Climate change inaction: Why aren’t companies doing more?

Professor Daina Mazutis’ recent paper Sleepwalking Into Catastrophe: Cognitive Biases and Corporate Climate Change Inertia, published in the California Management Review touched on a hot topic: climate change.

Climate change and its impact on the future of the planet is a subject everyone is aware of, but where does business stand on it? Despite plentiful evidence that documents the severe financial impact of climate change on business, it appears that only 29% of companies consider climate change to be a “quite or very urgent” issue. How can we explain this perception – the corporate inaction that comes out of it?

The issue behind climate change inaction is a lot more complicated than it seems, Professor Mazutis contends. The study argues that cognitive biases sneak into the decision-making process and they are one of the reasons for businesses lack of action on climate change related issues. A cognitive bias occurs when someone’s perception of the reality is mistaken by one’s belief, against rationality or logic. They interfere directly in decision-making processes, preventing managers from making crucial strategic decisions with environmental consequences.

Professor Mazutis argues that climate change is a moral issue and yet managers fail to see it as such. This explains why there is a distance between the problems and the solutions. Decision-making processes in management are made strategically, but cognitive biases are obstructing from a strategic and from a most beneficial output for the future of the climate. This information needs to be communicated to the senior management of businesses, important stakeholders, and change experts.

As for solutions, Professor Mazutis has many. The article provides thirty different mitigating strategies to help tackle stubborn cognitive biases. For example, she argues that some cognitive biases occur when a problem is hard to understand or believe, especially if you haven’t lived or seen it. To resolve this issue, she suggests bringing stakeholders to places where climate change affects lives and people directly. A second solution would be to change stakeholders’ way of thinking. For example, with questions like: “If we wanted to do something about climate change, what could we do?” Changing should with could through thought experiments can stimulate different thought patterns and improve the overall decision-making process.

Although cognitive biases are present everywhere, acknowledging them is insufficient. Businesses have to go beyond that by planning for mitigating strategies. To do so, the help of change experts within businesses is crucial. Some are already making smart environmental decisions. Hopefully, more will follow a similar path.

More about the study:

Mazutis, D., Eckardt, A. (2017). Sleepwalking into Catastrophe: Cognitive Biases and Corporate Climate Change Inertia. California Management Review, article first published online May 25, 2017, http://journals.sagepub.com/doi/10.1177/0008125617707974