This action might not be possible to undo. Are you sure you want to continue?
Emerald Article: Business and climate change: emergent institutions in global governance Ans Kolk, Jonatan Pinkse
To cite this document: Ans Kolk, Jonatan Pinkse, (2008),"Business and climate change: emergent institutions in global governance", Corporate Governance, Vol. 8 Iss: 4 pp. 419 - 429 Permanent link to this document: http://dx.doi.org/10.1108/14720700810899167 Downloaded on: 11-12-2012 References: This document contains references to 39 other documents Citations: This document has been cited by 7 other documents To copy this document: email@example.com This document has been downloaded 1789 times since 2008. *
Users who downloaded this Article also downloaded: *
Ans Kolk, Jonatan Pinkse, (2008),"Business and climate change: emergent institutions in global governance", Corporate Governance, Vol. 8 Iss: 4 pp. 419 - 429 http://dx.doi.org/10.1108/14720700810899167 Ans Kolk, Jonatan Pinkse, (2008),"Business and climate change: emergent institutions in global governance", Corporate Governance, Vol. 8 Iss: 4 pp. 419 - 429 http://dx.doi.org/10.1108/14720700810899167 Ans Kolk, Jonatan Pinkse, (2008),"Business and climate change: emergent institutions in global governance", Corporate Governance, Vol. 8 Iss: 4 pp. 419 - 429 http://dx.doi.org/10.1108/14720700810899167
Access to this document was granted through an Emerald subscription provided by UNIVERSITY OF SOUTH PACIFIC For Authors: If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service. Information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.com With over forty years' experience, Emerald Group Publishing is a leading independent publisher of global research with impact in business, society, public policy and education. In total, Emerald publishes over 275 journals and more than 130 book series, as well as an extensive range of online products and services. Emerald is both COUNTER 3 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation.
*Related content and download information correct at time of download.
This especially applies to the market mechanisms as DOI 10. Since March 2006.1108/14720700810899167 VOL. frequently home-country-focused approach. thus helping to shape a new form of governance with considerable private involvement. The case used to illustrate emergent institutions involves market mechanisms for climate change. 2006. Q Emerald Group Publishing Limited. follow-up studies into larger numbers of ﬁrms would be worthwhile to unravel the dynamics. Particularly global environmental issues have been used to illustrate the rise of this new global governance. 2006. considering the fact that they face the dualility of managing a global context and multiple local contexts. Canada and Russia are still unclear about their exact plans on how to implement it. which has started to be implemented. 2002. with the level of activity in emissions trading frequently shaped by local management. but is still surrounded by uncertainty and diversity across countries/regions. Governance Paper type Research paper Introduction In recent years it has been argued that governance patterns are changing as a result of internationalization and the concomitant emergence of non-state. Such new ‘‘arrangements beyond the state’’ include a variety of governance concepts (public. Yet. Multinational companies. Pattberg. private actors (e.g. Meidinger. adopting a multidomestic. Findings – Both with regard to nonbargaining and bargaining strategies MNCs’ prevailing view seems that they have to deal with distinctive national patterns. with biodiversity and forestry as main examples where private involvement has played a role in furthering implementation and consensus-building on international frameworks adopted earlier in the process (Arts. private and mixed). This instrument is a crucial component of the Kyoto Protocol. Design/methodology/approach – Information from MNCs’ responses to the Carbon Disclosure Project is used to shed light on their bargaining and nonbargaining activities and how these seem to relate to their overall strategy and location. Arts. Organizations. while others such as Japan. 2006. The aspects identiﬁed in this paper can be used as starting point for such analyses. Keywords Global warming.Business and climate change: emergent institutions in global governance Ans Kolk and Jonatan Pinkse Ans Kolk and Jonatan Pinkse are based at the University of Amsterdam Business School. 419-429. Research limitations/applications – Since market mechanisms for climate change are just unfolding. Climate change can be mentioned as another case in point. 4 2008. 2005). ISSN 1472-0701 j CORPORATE GOVERNANCE j PAGE 419 . particularly emissions trading. Amsterdam. the type of corporate structures created by some MNCs indicates that they take into account that EU-ETS may form the onset for a more global emissions trading scheme. 8 NO. Pattberg. pp. Abstract Purpose – This paper aims to explore how multinational corporations (MNCs) may operate in the context of a so-called emergent institution which is not yet settled and taken for granted. The Netherlands. 2005). Originality/value – The paper explores how MNCs may help shape an emergent institution. Practical implications – The information and corporate considerations regarding market mechanisms for climate change can be helpful for both managers and policymakers in designing future approaches and reﬂecting upon the limitations and opportunities for MNC involvement in global governance. Although the Kyoto Protocol entered into force in 2005. the research on climate change by both authors has been supported by The Netherlands Organisation for Scientiﬁc Research (NWO). Their responses vary according to the national situation. Knill and Lehmkuhl. some countries including the US have not ratiﬁed.
