Does it pay to be science-based green? The impact of science-based emission-reduction targets on corporate financial performance

The number of companies with highly ambitious carbon emission targets is increasing rapidly. So-called science-based emission-reduction targets (SBTs) are aligned with the aim of the Paris Climate Agreement to limit global warming to below 2°C and preferably to 1.5°C. These voluntary corporate emission targets are substantially more challenging than companies’ prevailing reduction objectives, because climate science guides the target setting. By 2021, more than 2200 companies had publicly engaged in SBTs, covering more than a third of the global market capitalization. The number of participating firms has essentially doubled every year since the first SBTs in 2015. Despite this increased empirical relevance, the impact of SBTs on firm outcomes remains unclear. Notably, their effect on corporate financial performance (CFP) is unknown. The present study addresses this research gap by empirically examining the relationship between corporate carbon emission performance (CCP) and CFP of firms with SBTs from 2015 to 2020. The cross-country panel comprises 2014 observations of 465 firms. Our findings indicate a positive association between CCP and CFP for firms engaging in SBTs, implying a positive relation between decarbonization efforts and financial results. We thereby advance research on the important question of when it pays to be green. On a practical level, we provide transparency on the effects of SBTs for managers and climate-change advocates.     

The Dematerialization Potential of the Australian Economy

In this article we test the long‐term dematerialization potential for Australia in terms of materials, energy, and water use as well as CO₂ emissions by introducing concrete targets for major sectors. Major improvements in the construction and housing, transport and mobility, and food and nutrition sectors in the Australian economy, if coupled with significant reductions in the resource export sectors, would substantially improve the current material, energy, and emission intensive pattern of Australia's production and consumption system. Using the Australian Stocks and Flows Framework we model all system interactions to understand the contributions of large‐scale changes in technology, infrastructure, and lifestyle to decoupling the economy from the environment. The modeling shows a considerable reduction in natural resource use, while energy and water use decrease to a much lesser extent because a reduction in natural resource consumption creates a trade‐off in energy use. It also shows that trade and economic growth may continue, but at a reduced rate compared with a business‐as‐usual scenario. The findings of our modeling are discussed in light of the large body of literature on dematerialization, eco‐efficiency, and rebound effects that may occur when efficiency is increased. We argue that Australia cannot rely on incremental efficiency gains but has to undergo a sustainability transition to achieve a low carbon future to keep in line with the international effort to avoid climate change and resource use conflicts. We touch upon the institutional changes that would be required to guide a sustainability transition in the Australian economy, such as an emission trading scheme.     

Management into the Development Strategies of Urbanizing Regions in Asia: Implications of Urban Function, Form, and Role

The way urbanization unfolds over the next few decades in the developing countries of Asia will have profound implications for sustainability. One of the more important opportunities is to guide urbanization along pathways that begin to uncouple these gains in well-being from rising levels of energy use. Increasing energy use for transport, construction, climate control in houses and offices, and industrial processes is often accompanied by increasing levels of atmospheric emissions that impact human health, ecosystem functions, and the climate system. Agriculture, forestry, and animal husbandry alter carbon stocks and fluxes as carbon dioxide, methane, and black carbon. In this article we explore how carbon management could be integrated into the development strategies of cities and urbanizing regions. In particular, we explore how changes in urban form, functions, and roles might alter the timing, aggregation, spatial distribution, and composition of carbon emissions. Our emphasis is on identifying system linkages and points of leverage. The study draws primarily on emission inventories and regional development histories carried out in the regions around the cities of Manila, Jakarta, Ho Chi Minh City, New Delhi, and Chiang Mai. We find that how urban functions, such as mobility, shelter, and food, are provided has major implications for carbon emissions, and that each function is influenced by urban form and role in distinct ways. Our case studies highlight the need for major "U-turns" in urban policy.     

The Physical Economy of the United States of America

The United States is not only the world's largest economy, but it is also one of the world's largest consumers of natural resources. The country, which is inhabited by some 5% of the world's population, uses roughly one‐fifth of the global primary energy supply and 15% of all extracted materials. This article explores long‐term trends and patterns of material use in the United States. Based on a material flow account (MFA) that is fully consistent with current standards of economy‐wide MFAs and covers domestic extraction, imports, and exports of materials for a 135‐year period, we investigated the evolution of the U.S. industrial metabolism. This process was characterized by an 18‐fold increase in material consumption, a multiplication of material use per capita, and a shift from renewable biomass toward mineral and fossil resources. In spite of considerable improvements in material intensity, no dematerialization has happened so far; in contrast to other high‐income countries, material use has not stabilized since the 1970s, but has continued to grow. This article compares patterns and trends of material use in the United States with those in Japan and the United Kingdom and discusses the factors underlying the disproportionately high level of U.S. per capita resource consumption.