Climate Litigations and Corporate Emissions

Abstract

Climate lawsuits against corporations are on the rise as a means to advance climate action and accountability in the private sector. However, little is known about how firms respond to these pressures. This study highlights the important role of litigation claims utilized, particularly the nature of plaintiffs’ relief requirements, in shaping corporates’ emission behaviors. We argue that, in response to litigation that exclusively seeks financial relief for corporate contributions to climate change, firms ironically increase local emissions rather than decrease emissions, as firms interpret financial penalties not as deterrents but rather manageable and predictable costs of doing business— a de facto “license” to pollute. Exploiting a novel dataset of staggered U.S. climate litigation cases filed between 2010 and 2022, together with facility-level emissions data, we provide strong empirical evidence supporting our theory. Further analysis reveals that this tendency is weaker in regions with strong public support for emissions reductions and where corporations are repeatedly litigated, but stronger in electorally competitive districts where firms can exert greater influence over legislative and regulatory processes. Our additional analysis affirms that litigations seeking mixed forms of relief beyond pure financial claims do not induce the same effect and insignificantly impact corporate emissions. Our findings call for attention to the unintended consequences of relying solely on financial compensation as a tool for climate governance and contribute to our understanding of emerging legal drivers behind corporate climate actions.

Speaker Biography

Shipeng is an Assistant Professor of Management and Strategy at the University of Hong Kong. He holds a PhD from IESE Business School in Spain. With a focus on corporate sustainability and ESG, his research has appeared in journals such as Administrative Science Quarterly, Organization Science, and Journal of International Business Studies. He currently serves as a Senior Editor for the journal Management and Organization Review and as a Deputy Editor for Organization & Environment. He is also the 2023 recipient of the Emerging Scholar Award from the Organization and Natural Environment Division of the Academy of Management.