1999. which builds on the international management literature. 2005. 2005). Only in the EU. This intergovernmental emissions trading regime. 2001. We will quote those company responses most appropriate to the topic of this paper. This means that industry needs a permit to emit GHGs and PAGE 420 CORPORATE GOVERNANCE VOL. The set-up of this paper is as follows. 1995). as illustrations. In that section. Subsequently. Market mechanisms for climate change The main market-based instrument for climate change is emissions trading through a ‘‘cap-and-trade’’ system. Boddewyn and Brewer. particularly the potential role of multinational corporations (MNCs) in helping shape policies globally. 1994. The lack of widespread acceptance and clarity mean that such emergent institutions are highly susceptible to pressures for change. Zucker. The paper presents some exploratory ﬁndings reported from large multinationals on their bargaining and nonbargaining activities on market mechanisms and how this seems to be related to their overall strategy and location. considering the implications for the future governance of climate change. Kolk and Hoffmann. This will be followed by an exploration of MNC responses to emergent institutions for climate change. 4 2008 j j . 2007. 1999). In this paper we will explore how MNCs may operate in the context of a so-called emergent institution that is not yet settled and taken for granted. accepted by all countries. Westney. the label ‘‘emergent institutions’’ has recently been introduced to characterize such arrangements that lack ‘‘taken-for-grantedness’’ and are surrounded by uncertainty about their permanence (Henisz and Zelner. divided into bargaining and non-bargaining strategies. 1993). more concrete steps have been taken with the start of an emissions trading scheme per 1 January 2005. Our focus on MNCs. has received attention (e. It also implies. in both home and host countries. that companies which are affected. notes that ‘‘as governments develop trading systems and allocation plans are drawn up. Markussen and Svendsen. which enables countries to transfer greenhouse gas (GHG) emissions. Shell. 2007.g. thus helping to shape a new form of governance with considerable private involvement. Political disagreements about the exact rules for the use of market mechanisms (particularly emissions trading) and the appropriateness of legally binding targets for emission reduction have made a global institutional framework for climate change mitigation. ﬁrms have the opportunity to inﬂuence the direction of these developments’’. In the management literature. however. In view of their size and spread. problematic. This is openly acknowledged by some companies. The case that we use to illustrate such upcoming arrangements involves market mechanisms for climate change. somewhat more attention is paid to theoretical insights on the interaction between MNCs and institutions as far as relevant for the climate change issue. has led to the creation of domestic systems to trade emissions at an industry level. The paper will also indicate areas that deserve further study. Participating countries in the Kyoto Protocol are allowed to exchange part of their obligations with another party (Grubb et al. such as the Shell statement mentioned above. Suchman. adds a ‘‘private governance’’ perspective that has not received much detailed attention in the more general discussion on global governance. 8 NO. This will yield insights not only for policymakers active in engaging companies in the governance of climate change. for example. we will use some of the raw data that has become available through responses by the Financial Times Global 500 companies to the second questionnaire as sent by the Carbon Disclosure Project. but even there large uncertainty exists about details of implementation and about the precise arrangements in future years (Egenhofer. The ﬁrst section will characterize the current state of market mechanisms for climate change. but also suggest directions for further academic research. Lawrence. particularly on the way in which multinationals respond to and try to inﬂuence the development of market mechanisms.established under the 1997 Kyoto Protocol. This has a large impact on those companies operating in the various regions that are exploring concrete steps to face the new realities of market mechanisms for climate change. but is still surrounded by uncertainty and diversity across countries/regions. This instrument is a crucial component of the Kyoto Protocol and has started to be implemented. intend to participate and/or are already taking steps have the possibility to inﬂuence the development of market mechanisms for climate change (cf.. 1987). Rugman and Verbeke.
the government has merely introduced ‘‘mandatory information disclosure’’.4 billion in 2006 (compared to $7. with METI underlining the harmful effect for Japanese companies’ competitiveness. Through a ‘‘linking directive’’. 2007. Capoor and Ambrosi. the Environment Ministry proposed a voluntary emissions trading scheme and carbon tax.governments allocate allowances that determine how much (‘‘the cap’’). oil and gas. 1999). Emissions trading accounted for a much larger share of the total carbon market.9 billion in 2005) (Capoor and Ambrosi. 2003. the government ﬁnally issued a plan in 2005 to achieve Kyoto compliance. they have to agree on how to divide the ‘‘reduction credits’’. which was a threefold increase compared to 2005 (Capoor and Ambrosi. Both JI and CDM allow industry involvement (private investments). Watanabe. the receiving country of a cross-border investment is a developing country that does not have an obligation to reduce emissions (yet). 3). In the case of CDM. 3). Companies may purchase emission reductions from others with excess reductions. progress on climate policy and emissions trading has been slow due to disagreement between the Environment Ministry and the Ministry of Economy. JI can only be used between two countries that both have an obligation to reduce emissions. 2007. 2007. which started in 1999.6 billion in 2006. Other industrial countries that ratiﬁed the Kyoto Protocol have not yet created schemes equivalent to EU-ETS. 2005). Consequently. large combustion installations are also covered. The plan also announced a Climate Fund that buys credits from emission reduction projects on behalf of the Canadian government. aluminum and chemical industries are exempted from EU-ETS. Notably. several emissions trading schemes evolved (i. If individual countries launch similar ‘‘national’’ emissions trading schemes. pulp and paper. Trade and Industry (METI) (Schreurs. which means that other industries with energy-intensive activities. CDM credits from early project activities (from 2000 onwards) can be used for compliance in the ﬁrst commitment period (2008-2012). It is again up to member states whether a limit will be imposed on the use of such credits. in 2002).. experts assess it as more mature than before. the combined value of CDM amounted to $5. p. and electric utilities. So far. international disagreements have led countries to design emissions trading schemes independently. Markussen and Svendsen. and as leading to cost-effective emissions reductions (Røine and Hasselknippe. Although not mature yet. supposedly due to their strong lobbying activities (Butzengeiger et al. 2005). 