Do you really want to fight CLIMATE CHANGE? First and most important of all: your MANAGERS need to be AWARE!
EYE ON RESEARCH: the article "The influence of managers' awareness of climate change, perceived climate risk exposure and risk tolerance on the adoption of corporate responses to climate change", by Todaro N., Daddi T., Testa F. and Iraldo F., has been recently published on Business Strategy and the Environment.
Uncertainties posed by climate change hinder companies' ability to understand implications of global warming on business and society at large, therefore hampering the adoption of tangible and effective organizational responses to climate change. Understanding climate action, thus, requires to investigate influential factors of decision-making under uncertainty, which implies acknowledging managerial interpretations and perceptions about climate issues. Drawing insights from the literature on climate inaction and from corporate sustainability literature, our study examines awareness of climate change and perceived exposure to climate risks as antecedents of corporate responses to climate change, drawing on a survey of managers of Italian manufacturing companies. In addition, the study tests the moderation of risk tolerance on the relation between perceived climate risk exposure and climate action, suggesting that risk attitudes are a significant factor of decision-making under climate uncertainty. Our results support the hypothesis of the model and thus provide several contributions to the literature on business and climate change.
First, we demonstrate how awareness of climate effects, that account for long-term and societal implications of climate change, stimulate a more comprehensive assessment of exposure to climate risks. Therefore, recognizing that organizational systems, management structures or organizational policies may favour the adoption of a present-time perspective, stifling the understanding of long-term implications of sustainability issues, appear as a primary concern for companies wanting to stimulate a more proactive stance on climate issues. Consequently, raising and directing managers' awareness of harmful climate impacts emerge as an important task. However, assessing and communicating the potential implications of climate change on a company's business activities is not an easy task.
The understanding of climate impacts on business is hindered by uncertainties concerning the type, the occurrence, the scale and the location of anticipated impacts. Similar uncertainties are further heightened when paired with the complexity of modern organizations' supply chains and the difficulties associated with monitoring business activities in constantly evolving market and competitive environments. Raising awareness of climate change also means stimulating concern for the indirect impacts of climate modifications on a wide array of interconnected activities, such as production, procurement, distribution and regulatory compliance. Therefore, assessing companies' exposure to climate risk also implies acknowledging risks associated with modifications in the institutional, market and regulatory environment in which the company operates, as a consequence of climate change.
Because of these uncertainties and complexities, climate impacts are hard to detect and judge based on personal experience, and organizations may therefore fail to interpret, internalize and promptly react to external climate stimuli.
Accordingly, companies' assessment of climate change should rely on an analytical and statistical appraisal of risks. This implies the need to further investments in developing appropriate risk management tools, methodologies and capabilities. Risk assessment tools and methodologies support managers in monitoring and interpreting stimuli from the natural, institutional and business environment, for decision-making purposes. However, climate risk appraisal, if detached from personal experience, is not a sufficient trigger of organizational action. Our underlines the importance of the human dimension in the sensing process underlying corporate climate action. Accordingly, enhancing managerial proactivity with regard to climate issues entails paying attention to the way climate change issues are framed by organizational members. To this aim, behavioural decision research has offered insights on how to shape social perceptions on climate change. E.g., the use of behavioural nudges can alter interpretations and framings of climate issues and facilitate the understanding of complex scientific information.
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