Business and climate change: emergent institutions in global governance

Abstract

PurposeThis 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, 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, particularly emissions trading. This instrument is a crucial component of the Kyoto Protocol, which has started to be implemented, but is still surrounded by uncertainty and diversity across countries/regions.Design/methodology/approachInformation 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.FindingsBoth with regard to nonbargaining and bargaining strategies MNCs' prevailing view seems that they have to deal with distinctive national patterns, adopting a multidomestic, frequently home‐country‐focused approach. Their responses vary according to the national situation, with the level of activity in emissions trading frequently shaped by local management. Yet, 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.Research limitations/applicationsSince market mechanisms for climate change are just unfolding, follow‐up studies into larger numbers of firms would be worthwhile to unravel the dynamics. The aspects identified in this paper can be used as starting point for such analyses.Practical implicationsThe 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.Originality/valueThe paper explores how MNCs may help shape an emergent institution, considering the fact that they face the dualility of managing a global context and multiple local contexts.