2004. In addition to emissions trading. 2005). However. The investing country can thus use all obtained credits for compliance with its own commitment. In Japan. Although the Kyoto Protocol has established market mechanisms. CDM became operational already before the Kyoto Protocol entered into force (Streck. with a market value of $24. Interestingly. By contrast. credits earned with JI and CDM can be used to fulﬁll the obligations under EU-ETS. p. In 2004. 3). require permits as well and received allowances. with varying roles for speciﬁc industries. Looking at the size of these markets. for instance automotives and food processing. Emission targets focus on mining and manufacturing. 2004). 2002). but no exact rules for such trades were indicated. but by far the most important has been the emissions trading scheme for CO2 at the EU level (EU-ETS). CDM is viewed as a cost-effective way to take advantage of prior investments. 2007). the UK. EU-ETS by far accounts for the largest share of the carbon market. in Denmark.e. It VOL. In Europe.6 billion and $68 million respectively. p. cement. 8 NO. In Canada. which began in 2005. Kyoto also enabled two projected-based instruments: joint implementation (JI) and the clean development mechanism (CDM). $24. EU-ETS primarily affects energy producers (including electric utilities). metals. but Japanese companies strongly opposed such a voluntary scheme because they feared it might become obligatory (Arita.3 billion and JI to $141 million in 2006 (2005 ﬁgures were $2.. which means that industry has to report its GHG emissions (Watanabe. the detailed plans for the allocation of allowances (National Allocation Plans) and for monitoring participants’ emissions data are left to the individual national governments. While EU-ETS is meant to ensure harmonization of emissions trading across the EU. 4 2008 CORPORATE GOVERNANCE PAGE 421 j j . the two can be linked and industries/companies can engage in cross-border trade of emission allowances. They allow countries to reduce emissions resulting from cross-border investments (Grubb et al.
p. and voluntary for other companies. Australian rejection of Kyoto. This would mean that MNCs within the same global industry may increasingly resemble each other with converging perceptions of how to respond to particular issues. 1993). Moreover. These often exert conﬂicting pressures on MNCs. However. e. Prahalad and Doz. In Australia. the New South Wales Greenhouse Gas Abatement Scheme was launched early 2003 by the state government. While the view presented above usually implies that an MNC consists of a set of relatively independent subunits belonging to several organizational ﬁelds. and/or proﬁt from. In recent years. Applied to climate change. as well as the different political. while Australia seems to be moving towards a nation-wide system. though. the scheme is restricted to projects on the American continent. 1993). also under a new US president. that implementation has stalled since the new government has distanced itself from the plan (and also from Kyoto more generally). which can lead to contradictions (Westney. until recently. the Kyoto Protocol). In this situation. the variety of approaches adopted by governments could also justify a more multidomestic. country-by-country or regional approach to cope with. the Chicago Climate Exchange. These include the choice between transferring standardized practices from the home country to foreign subsidiaries and developing a variety of practices tailored to local needs (Bartlett and Ghoshal. p. it can also be seen as entity that together with its global competitors constitutes a single organizational ﬁeld. a private trading scheme was created in 2003. MNCs and institutions The relation between MNCs and institutions is complex due to the peculiarities of operating across borders. Clear distinctions have surfaced between and among ratifying and non-ratifying countries. existing differences (cf. In the ﬁeld of international management. Despite US and. some trading schemes emerged there. Rosenzweig and Singh. 1993). 1989. its value amounted to $38 million ($3 million in 2005) (Capoor and Ambrosi. It is mandatory for electricity generators. MNCs’ institutional contexts reﬂect a duality – a global context and multiple local contexts (see. although emissions trading and carbon offset projects are part of institution building on an intergovernmental level. Hence. geographical and economic realities that have shaped governments’ behavior on the issue. MNCs can also change the boundaries of an organizational ﬁeld (Westney. This would fall in line with the diversity of perceptions regarding the need to act on climate change. Westney. Geographically. How all of this will work out. in which a number of MNCs. 2004). we see a global issue governed by an international approach (the United Nations Framework Convention on Climate Change. the US has seen the emergence of several trading schemes at the regional level. national or regional level. and the market size is growing substantially. with trading of allowances and offsets as options. 2007. participation is voluntary and it includes all six GHGs covered by the Kyoto Protocol. not just CO2.g. In the US. Prahalad and Doz. MNCs may follow a global approach to minimize costs or exploit possible opportunities from coordinated emissions reduction.should be noted. 2007. Bartlett and Ghoshal. in others the inﬂuence of the local situation was more important. using insights from the international management literature. 1989. 1993). 1991. and perhaps more importantly. local companies. In 2006. 4 2008 j j . MNCs frequently belong to several industries and thus participate in different industry-level ﬁelds simultaneously. 1987. but also. the governance of this climate change instrument is still evolving and its ultimate form is uncertain. Below we will analyze how this variation affects MNCs. however. 3). Although CCX shows parallels to EU-ETS. Participants commit to voluntary reduction targets. retailers and large market customers. PAGE 422 CORPORATE GOVERNANCE VOL. attention has focused not only on the conformity of organizational practices that institutions invoke. 3). MNCs thus change the boundaries of an organizational ﬁeld by widening it across national borders (Westney. governments and NGOs participate. In some instances standardization turns out to prevail. Rugman and Verbeke. CCX aims to demonstrate that climate change can be managed on a voluntary basis and that market mechanisms are viable. remains to be seen. but which is being implemented (particularly through emissions trading schemes) at a local. 8 NO. Its 2006 market value was $225 million ($59 million in 2005) (Capoor and Ambrosi. on the divergent pressures on MNCs. 1987).
