Carbon neutrality drivers and implications for firm performance and supply chain management

Abstract

AbstractMany nations have committed to achieving carbon neutrality to combat climate change, but little is known about its drivers at the micro level and implications for firm performance and supply chain management. To address the knowledge gap, this research conducts case studies of seven early movers in the initiative by exploring the key drivers, influential stakeholders and effects of institutional pressures. We find four major drivers: ‘customer enforcement’, ‘sustainable business value’, ‘environmental legitimacy’ and ‘competitive pressures’. Customers and competitors were the most influential external stakeholders. Shareholders and top management with intrinsic environmental values, being internal stakeholders, played pivotal roles in a proactive move to carbon neutrality when there was limited regulatory pressure. The early movers believed in the long‐term economic benefits of transitioning to carbon neutrality. We also identify the implications of carbon neutrality initiatives for supply chain management. Based on the research findings, we develop a decision support framework to guide firms in transitioning towards carbon neutrality in a multi‐tier supply chain context.