Explaining different corporate climate strategies

The previous section showed that North American and European oil companies have chosen significantly different climate strategies. ExxonMobil has chosen a reactive strategy, while BP and Shell have chosen a proactive strategy. The consequences of these strategies extend far beyond rhetoric. The US oil and fossil fuel industries have influenced US climate policy since the early 1990s and contributed to the US exit from the Kyoto Protocol. Conversely, the European oil industry has voluntarily led the way towards, in relative terms, a viable policy aimed at cutting GHG emissions. Even though this 'beauties and beast' distinction between US-based and European-based companies does not necessarily say much about their actual behaviour in terms of GHG emissions, it represents a clear indication of the kind of climate policy futures the oil companies are preparing for.28

As noted in the introduction, the oil industry is a global industry operating in a global market. The business opportunities and challenges offered by the problem of climate change would thus apparently be the same for ExxonMobil, Shell and BP. Why then have these companies chosen such different climate strategies? There are at least two different answers located at three levels of analysis. First, different strategies may be a result of differences between the companies themselves. Second, differences may have resulted from the different political contexts in which the companies operate. Differences in regulatory pressures and market opportunities may be generated at the national level as well as the international. International regimes and the EU can generate different responses among corporate actors to the extent they generate different rules, norms and principles for different (groups of ) actors.29

These two explanatory perspectives have some important consequences for governance in the field of climate change. If different climate strategies result mainly from differences between the companies themselves, the room for affecting corporate strategies by political means tends to be limited. Conversely, if political context accounts for the observed differences, the outlook for political institutions to influence the strategies of multinationals is brighter.

With respect to corporate-specific factors, the business management literature has developed a broad spectrum of factors to explain corporate environmental strategy choice.30 Factors such as the environmental risk faced by the companies, learning capacity, environmental reputation, leadership, corporate tradition and ownership have been singled out at the corporate level. Even though previous analyses have identified some differences along these lines, they have concluded that corporate differences do not sufficiently explain the significant differences in climate strategies (Rowlands, 2000; Skjœrseth and Skodvin, 2001). Similarities rather than differences dominate the picture of company-specific features related to economic and organizational factors relevant to climate strategies. ExxonMobil, Shell and BP are highly comparable in terms of core business areas, exploration and production volumes, resource reserves and incomes. Moreover, the three companies currently have very similar organizational structures - that is, they are all based on a corporate headquarters governing all parts of the organization according to the same principles, which ensures communication across all divisions. The most important difference between Shell, BP and ExxonMobil is perhaps the relative importance of European and US markets, which provides a backdrop for exploring the impact of factors related to the political context in these regions.

The 'nationality' of private multinational companies appears to be particularly important for their attitudes and strategies (Rowlands, 2000; Skjœrseth and Skodvin, 2003). Thus, in this context, the companies' home countries - the locations of their historical roots, their headquarters and many of their activities - are the main sources of explanation for strategy choice. The basic assumption is that corporations are affected by the social demand for environmental protection, the governmental supply of relevant policy, and the political institutions that link this supply and demand.

The variation in social demand for climate policy and the governmental supply of such policy create different pressures and opportunities for companies. A high degree of social demand creates the risk of consumer campaigns and boycotts of petroleum products like gasoline, which can affect the companies' market shares. On the other hand, a high degree of social demand also creates opportunities: companies can respond to green consumers' willingness to pay higher prices for clean energy products. Likewise, an ambitious climate policy in terms of targets and policy instruments exposes companies to regulatory pressure, while an active public policy on renewables creates market opportunities. A high degree of social demand for climate policy combined with an ambitious climate policy thus appears to be a forceful (and logical) combination in democratic systems stimulating proactive strategies. Conversely, a low degree of social demand and a lenient climate policy may provide corporations with correspondingly scant incentives (Skjœrseth and Skodvin, 2003).

The political institutions that link corporations and states can also influence the strategies of corporate actors. However, corporations do not only represent political targets for governmental policy, they also represent in themselves a social interest group with the potential to influence governmental policies. On the other hand, governmental decision makers can, in stereotypic terms, organize this relationship as a conflict-oriented process where the state imposes regulations on corporations excluded from the decision-making process, or as a collaborative, inclusive process where the state consults and negotiates goals and policy instruments with target groups. The conflict-oriented approach rests on punishment in cases of noncompliance and aims to avoid regulatory capture (where the regulated takes control over the regulator). This strategy is likely to produce resistance and a reactive strategy among companies. Conversely, the aim of a consensus-oriented approach is to raise awareness and promote social responsibility among companies. This strategy appears more compatible with a proactive corporate strategy. Whereas these approaches are likely to spur different corporate strategies, their relative short-term impacts on environmental policy effectiveness are not obvious.

It thus appears that a high degree of social demand, the supply of an ambitious policy and consensual political institutions will lead to a proactive climate strategy. This is borne out by the cases of the US and the EU (the UK and the Netherlands), which differ systematically along these dimensions, as will be discussed in more detail in the following section.

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