However. ranging from bargaining to nonbargaining strategies (Boddewyn and Brewer. 2002. more than half (113) provided information. especially the ones with respect to project based instruments still need political clariﬁcation at the EU/international level (DaimlerChrysler). Markussen and Svendsen. 1991). regional and global institutional pressures (Henisz and Zelner. particularly in ﬁghting the launch of emissions trading schemes. Maguire et al. the positions they adopt in public policy debates. In the case of market mechanisms. 2003. where vested interests have played a considerable role. local/regional initiatives covering multiple states are nevertheless emerging. Hoffman. and impact on global governance. some companies explicitly underline the existing uncertainty and their consequent hesitation to assign internal resources: However we haven’t engaged into active trading yet. In view of the emergent state of market mechanisms and the absence of systematic data about actual MNC activities. 1994). in particular. Despite backing by a considerable number of companies. US Congress has rejected proposals to launch a mandatory emissions trading scheme on a federal level. leading to the adoption of more superﬁcial strategies that are not accompanied by strong internal organizational support structures (Jiang and Bansal. however. the intensity of strategic responses to institutional pressures can also differ. because a number of important boundary conditions. Royal Dutch/Shell). including powerful oil MNCs (e. Compliance means that companies incorporate an organizational practice to anticipate particular beneﬁts that may be gained in the future. Lawrence.g. Most recently. focusing respectively on bargaining and nonbargaining strategies as identiﬁed in the literature. we believe that the information nevertheless provides important insights into companies’ perceptions of policy instruments such as emissions trading and. 2005). 1999. BP. 2003. Kolk and Pinkse. 2002).. European steel and chemical industries lobbied against the launch of EU-ETS (Markussen and Svendsen. Gulbrandsen and Andresen. According to Boddewyn and Brewer (1994). have tried to inﬂuence their exact shape. whether clean development VOL. 2005. The next section will explore these two components. to some exploratory results from responses to the Carbon Disclosure Project. The fact that an emergent state leads to uncertainty about an institution’s permanence may affect the intensity of MNCs’ responses. interesting enough to sketch developments and indicate the range of responses. this has also started to apply to market mechanisms. 2007). 2005).g. while in case of avoidance companies try to prevent conforming to institutional pressure. 2005).this is also notable in the case of climate change. cf. Exploring MNC responses to emergent institutions for climate change MNCs can adopt various approaches in response to the different national. thus helping to shape the governance of climate change. 2004.. Of the 218 MNCs that made responses available. but not extensive enough to allow a more detailed elaboration of results as done on other topics (e. The question is in what way MNCs are responding now that market mechanisms are being implemented but still uncertain. Nonbargaining strategies imply that companies respond to institutional pressures through compliance or avoidance. It is difﬁcult to implement detailed plans until various procedures are established including the relationship between trading schemes in different countries. We recognize the limitations in relying solely on published/self-reported data (see Kolk and Pinkse. The emergent nature means that MNCs could play the role of ‘‘institutional entrepreneurs’’ (cf. Milstein et al. emissions trading have also been widely opposed (Christiansen and Wettestad. which has emerged as a ‘‘global issue arena’’ (Levy and Kolk. For example. 8 NO. 4 2008 CORPORATE GOVERNANCE PAGE 423 j j . Oliver. and how this private involvement affects and shapes the global governance of climate change. 1999). but mostly on nonbargaining activities. as noted in the introduction. 1991). we will refer. With bargaining strategies companies actively try to shape institutions through activities such as lobbying and partnerships with institutional actors. MNCs report only to a limited extent. 2004) which help shape new practices in such ﬁelds. but most notably MNCs. for example by relocating production activities (Oliver. The development of climate change policy has taken place in a fairly disorderly way in which many different interest groups.
