To Adapt or to Mitigate: Climate Change Cognition, Green Innovation and Environmental-Social Performance

Abstract

While climate change profoundly impacts various aspects of society, its effects on corporate environmental-social performance (ESP) remain inconclusive, and the mechanism of this influence is still inadequately understood. Based on natural resource dependence theory, this study investigates the intricate influence of corporate climate change cognition on ESP, as well as the mediating effect of green innovation, which includes green technology innovation (GTI) and green management innovation (GMI). We assume that the aforementioned influence is achieved through the shift between mitigation and adaptation strategies for addressing climate change. Using panel data of 26,678 firm-year observations of 3928 Chinese A-share listed companies from 2010 to 2023, the study applies fixed effects panel regression and bootstrap methods to test study hypotheses. The results reveal an inverted U-shaped relationship between climate change cognition and ESP. Notably, GMI partially mediates the relationship between climate change cognition and ESP, while GTI does not. Furthermore, heterogeneity analysis reveals that the impact of climate change cognition on ESP is more pronounced in eastern regions, low environmental uncertainty, state-owned and technology-intensive firms. Overall, this study reconciles the existing inconsistent views on the relationship between climate change cognition and ESP, and proposes recommendations for adopting strategic climate change cognition to promote corporate sustainable development from both government and firm levels.