From Boardrooms to the Biosphere: Global Corporate Climate Governance in Action

Trinh, VQ; Cao, DN

doi:10.1093/9780198945239.003.0049

From Boardrooms to the Biosphere: Global Corporate Climate Governance in Action

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Abstract

Literature highlights an increasing need to transition from traditional corporate governance structures to climate-focused governance systems, as conventional models often fail to adequately reflect firms’ commitments to tackling climate change, an issue of critical importance to both the environment and human life. Climate governance mechanisms typically include the establishment of environmental committees, the implementation of climate-linked incentive structures, and the disclosure of sustainability-related reports. This article investigates whether, and to what extent, the strength of climate governance mechanisms affects corporate commitment to addressing climate change. Using an international dataset comprising 17,952 firm-year observations from 1,207 firms across 32 countries between 2002 and 2021, the research provides consistent and robust evidence that firms with stronger climate governance frameworks exhibit significantly greater commitment to climate-related initiatives. Extended analyses further show that strong climate governance is associated with (a) higher environmental scores, suggesting enhanced environmental disclosure, but (b) higher actual levels of carbon emissions. These findings indicate that although firms with stronger climate governance appear more committed to climate-related disclosures and governance practices, this does not necessarily translate into real reductions in carbon emissions. The results offer important implications for policy-makers aiming to design more effective environmental regulations at both national and international levels.