MNCs do not face much uncertainty about broad design issues. Only one non-EU company (ExxonMobil. federal and state levels. p. At ﬁrst sight. providing input on the development of the rulebook (including protocols concerning accounting. cross-border political engagement is not widely reported. most MNCs that mention bargaining activities adopt a multidomestic. for example by pressurizing home-country governments in the Kyoto negotiations (see Levy and Egan. The most explicit in this regard are US MNCs that have responded to (upcoming) European regulations. 1993) is a particular attribute of the oil industry. other sectors seem to be much more focused on their home country/region. veriﬁcation and validation of emission reductions). seems not something that the companies involved will proudly report. In most cases. however. 2002). This reﬂects the reality that MNCs’ PAGE 424 CORPORATE GOVERNANCE VOL. cf. although in the US somewhat more openness may be expected due to the particular political culture. A few US MNCs have also adopted a home-country approach by engaging in the development of CCX. Westney. where MNCs try to inﬂuence the design. Japanese companies remain silent on their bargaining strategy. most companies tend to be silent about lobbying activities. Levy and Kolk. a well-known player in the climate issue. this contrasts somewhat with Levy and Kolk (2002) who found that large oil MNCs moved towards a common. and by purchasing allowances in the initial CCX auction. joint implementation plans. and to refrain from too much interference with host-country governments. Ford and Stora Enso: they have been involved in development and evaluation of regulatory schemes in the EU and voluntary schemes in the US (particularly CCX). It is our hope that the ‘‘lessons learned’’ will inform the policy debate on climate change and positively inﬂuence the design of greenhouse gas mitigation policies at the international. however. which frames it as a corporate effort to give emissions trading moral legitimacy by demonstrating that it is ‘‘the right thing to do’’ (Suchman 1995. Two Canadian companies. there are a few examples where MNCs from one EU country cooperate with or lobby government in another country (Kolk and Pinkse. companies have tended to focus primarily on their home countries. Levy and Kolk. to contest US regional carbon trading initiatives (see Rabe. and sequestration will be allowed and how reductions from combined heat and power projects will be treated (Abbott Laboratories). Suncor and Petro-Canada. 2007). this is notable because their government has been discussing the launch of an emissions trading scheme to meet Kyoto commitments. The tendency. home-country-focused approach. Nevertheless. mostly by either trying to affect the design of the National Allocation Plans or to lobby for favorable allocations. but merely about the outcome of the allocation process. which may be due to cultural peculiarities. global perception of their institutional context. Bargaining activities Previous studies showed that MNCs used their political clout to inﬂuence the process of building institutions for climate change.mechanisms. Overall. 2002) also mentions involvement in the political process of drawing up National Allocation Plans. Examples of MNCs that report to focus on inﬂuencing the design of schemes in home and host countries simultaneously are BP. 8 NO. 2006). or to later phase where they lobby for a favorable allocation of allowances. thus conﬁrming Baron’s (1997) argument that such corporate political activities tend to be less global in nature. It is also notoriously difﬁcult to investigate in view of the secrecy and ‘‘behind-the-scenes’’ nature. An example is American Electric Power. Corporate involvement in the allocation process is currently limited to MNCs affected by EU-ETS. Because it was established by EU directives. Obviously. have a strong home-country focus in helping to set up a Canadian trading scheme. 2007). European companies thus tend to focus on the latter. 579): AEP has supported CCX in numerous ways. including serving on the board. It might well be that a process of changing boundaries of an organizational ﬁeld to form one global industry (cf. for example. We are doing so to demonstrate the cost-effectiveness of reducing emissions by utilizing this market-based instrument. 2003. a number of particularly energy-intensive MNCs disclose bargaining activities on market mechanisms: either related to the early stages of emissions trading schemes. In addition. As also noted elsewhere (Kolk and Pinkse. 4 2008 j j .
The cautious position also reﬂects the uncertainty created by the Canadian government for domestic companies with the relatively long period taken to come up with concrete policies to meet Kyoto commitments – a similar situation still exists in Japan. a host-country orientation can also be noted for some US MNCs with activities in the EU. In contrast. oil. in its home country. in part because the home country generally beneﬁts more from the company’s activities (Baron. Nonbargaining activities Compared to bargaining activities. although much less than in emissions trading (the market values for the respective activities. Suncor.250 respondents conﬁrmed this ﬁnding: only a ‘‘handful’’ referred to relocation. states that ‘‘a clear direction from the Canadian government with respect to Kyoto obligations and standards to ensure emission reductions are standardized across an international market’’ is a prerequisite for engagement in trading schemes outside the home country. Several US and a few Australian MNCs express an intention to participate in EU-ETS and in locally-oriented schemes such as CCX and the NSW Scheme.` -vis home and host country governments. while compliance (via EU-ETS in the ﬁrst instance. indicating a home-country effect. This only covers compliance. Ford gives a different argument for participation in EU-ETS: to gain experience out of the belief that it is a cost-effective way to reduce emissions. EU climate regulation may create some spillover effects as (non-Kyoto) emission markets in the US and Australia seem to attract relatively much attention from MNCs in metals. however. In complying with emissions trading schemes. disclosure on nonbargaining activities is more common. MNCs from these two countries do. They are also more inclined to become active in JI and CDM. express more intention to participate in EU-ETS than their US and Japanese counterparts. A recent web-based survey amongst 2. as outlined above. and both internal abatement and CDM/JI as second) prevailed (Røine and Hasselknippe. until recently. countries with a binding commitment. It is not surprising that EU companies. This implies that Kyoto ratiﬁcation is not decisive for MNCs: it seems more important that policies are actually being implemented in home or host countries (such as in the case of the EU). for example. while they in fact. In a sense. because they aim to comply with all regulations. This shows how linkages between international (Kyoto) and domestic developments can affect MNCs. 4 2008 CORPORATE GOVERNANCE PAGE 425 j j . 1995). for example through industry associations. 2007). interestingly enough. engage in more global and/or host-country lobbying. 8 NO. It bargaining power is generally not equal vis-a requires much ﬂexibility and bargaining power to persuade host-country governments to take an MNC’s interests into account (Baron. MNCs appear to mostly conform to the existing regulatory diversity by adopting a multidomestic approach: Compliance with GHG regulations and participation in local or supra-national trading schemes such as the EU-ETS or the UK Climate Change Levy Scheme is a local or regional management decision (Unilever). Australia can be seen as having provided clarity to MNCs from these countries. gas. avoidance in the rather drastic form of relocating production (threats) is not mentioned. also to ﬁnd out to what extent such (a portfolio of) bargaining activities contributes to furthering global governance. This suggests that MNCs start with emissions trading not only to comply with existing rules. but also to anticipate future developments elsewhere. the absence of federal climate regulation in the US and. 1997). However. It may also be possible that MNCs only report a few activities. manufacturing. a company typically has a much stronger foothold in the policymaking process. Although the US and Australia have not ratiﬁed Kyoto. it allowed them to be relatively active in emissions trading in host countries because uncertainty about forthcoming domestic policies had been reduced. VOL. reﬂect this). not lag behind MNCs from Japan and Canada. particularly from those sectors directly covered. mining and utilities – sectors covered by EU-ETS. These are aspects that deserve further study.
