Carbon Choices: Understanding Firm-Level ESG and Demand for Public Regulation

• In Event: Political Economy of Firms

Abstract

Policies to mitigate and adapt to climate change entail significant economic costs for firms. However, despite firms' initial resistance to environmental regulation, this trend started to shift around the late 1990s. More recently, a rising number of multinational corporations (MNCs) have integrated Environmental Social Governance (ESG) strategies into their business plans. Exploring the drivers and consequences of firm-level ESG strategies is essential for tackling climate change since a considerable portion of global GHG emissions is produced by a relatively small number of MNCs. By utilizing a multi-method approach, this paper investigates why firms increasingly commit to seemingly costly environmental self-regulation and whether these self-regulatory activities preempt the demand for stringent public regulation for firms. First, the paper introduces a novel text-based measure of firm-level environmental self-regulation using an original dataset of Environmental Social Governance (ESG) reports of Fortune 1000 companies. Then, it shows that carbon-intensive industries are more likely to allocate space to climate-change-related topics in their ESG reports. Second, using an original online survey experiment with a representative sample of 2,000 respondents in the US, I show that people are more likely to demand stringent public regulation for low-environmental performance firms, especially those headquartered abroad. Nonetheless, corporate self-regulation does not preempt demands for formal environmental regulation. These findings contribute to multiple sets of literature on the international political economy of climate change, public attitudes toward investment restrictions, and, more broadly, the role of businesses in contentious politics.

Author

• Volkan Tibet Gur, Rutgers University, New Brunswick