data analysis. The study is a working paper with primary data still needing to be completed. Secondary data analysis begins with a review of the literature which suggested four potential factors: ISO 14001 certification, Customer Engagement, Emission Credit Purchases, and presence of Absolute Emissions Targets. Preliminary results using panel logistic regression suggest that Emissions Credit Purchases and Absolute Emissions Targets influence SBT participation.
The third essay seeks to understand whether stakeholder pressure drives firm GHG emissions reductions. This relies on Stakeholder Theory and classification schemes proposed in Management literature to divide stakeholders, based on their relationship with the firm, into three groups: primary, secondary, and public. Random effects estimation results provide evidence for primary and public stakeholder pressure impacting firm GHG emissions.
In the first essay, I investigate the financial impact of a buyer-initiated supplier-focused sustainability improvement program on suppliers’ profitability. The results indicate that a supplier sustainability program may lead to short-term financial loss but long-term financial gain for suppliers, and this effect is contingent on supplier slack resources. The second essay of this dissertation focuses on the consumers and investigates their reactions to two types of firm environmental sustainability claims – sustainable production versus sustainable consumption. The results indicate that firm sustainable consumption claims increase consumers’ purchase, thus leads to larger firm sales, whereas firm sustainable production claims decrease consumers’ buying intention, then result in smaller firm sales. Therefore, I show that, contrary to extant belief, firm environmental sustainability can decrease consumers’ intention to buy. Finally, a firm may be impacted when some of its upstream or downstream stakeholders, or its own operations, are impacted by a natural disaster, which are becoming more frequent due to climate change. In the third essay I study the joint effect of market attention and donation timing on firm stock returns based on the experiences of firms who donated to the 2017 Hurricane Harvey. I conclude that neither the first donors nor the followers can mitigate the negative stock returns due to disasters. However, firms who match their donation timing with market attention experience less negative stock market returns compared to other counterparts.