while BHP Billiton and Westpac combine EU-ETS with the NSW Scheme. and that it ‘‘must be designed to reach beyond the geographic boundaries of Europe’’. while Statoil has a ‘‘Carbon Treasury’’ that acts as ‘‘the single operational interface with the emission trading market and will perform market operations on behalf of the installations operated by Statoil’’. AstraZeneca. to facilitate (future) compliance and/or participation in voluntary schemes. PAGE 426 CORPORATE GOVERNANCE VOL. Thus. Dow Chemical and Fortis have set up units that more strongly concentrate on the overall business opportunities from upcoming emission markets. Interestingly.] The proposed inclusion of the JI and CDM Kyoto mechanisms in the EU-ETS may open a route for the involvement of AstraZeneca operations outside the EU to play a part in our response to the scheme. there are others which are building internal structures even though market mechanisms are only emerging. It is notable that pilot schemes are mostly organized locally: Japanese companies participate in schemes set up by METI or the Environment Ministry and German MNCs in schemes on a state level or with local institutes. although many MNCs.However. . while BP emphasizes the importance of EU-ETS as a ﬁrst step ‘‘in the longer term development of much needed international market mechanisms’’. This has included bilateral (demonstration) transactions. And ChevronTexaco states that: While individual business units are responding to local opportunities and regulations associated with emerging GHG trading regimes. but there are also companies that have systems covering worldwide operations. ChevronTexaco) show a view of (or desire for) the emerging emission market as one global system. for example. has created a separate unit to manage ‘‘the overall Group approach to the various national and international markets’’. Likewise. but initially fragmented. Suez is identifying possible opportunities to use reduction possibilities in other regions (US. Fortis. for example. It is not only through bargaining activities that MNCs can inﬂuence emergent institutions. often small (nonbargaining) steps that show the feasibility or future directions of such arrangements. for example. Royal Dutch/Shell. offering feedback to policymakers and others involved. but also by taking concrete. intends to trade allowances on behalf of customers. Westpac’s participation in the NSW scheme is partly motivated by the intention to enter EU-ETS because it hopes that Australian credits may become entitled for compliance with EU-ETS through a linking directive. GHG market’’. Royal Dutch/Shell mentions ‘‘a global. for example. 8 NO. tend to wait until there is more certainty. this does not necessarily mean that MNCs treat emissions trading as a purely local/regional strategy. MNCs are also starting to make inventories of their GHG emissions. Canada) for EU-ETS as well. Others established a separate organizational unit that is not only responsible for the coordination of compliance with EU-ETS. Some have created cross-functional teams that coordinate the company’s response to regulatory developments in the EU. Japan. this means that an MNC collects emission data of installations affected by EU-ETS. In a sense. For some MNCs international dispersion of their operations has led to the development of a bi-regional strategy (cf. Royal Dutch/Shell. tested emissions trading on a small scale to already gain some experience. three oil MNCs (BP. Some MNCs mention the intention to use JI/CDM for the development of international project activities and thus bring their global presence into play. for example. for example. A number of MNCs is setting up internal structures as well. . 4 2008 j j . Rugman and Verbeke. creation of an internal scheme or participation in a pilot scheme. such approaches may be seen as contributions to shaping a global governance of climate change. Baxter. ChevronTexaco is also developing an overall corporate carbon markets strategy. focus on EU-ETS and CCX. states that: [. In most cases. states that setting an emission reduction goal and establishing a reporting and veriﬁcation system to track performance is ‘‘critical to ensuring compliance with emerging greenhouse gas regulations’’. 2004). Baxter. the precise components of which deserve follow-up research. International Paper. but also for developing a company-wide strategy for emerging emission markets globally. Motorola and Stora Enso. Some MNCs have. as the quotes from DaimlerChrylser and Abbott illustrated.
