Corporate climate adaptation proactivity: an empirical investigation of managerial perceptions and the role of environmental management control systems
Creators: name: PATABENDIGE, Sugeeth
Publisher: name: RMIT University
Year: 2024
Subjects: classificationCode: 350105
subject: Management accounting
classificationCode: 350107
subject: Sustainability accounting and reporting

description: Organisational adaptation to climate change is a critical global challenge. Increasingly, mitigation efforts based on incremental approaches by businesses are seen as inadequate, and there are fervent calls for more transformational changes at both the strategic and operational levels. This thesis assesses how organisational climate adaptation strategies are a function of managerial perceptions of climate risks and the style of use of environmental management control systems (EMCS). The level of proactive responses by business to climate change risks (hereon referred to as corporate climate adaptation proactivity, or CCAP) is vital for organisational survival. CCAP may range from highly passive to highly proactive, where strategic processes and outcomes are distinguished by initiatives to adapt and manage climate risks that are incremental, short-term and localised in nature through to transformational, long-term and pervasive to the organisation. However, our understanding on how individual and organisational level control features may better facilitate an organisation's CCAP to meet emerging risks and opportunities related to climate change is still nascent.

Conceptual guidance for this study is drawn from Rogers' (1975; 1983) Protection Motivation Theory (PMT), a psychology-based human behavioural theory, and Simons' (1995) Levers of Control (LOC) framework, where control mechanisms are seen to function in enabling and controlling ways. PMT proposes that responses to fearful situations are shaped by the perceptions of risk likelihood and impacts, and the capacity to respond to the perceived risks. The EMCS literature suggests that control features and practices can lead to enabling outcomes - or example, creative and innovative solutions through leveraging belief and interactive LOC - as well as controlling outcomes by leveraging boundary and diagnostic LOC, enhancing predictability, efficiency and meeting preset targets. However, there is negligible empirical evidence on the duality of LOC (i.e. enabling and controlling) within an EMCS context, and managerial perceptions of climate risks and their impacts on CCAP, which form the main motivational basis for this study.

This study employs a multiple case study design within an agriculture setting in Sri Lanka, with evidence derived from four large plantation companies (Alpha, Beta, Delta and Gamma). Sri Lanka was chosen as it is a developing nation where climate risks are seen to pose serious threats to the economy, environment and society at large, and ranked second in the world in terms of exposure to climate change risks. Evidence is drawn from in-depth interviews of 42 senior and middle level managers, as well as documentary analysis and field visits, which provide rich insights for the research questions. 

The findings of the study suggest that while incremental climate change initiatives are undertaken in all four cases, only two case companies, Alpha and Beta, had advanced to taking on a more transformational strategy where there was a major overhaul of their business models. Incremental climate adaptive strategies largely involved improving agriculture practices around environmental management of soil and water, and other largely physical issues. However, Alpha and Beta proceeded to transform their business models to be defined by and enrooted in new and innovative products and markets. 

The results of this study are consistent with the PMT proposition that managerial perceptions of climate change risk and organisational adaptive capacity vary with the nature and extent of CCAP. The two companies which engaged in more transformational strategies appeared to view climate change risk as entailing very high business risk, and climate change adaptation to be a strategic imperative, compared to managers from the two less proactive companies. In terms of managerial assessments of their organisation's ability to adapt to climate change, this study finds that the two companies which engaged in transformational strategies assessed a higher number of adaptive responses and considered adaptive responses to be generally effective against climate change risks than the two companies which engaged only incremental strategies. It is also evident that sustainability beliefs and interactive discussions through workshops and regular performance reviews particularly supported risk assessments and adaptive capacity development and the transformational adaptation of the high CCAP companies. Thus, the study finds LOC within an EMCS context to play an equally important role in managerial assessments of climate change risks and their organisational adaptive capacity in driving climate adaptive actions of companies.

The style of use of EMCS is also seen to play an important part in transitioning from incremental to transformational change. Findings show that managers mobilise belief and interactive systems to facilitate more innovative, longer term strategic transformations as evidenced by expansions into alternative product markets or alternative use of land resources. By contrast, the use of boundary and diagnostic controls tends to motivate more short-term incremental solutions such as support of soil rejuvenation initiatives and use of precision agriculture technologies. Interestingly, the study demonstrates that companies that utilise EMCS in a balanced manner tend to undertake more transformational climate change adaptation. Further, the presence of informal controls and discourses on climate risk, and the use of external sustainability certification processes, were also instrumental factors in shaping CCAP.

The results of this study extend the EMCS and LOC literature in identifying the importance of using all four LOC in a balanced manner, and that such balance is also open to external factors. The study also guides the agriculture sector on the importance of having managers informed and included in change adaptations where climate risks are provided clear boundaries, and in the development of action plans that strengthen capacity to adapt to climate change, in both physically and in business models. The findings of the study are vital for countries such as Sri Lanka where the plantation industry is particularly vulnerable to climate change and there is a need for support from multi-level governance and support mechanisms, including the government, plantation leaders and the community, that can induce innovative, transformative solutions. The results of this study have implications for regulatory and professional practices within the agriculture sector.