Firm Adaptation to Climate Change: Applying the GISTe Model to a Cohort of FT500 Firms 2004-2020

Abstract

We develop a 17-year longitudinal data-driven application of the GISTe model aggregating data involving how firms adapt to climate change and decarbonization at five four-year intervals between 2004 and 2020. We apply the model to a cohort of 117 FT500 North American and European firms, by coding firm-level responses to the 2004, 2008, 2012, 2016, and 2020 Carbon Disclosure Project (CDP) database with high-quality information. The GISTe model comprises a two-stage process, namely Walk I and Walk II. Walk I represents devoting scarce resources to governance (G), information management (I), and systemic (S) capabilities. Walk II builds on Walk I by making technology investments (Te) and ultimately transforming firm behavior. Walk I investments initiate and prepare the firm to transition to a greater level of proactivity towards climate change, while long-term capital investments along Walk II lead to meaningful large and permanent reductions in the firm’s carbon footprint and transforms the firm. Initiating the transition paradigm towards greater integration of climate change into a firm’s business operations starts with the importance of climate change to the Board and top management C-suite team. This level has responsibility for the vision, allocation of scarce resources, and strategic direction of the firm.