BUSINESS CONTRIBUTIONS TO CLIMATE
CHANGE GOVERNANCE
(with an aside into ROI)
Ralph Hamann (University of Cape Town)
Tanja Börzel (Freie Universität Berlin)
With Farai Kapfudzaruwa and others…
How and why do business organisations
contribute to climate change governance,
particularly in areas of limited statehood?
Territories or policy
themes in which the state
struggles to enforce rules
or provide public goods
Intentional efforts at
climate change
mitigation and adaptation
Climate change as a “wicked problem”…
- Cause and effect, and costs and benefits, are distant
in space and time
- Technological lock-ins, inelasticity in demand
- Collective action problems…
 Failures in markets and governance
 A vital role for business organisations
“Your [business] leadership is essential: 1. To push
the envelope within your own business; 2. To bring
around others in your business field to be ambitious;
and 3. To create a virtuous cycle of push and pull
between public and private sectors to pave the road
toward sustainability and a low carbon future”
(Figueres, 2012).
Organisation
Organisational field
CLIMATE CHANGE AS
WICKED PROBLEM
5
Institutional drivers: e.g.
- State regulation
- “Private” regulation
- Consumer / NGO / peer pressure
Organisation
Organisational field
6
Competitiveness-driven
innovation in processes,
products, business models
Organisation
Institutional drivers: e.g.
- State regulation
- “Private” regulation
- Consumer / NGO / peer pressure
Organisational field
7
Competitiveness-driven
innovation in processes,
products, business models
Institutional drivers: e.g.
- State regulation
- “Private” regulation
- Consumer / NGO / peer pressure
“Shadow of anarchy”
Organisation
Organisational field
8
Competitiveness-driven
innovation in processes,
products, business models
Institutional drivers: e.g.
- State regulation
- “Private” regulation
- Consumer / NGO / peer pressure
“Shadow of anarchy”
Organisation
Organisational field
Companies as “institutional entrepreneurs”
Lobbyists
Participants in public deliberation
Building capacity of state / others
9
Typology of strategic options for corporate responses to climate
change, according to Kolk and Pinkse (2005) - mitigation
Innovation
Compensation
Internal
(Company)
Process
Improvement
GHG accounting
and internal
transfers
Vertical (supply
chain)
Product
Development
Supply-Chain
Measures
Horizontal (beyond New Product and
the supply chain) Market
Combinations
Acquisition of
Emission Credits /
Political activism
10
Adaptation options ranging from coping to transformation,
based on Moser and Ekstrom (2010)
Resources &
investments
typically
required
System
transformation
More substantial
adjustments
Coping measures
Short term
Re-active
Long term
Pro-active
11
External
LOCUS OF
INTENT
Internal
Shorter-term
INVESTMENT
TIMEFRAME
Longer-term
12
External
LOCUS OF
INTENT
Internal
Emphasis on
exploiting existing
resources and “lowhanging fruit”
Shorter-term
INVESTMENT
TIMEFRAME
Emphasis on
developing new
resources, innovation
and learning
Longer-term
13
External
LOCUS OF
CAPABILITIES
Lobbying &
advocacy
External
insurance
Offsets &
trading (GHG,
water)
Measurement &
reporting (GHG,
water)
Innovation in
products &
services
System innovation
Innovation in
business models
Innovation in
processes
Internal
Lower effort
Shorter-term
LEVEL OF EFFORT
AND INVESTMENT
TIMEFRAME
Higher effort
Longer-term
14
External
LOCUS OF
CAPABILITIES
Lobbying &
advocacy
External
insurance
Offsets &
trading (GHG,
water)
Measurement &
reporting (GHG,
water)
Innovation in
products &
services
System innovation
Innovation in
business models
Innovation in
processes
Internal
Lower effort
Shorter-term
LEVEL OF EFFORT
AND INVESTMENT
TIMEFRAME
Higher effort
Longer-term
15
External
LOCUS OF
CAPABILITIES
Lobbying &
advocacy
External
insurance
Offsets &
trading (GHG,
water)
Measurement &
reporting (GHG,
water)
Innovation in
products &
services
System innovation
Innovation in
business models
Innovation in
processes
Internal
Lower effort
Shorter-term
LEVEL OF EFFORT
AND INVESTMENT
TIMEFRAME
Higher effort
Longer-term
16
ROI =
gain from investment – cost of investment
cost of the investment
ROI calculations are not an exact science!
– Expected ROI is used to help make decisions, not to make accurate
predictions
– Assumes capital investment, while many important strategic
decisions do not involve or require investment
– Key terms (“investment”, “gain”, “cost”) can often be defined in
diverse ways
– There are usually significant assumptions that need to be made and
contingencies that are difficult to quantify (e.g. GDP growth)
– Trends point to the need to broaden our measures in national and
organizational accounting (e.g., “green GDP”, integrated reporting)
17
ROI plays an important role in sustainability strategy
Managers’ challenges in implementing sustainability efforts
18
ROI analyses complete or underway…
19
ROI and strategy, culture and innovation
• Most sustainability related investments are made for
strategic reasons, not clear ROI calculations
• ROI cannot account for the impact of (disruptive)
innovation
• ROI depends on the organisational context and culture
20
Resources &
investments
typically
required
Short term
Re-active
Enablers:
• A commitment to evidencebased management and
performance measurement
• A broader delineation of the
firm’s boundaries, including
Long term
suppliers in the definition
of
Pro-active
the business case
21
Conclusions
1) Business leadership is essential in tackling the “wicked
problem” of climate change, creating a “push and pull”
relationship with the state
2) There are a broad range of business responses across a
spectrum from “low hanging fruit” to more innovative
and exploratory efforts
3) ROI is an important decision-making tool, but it is limited
in providing guidance in this context, and it is
circumscribed by strategy and culture
22
Thank you
ralph.hamann@gsb.uct.ac.za
23
Institutional drivers:
 State regulation and the “shadow of
hierarchy”
 “Shadow of anarchy”
 Norm diffusion and NGO activism,
consumer preferences
Organizational
response
Institutional drivers:
 State regulation and the “shadow of
hierarchy”
 “Shadow of anarchy”
 Norm diffusion and NGO activism /
consumer preferences
Organizational drivers:
 Brand name and market orientation
 Culture and leadership commitment
 Knowledge and learning
Organizational
response
Institutional drivers:
 State regulation and the “shadow of
hierarchy”
 “Shadow of anarchy”
 Norm diffusion and NGO activism /
consumer preferences
Organizational drivers:
 Brand name and market orientation
 Culture and leadership commitment
 Knowledge and learning
Issue area:
 Problem pressure and issue salience
 Task complexity
 Type of goods – public or common pool
resources
Low task complexity 
State regulation
Organizational
response
High task complexity 
Shadow of anarchy
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http://www.nbi.org.za