Impact of stakeholder pressure on the adoption of carbon management strategies: Evidence from Australia

Abstract

Purpose

This paper aims to examine whether the perceived pressures from stakeholders with high potential to cooperate and/or threaten the firm’s survival affect the decision to adopt carbon management strategies (CMSs).

Design/methodology/approach

A logistic panel regression model is estimated using longitudinal data from Australia’s Top-200 listed firms over seven years from 2009 to 2015. The authors test the firm’s propensity to adopt CMSs conditioned on the influence of four groups of stakeholders: the regulators, institutional investors, media and creditors. Data on CMSs adopted by firms are sourced from Thomson Reuters ASSET4 database, the Carbon Disclosure Project survey, annual reports, company websites and sustainability reports.

Findings

The authors show that stakeholder pressures are associated not only with the adoption or non-adoption of CMSs but also with the type of CMSs adopted. Three types of CMSs are identified, namely, compensation, reduction and innovation strategies. The findings reveal that CMS adoption and the firms’ propensity to adopt compensation and reduction strategies are significantly related to perceived pressures from the regulators, media and creditors. While pressure from the regulators is also associated with the firms’ propensity to adopt innovation strategies, a more advanced type of CMSs, the potential pressure from the media and creditors are not significantly related.

Practical implications

The findings imply that a firm’s adoption of CMSs is not merely about managing stakeholders in the regulatory sphere but also about taking into account the perceived pressures from non-regulatory stakeholders and the context-dependent nature of their influences. The authors show that by influencing the voluntary disclosure of carbon emissions, the government continues to be effective in encouraging firms to take action on climate change despite the abolition of the carbon tax in Australia.

Social implications

This study highlights that, apart from a heavy-handed approach, regulators can adopt softer forms of regulation such as the National Greenhouse and Energy Reporting (NGER) Act and a less invasive, stakeholder-driven approach to encourage firms to adopt CMSs and thereby work towards climate change mitigation.

Originality/value

This study extends the literature by showing that perceived pressure from some stakeholders found to be influential in relation to some corporate decisions (such as environmental strategy adoption and climate-change-related disclosure) may not necessarily be influential in relation to CMS adoption.

Citation

Yunus, S., Elijido-Ten, E.O. and Abhayawansa, S. (2020), "Impact of stakeholder pressure on the adoption of carbon management strategies: Evidence from Australia", Sustainability Accounting, Management and Policy Journal, Vol. 11 No. 7, pp. 1189-1212. https://doi.org/10.1108/SAMPJ-04-2019-0135