The evolution of multinationals' responses to climate change

Climate change is one of the environmental issues that has increasingly attracted business attention in the course of the 1990s. While public and policy interest started already in the late 1980s, leading to a first international agreement at the Rio-conference in 1992, the main driver for corporate strategic change was the adoption of the Kyoto Protocol in 1997. This event spurred the development of regulation, and increased the pressure from non-governmental organisations (NGOs) on governments to ensure ratification of the Protocol, and on multinational corporations (MNCs), which were urged to take appropriate steps to address global warming. The last decade has witnessed radical developments in the international climate policy context. For the approach taken by MNCs towards climate change this has led to a clear shift in the strategies adopted. While political, non-market, strategies predominated in the first half of the 1990s, the market component is clearly increasing in importance. At the same time, however, the fact that MNCs operate in a range of countries with sometimes different climate policies means that the more multi-domestic non-market strategies continue to have an impact. But in the firm-specific blend of market and non-market strategies in the field of climate change, the former is currently receiving more attention, although political strategies continue to play a role as part of companies' overall strategic positioning. In this paper we examine the evolution of MNCs' responses to climate change, paying attention to both market and non-market components, and refer to a survey among the largest multinationals worldwide. The paper will first examine the main policy developments, followed by a characterisation of non-market and market responses. Finally, we reflect on overall corporate responses to climate change, paying attention to the influence of the policy contexts on emergent market strategies, and taking respondent characteristics regarding country of origin and sector into account.