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“Soft” Climate Change Exposure and Firm Performance Across Countries: Legitimacy Theory Perspective

Year: 2025

Type: article

Abstract: ABSTRACT This paper examines the impact of a firm‐level ‘soft’ measure of climate change exposure on the performance of 6228 companies across 40 countries (2001–2021) using legitimacy theory. We find that the relationship between climate change and performance is contingent upon industry and the content of climate change exposure (opportunities, regulatory, and physical). Industry‐level analysis reveals that the top 10 high‐exposure industries generally experience negative performance impacts, whereas the bottom 10 low‐exposure industries exhibit positive effects. In terms of content, physical exposure positively affects performance, regulatory exposure negatively impacts performance, and opportunity exposure shows an insignificant positive effect. Climate change thus presents industry‐ and content‐specific risks and opportunities, highlighting the need for targeted policy incentives to encourage genuine climate‐related investments. Theoretically, climate exposure conveys either symbolic legitimacy (tokenism without real impact) or substantive legitimacy (genuine, tangible effects), depending on industry context and the nature of exposure.

Source: Business Strategy and the Environment

DOI: 10.1002/bse.70029

Authors: Naimat U. Khan, Mushtaq Hussain Khan

Institution: Cardiff Metropolitan University

Language: English

Topic: Corporate Social Responsibility Reporting

Subfield: Strategy and Management

Field: Business, Management and Accounting

Domain: Social Sciences

SDGs: Climate action, Decent work and economic growth

Open Access status: hybrid

Estimated APC paid: $4,480