Transgression of Planetary Boundaries: Are Multinational Firms Addressing the Emergent Risks?

Abstract

The debate around corporate sustainability has become increasingly heated, with opinions ranging from denial of climate change to fatalistic acceptance of an impending collapse of civilization. This study examines how multinational enterprises, which contribute to nearly half of global GDP, internalize knowledge of planetary boundaries and take action within the organization or externally with investors, industry bodies, and policymakers. The research is grounded in empirical analysis of longitudinal data on two large samples of multinationals. It is found that, despite warnings from scientists about breaching planetary boundaries, multinationals, at best, follow an incremental approach to sustainability initiatives that collectively fail to drive positive global change. This well-entrenched practice remains unquestioned by external stakeholders, such as regulators, investors, and lenders. The research explains this behavior through (a) our inability to link global scientific findings to non-financial performance imperatives for individual businesses, and (b) our reliance on traditional enterprise risk management models that are less effective in a non-ergodic world.