regional or global orientation).Conclusions This paper has explored multinationals’ responses to market mechanisms for climate change. which is a limitation of this study. 2. 37 No. with the level of activity in emissions trading frequently shaped by local management. California Management Review. until recently. Yet. This will be helpful. pp. However. It is noteworthy that. The long period taken by the Japanese and Canadian governments to reveal their approach to reduce emissions has led many MNCs from these countries to adopt a wait-and-see attitude. on the other hand. 47-65. Baron. 7 August. D. MNCs are frequently responding to the existing variety with an eventual global approach in mind. despite the 1997 Kyoto agreement. Arts. VOL. Delegation and Inclusiveness. The more mature emission market in the EU has inﬂuenced the level of activity of European MNCs. in which market mechanisms are likely to become an even more important component. Further studies into this unfolding situation would be worthwhile to unravel these dynamics that may have interesting implications for the future of global (private) governance. in this way thus in fact helping to create and shape it. Vol. and can reasonably expect to be subject to regulation in other countries as well. 145-69. and to explore such involvement if they see this as compatible with their overall strategy. follow-up research can shed more light and also link MNCs’ climate strategies to the characteristics of their international presence in different markets (looking at both sales and production). This explains why for example US and Australian companies in sectors that fall under EU ETS have been relatively active in engaging in voluntary emissions trading schemes in their home countries. ‘‘Integrated strategy.P. ‘‘Proposed emissions trading. (Eds). Baron. (1997). (2004). a considerable number of MNCs has started with reporting and veriﬁcation systems to measure emissions and sometimes also establish an organizational unit responsible for a global strategy for this emergent international emission market. also in the years to come. carbon tax set to be hard sell’’. M. They explicitly consider the possible impact of international diffusion of market mechanisms and reckon with the move towards a true international institution. Australia. M.P. Their responses vary according to the national situation. while countries have had difﬁculty to arrive at one international solution for addressing climate change. 2. clarity about implementation and instruments seems more important. MNCs in high-emission sectors face constraints in the EU at the moment. To adequately react to the emergence of trading schemes outside Europe. in Koenig-Archibugi. References Arita. seems to have given MNCs from these countries much more leeway to get acquainted with emissions trading in host countries. ‘‘Integrated strategy: market and nonmarket components’’. and the (potential) role of private actors in advancing implementation of international (and regional/local) frameworks adopted earlier. E. The ﬁndings of this exploratory study thus suggest that the emergent state of climate change institutions leads to different corporate responses that seem to reﬂect their country of origin. pp. and global competition’’. 39 No. trade policy. New Modes of Governance in the Global System – state’’. D. (1995). But the emergent state also means that the number of observations was fairly limited. B. 177-200. California Management Review. which are likely to become more stringent in the future. 8 NO. Japan Times. Once more data are available. (2006). Palgrave Macmillan. 4 2008 CORPORATE GOVERNANCE PAGE 427 j j . Vol. Houdsmills. and Zu Exploring Publicness. with evolving negotiations on a ‘‘post-Kyoto’’ regime as part of the Bali roadmap. particularly in those sectors covered by EU-ETS. the fact that a country has ratiﬁed the Kyoto Protocol does not necessarily mean that national industries take a similar position towards climate change measures. ‘‘Non-state actors in global environmental governance – new arrangements beyond the ¨ rn. Both with regard to nonbargaining and bargaining strategies MNCs’ prevailing view seems that they have to deal with distinctive national patterns. the type of corporate structures created by some MNCs indicates that they take into account that EU-ETS may form the onset for a more global emissions trading scheme. but also relates to their overall strategic peculiarities (particularly multidomestic. The unambiguous rejection of Kyoto by the US and. pp.
DC. C. 6. M. ﬂexibility mechanisms. 219-28. 3.L. and Kolk. A. A.. (2005). Global Environmental Politics. Academy of Management Review. Vrolijk. S. ‘‘The EU as a frontrunner on greenhouse gas emissions trading: how did it happen and will the EU succeed?’’. C. Gulbrandsen. 119-43. Vol. 54-75. Harvard Business School Press. 25 No. and Brack. Maguire. climate change and emissions trading: taking stock and looking ahead’’. 25 No. and Lehmkuhl. 2. Academy of Management Journal. Meidinger. C. 4 No. Levy. (2007). European Management Journal. 4 No. ‘‘The administrative law of global public-private regulation: the case of forestry’’.J. Kolk. pp. Kolk. D. 33. L. A. Intereconomics. V. S. State and Trends of the Carbon Market 2007. 19 No. Vol. G. and Ambrosi. 46 No. and Ventresca. pp. 47-87. W. Vol. ‘‘The making of the EU emissions trading scheme: status. and Bansal. pp. and Bode. Michaelowa. CA. Hart.J. ‘‘NGO inﬂuence in the implementation of the Kyoto Protocol: compliance.J. RIIA/Earthscan. in Hoffman. pp. (1999).T. 2. 3. 38 No. (2005). 657-79. Levy. 1047-67. 40 No. and Lawrence. Knill. 453-63. Vol. pp. 6-20. ‘‘Business. 151-72. 351-71. pp. pp.C. (2003). ‘‘A neo-gramscian approach to corporate political strategy: conﬂict and accommodation in the climate change negotiations’’. pp. 2. 4. Journal of Management Studies. and Hoffmann. Vol. 4. A. 1. 