How Firms Construct Climate Identities in New Zealand: Resolving the Tensions Between Economic Imperatives and Climate Goals

Sustainable Development

How Firms Construct Climate Identities in New Zealand: Resolving the Tensions Between Economic Imperatives and Climate Goals

ABSTRACT

Drawing on legitimacy theory, the aim of this study is to answer the research question: 'How does corporate climate identity construction enable firms to make legitimacy claims while managing tensions between the economic imperatives and climate goals?' The research design relies on a discourse analysis of two hundred fifty-two corporate reports published between twenty twelve and twenty twenty-one from fifty firms listed on the New Zealand Stock Exchange. This is coupled with thirty-five semi-structured interviews with representatives from twenty-eight firms in the sample. The findings suggest that firms largely adopt climate targets as a tool of legitimacy rather than to substantively decarbonise their operations. Committing to the targets allows firms to construct narratives that position them as climate leaders and as responsible, transparent entities that are compliant with emerging regulatory norms. These identities also allow them to claim discursive, technical, and relational forms of legitimacy even when the changes to their business models are not particularly meaningful. This study contributes to the literature on corporate climate governance by providing insights into the processes through which climate identities are constructed. The research also shows how firms leverage these identities to appease stakeholder expectations that the firm is doing something about climate change while still meeting their mandate to perform financially.

One Introduction

The impact of climate change is not only driving new regulations, but also technological disruption and competitive discontinuity. Firms have undertaken a variety of responses to the dominant climate discourse. Some firms have called for debate, lobbying against the idea of regulating greenhouse gas emissions. These firms tend to promote doubt about whether climate change even exists and, if it does, whether it is all that serious. Essentially, they attack climate science and the integrity of the climate scientists, too. By contrast, other firms have sought to accommodate regulatory changes by reassessing their strategies and branding themselves as good and green corporate citizens. Thus, firms are facing a difficult dilemma-the choice between their profitability and preserving the environment. To this end, constructing a corporate identity that depicts the firm as pro-mitigating climate change can be a convenient way out.

When a firm's identity meets the expectations of its stakeholders, firms gain legitimacy. However, when it does not, that can cause confusion, evoke disapproval, and threaten the firm's survival. Hence, in establishing an identity, firms generally want to signal that they are listening to their stakeholders and changing their practices accordingly. Such identities typically not only present a self-affirming, motivating vision of the firm but may also be designed to influence stakeholders. In this vein, constructing an identity around mitigating climate change might allow firms to actively shape the world through guidance and policy. In fact, within these identities, it is not uncommon for firms to replicate the logic of their most dominant stakeholders. Moreover, these identities can glue an organisation together in its thinking, deciding, and doing, thus deepening relationships with stakeholders.

To date, the research on creating corporate identities, especially ones built around sustainability, has focused on external pressures. For example, Backer argues that firms revise their identities as a form of protection against external stakeholder pressure. Onkila et al. point out that firms often build a 'green' identity through sustainability reporting. However, while tools such as codes of conduct, sustainability reporting, and target setting exist, they do not reveal how these practices shape identity internally. To fill this gap, this study focuses on both internal and external practices for establishing a corporate identity. This should provide a deeper understanding of how these identities allow firms to gain legitimacy without making any substantive changes to their underlying business models. More specifically, I seek to answer the following research question: 'How does corporate climate identity construction enable firms to make legitimacy claims while managing tensions between the economic imperatives and climate goals?'

Many firms consider climate targets as strategically important and incorporate them into their business plans. Although such targets might be a compelling tool for driving environmental performance, arguably these goals are only meaningful if they are based on the principles of planetary boundaries, that is, science-based targets-a 'fair share' of the total greenhouse gas emissions reductions required to ensure that the global average temperature does not rise to more than two degrees Celsius higher than pre-industrial levels.

Although setting climate targets may help to legitimise an organisation, this also poses challenges. As Baczewski and Payne note, long-term targets are often faith-based exercises, based on the hope that technologies will mature, infrastructure will emerge, and policy will catch up. Jiang et al. report that, of over one thousand organisations with science-based targets, nine percent failed to achieve them, sixty percent were achieved, but also thirty-one percent of targets 'disappeared' in the sense they were quietly dropped due to the likelihood of failure. Alternatively, they may have been updated to more ambitious future targets without reporting the outcome of the original goal.

Thus, the tensions and contradictions between achieving science-based targets and business growth remain. These tensions highlight the importance of corporate identities; that is, how firms construct a coherent sense of self while engaging in multiple social interactions and conflicting demands. Research on how science and law affect corporate discourse, and how identities based on mitigating climate change are constructed, is therefore of great importance.

In this endeavour, I draw on evidence from New Zealand. New Zealand was one of the first countries to take action against climate change by signing up to the Kyoto Protocol and introducing a Carbon Tax in two thousand two. Then, in two thousand seven, the Carbon Tax was replaced with an Emissions Trading Scheme. Further, in two thousand fifteen, with the advent of the Paris Agreement, New Zealand implemented policies to help meet the world's two degrees Celsius target. More recently, New Zealand has sought to further limit emissions to fifty-one to fifty-five percent of two thousand five gross emission levels by two thousand thirty-five. The government passed the Zero Carbon Act in two thousand nineteen, with a target of net zero carbon by two thousand fifty. And, last but not least, New Zealand was the first country in the world to mandate climate-related risk disclosures by financial institutions under the Financial Sector (Climate-related Disclosures and other Matters) Amendment Act in two thousand twenty-one. These initiatives all aim to drive meaningful climate action. Despite this long history, however, New Zealand's national domestic emissions levels by two thousand thirty seem certain to exceed its declared commitments. Hence, New Zealand will need to resort to 'offshore mitigation' through international collaboration if it is to meet its goals.

To the best of my knowledge, no prior research examines how firms adopt climate targets and use those targets to construct climate identities which are not necessarily matched by substantive climate action, at least not in New Zealand. This research therefore reveals how different corporate identities are used to resolve the tension between the conventional discourse of maximizing profit and the increasing expectation that good corporate citizens should work to mitigate climate change, particularly through Science-Based Targets.

The first step in the analysis was to review corporate reports. This revealed how firms ideologically construct an identity that balances climate accountability with a profit imperative. These empirical insights extend prior research on corporate identity politics, demonstrating how identities are critically shaped to respond to the climate crisis. This should help firms understand how to position themselves within the social, scientific, and regulatory context of climate change.

Moving beyond the polished public discourse found in corporate reports, I also conducted interviews. This exposed the backstage sense-making of managers in terms of the constraints firms face when setting targets, the negotiations they undertake, and the pragmatic compromises they must make. Their responses reflect the fragile balance between public discourse and how firms bridge contradictions ideologically.

The rest of the paper is structured as follows. The next section presents a review of the literature on climate targets as identity claims, climate identity construction as legitimacy work,

decoupling between climate targets and real mitigation action, and legitimacy versus accountability in climate actions. Then, the research methods are explained, followed by the findings and a discussion of the insights revealed. Lastly, the conclusion summarizes the contributions and limitations of the study.