Study Overview
While firms are increasingly responding to pressure to reduce their emissions by setting ambitious emissions reduction targets, many struggle to translate these targets into everyday investment and operational decisions. Practitioner experts claim that the use of internal carbon pricing (ICP), a novel management control that factors a cost of emissions into investment and/or operational decisions, can address firms’ struggles. We examine these claims using CDP survey data for a global sample of firms.
Study Results
We predict and find that emissions target substantiveness and ICP are complementary management controls. We examine variation in this complementarity and find results indicative of implementation challenges that firms face when combining ICP and substantive emissions targets. Our study provides novel evidence on the interrelation between two common yet relatively little-understood emissions-related management controls.