361-82. K. pp. 8 NO. Boddewyn. ‘‘Private actors and the state: internationalization and changing patterns of governance’’. pp. (1989). 1. 411-4. Capoor. and change in emergent institutions: the case of foreign investors and host country governments’’. A.B. 5. 30 No. ‘‘Seeing the need for ISO 14001’’. Business and Society. 4.A. 3-18. Vol. 42 No. Milstein. P. ‘‘International-business political behavior: new theoretical directions’’. 41-63. Lawrence. and sinks’’. (2003). A. T. The Kyoto Protocol: A Guide and Assessment. (2003). Vol. ‘‘Strategic responses to global climate change: conﬂicting pressures on multinationals in the oil industry’’. Vol. Vol.J. pp. 47 No.A. P. 1. S. pp. Stanford University Press.H. J. (2007). M.L. (2003). 803-29. ‘‘Institutional strategy’’. Vol. and Wettestad. J. (2006). interest group pressures. pp. (2002). Grubb.J. 201-28. D. R. Vol. Journal of Management Studies. Energy Policy. Vol. ‘‘Coercion breeds variation: the differential impact of isomorphic pressures on environmental strategies’’. pp. PAGE 428 CORPORATE GOVERNANCE VOL. Butzengeiger. E. and Egan. 17 No. Policy and the Natural Environment: Institutional and Strategic Perspectives. ‘‘Institutional entrepreneurship in emerging ﬁelds: HIV/AIDS treatment advocacy in Canada’’. 4 2008 j j . Vol. World Bank. Managing across Borders: The Transnational Solution. 15 No.L. MA. A. Markussen. (1999). Hoffman. (1999). Jiang. European Management Journal. Vol. (2004). J. Vol. 3 No. ‘‘Institutional evolution and change: environmentalism and the US chemical industry’’. ‘‘Industry lobbying and the political economy of GHG trade in the European Union’’. C. 1. ‘‘Business responses to climate change: identifying emergent strategies’’. Vol. Climate Policy. and Andresen. 275-300. (2002). pp. A. ‘‘Legitimacy. C. pp.. S. Vol. A. Boston. 47 No. Egenhofer. and Brewer. Journal of Management.L. J. D. P.B. (2004). London. Business and Politics. ‘‘Multinationals’ political activities on climate change’’. prospects and implications for business’’. (2005). Hardy.. 4. 25 No. Organizations. European Journal of International Law. 6. ‘‘Europe – a pioneer in greenhouse gas emissions trading: history of rule development and major design elements’’. pp.B.J. Henisz. Vol. pp. 4. pp. S. (1994). (2007). T. and York. California Management Review. Kolk. Governance. S. B. and Pinkse. and Zelner. Academy of Management Journal. T. 40 No. and Pinkse. Stanford.. (2002).Bartlett. Christiansen. 245-55. (2007). 161-88. and Svendsen. D. M. and Ghoshal. Academy of Management Review. D.S. Washington. (Eds).
(2006). and Brewer. C. pp. The Netherlands. Ans Kolk is the corresponding author and can be contacted at: akolk@uva. teaching and publications are in strategy and sustainable management.E. P. D. The Multinational Mission: Balancing Local Demands and Global Vision. A. Prahalad. Vol. in Rugman.org/events/docs/paperrabe1. NY. P. (1987). 18 No. Hayama. 3-18.V. Institute for Global Environmental Strategies. and Verbeke. C. A. Environmental Politics in Japan. pp. (2005). Organization Theory and the Multinational Corporation. ‘‘Environmental policy and international business’’.M. Academy of Management Review. 2.nl Jonatan Pinkse is Assistant Professor at the University of Amsterdam Business School.com Or visit our web site for further details: www. 16 No.E. (1991). (1993). pp. and Singh. Her areas of research. 13 No. Academy of Management Review. teaching and publications are in corporate social responsibility and environmental management.Oliver. M. T. Pattberg. K. 443-64. Oslo. Governance. New York. Rabe. available at: www. PointCarbon. Røine. Vol.com/reprints VOL. His PhD thesis.L. Vol. Germany. The Free Press. L. Option Survey for Japan to Acquire Credits from Abroad. ‘‘Organizational environments and the multinational enterprise’’.emeraldinsight.M. The Oxford Handbook of International Business. A. organization and disclosure of international business ﬁrms. The Netherlands. pp. ‘‘Institutional theories and organization’’. (2004).pdf (accessed 7 September 2006).K. Cambridge. To purchase reprints of this article please e-mail: reprints@emeraldinsight. Rugman. Y. and Westney. Rosenzweig. D. which has been awarded with the 2006 ONE Academy of Management Best Dissertation Award.M. ‘‘Institutionalization theory and the multinational corporation’’. R. (2005). 295-322.L. 340-61. 31-63. and international policy. Journal of International Business Studies. H. B. pp. (2002).wilsoncenter. ‘‘New partnerships in global environmental policy: the clean development mechanism’’. ‘‘The institutionalization of private governance: how business and nonproﬁt organizations agree on transnational rules’’. 53-76. and Doz. A. NY.M. pp. diffusion and regionalization’’. S. J. (1991). 13. Annual Review of Sociology. (2004). (2001). Vol. (1987). A. ‘‘Second generation climate policies in the American states: proliferation. (Eds) (2007). pp. Schreurs. pp. pp. (Eds). especially in relation to the strategy. 537-57. Vol. Oxford. Vol. and Hasselknippe. C. 35. Journal of Environment and Development. dealt with business responses to climate change. His areas of research. 1. 4 2008 CORPORATE GOVERNANCE PAGE 429 j j . Streck. Oxford University Press. 145-79. Current Japanese Climate Policy from the Perspective of Using the Kyoto Mechanisms. Carbon 2007: A New Climate for Carbon Trading. Rugman. in Ghoshal. and the United States. and Verbeke. Zucker. (Eds). 589-610. 16 No. ‘‘Strategic responses to institutional processes’’. About the authors Ans Kolk is Professor of Sustainable Management at the University of Amsterdam Business School. 8 NO.A. Westney. ‘‘A perspective on regional and global strategies of multinational enterprises’’. Watanabe. Cambridge University Press. New York. 4. 3. One of the topics on which she has published extensively in the past decade is business and climate change. St Martin’s Press.