Regulatory-induced uncertainties and corporate strategic responses: evidence from Australian climate policies

Purpose This study aims to explore how uncertainties associated with climate-related regulations can influence corporate strategic responses to carbon emissions management. Design/methodology/approach Drawing on Hoffmann et al. (2008) taxonomy of regulatory uncertainty, the authors carried out an interpretive qualitative field study, involving interviews and archival data collected from six large Australian-listed companies between 2013 and 2018. The authors analysed the interview data thematically. Findings Regulatory and regulatory-induced uncertainty significantly shapes managerial perceptions, influencing corporate strategies on climate-related risk management. It was evident that regulatory-induced uncertainties, as an exogenous shock from the carbon tax, pressured high-emitting corporations to act on carbon emissions to mitigate financial risks, regardless of political uncertainty. The findings also show that some companies tend to adopt more conservative strategies rather than explorative strategies due to regulatory uncertainties. Finally, institutional pressures exerted through the Task Force on Climate-related Financial Disclosures seem to have prompted carbon abatement actions that the Emissions Reduction Fund alone could not achieve among the case companies. Practical implications The findings will guide organisational decision-makers and regulators in deciding the type of strategic responses and understanding potential outcomes when managing uncertainties associated with specific climate-related regulations. Originality/value This study yielded valuable insights into how corporate managers view uncertainties regarding climate policy as strategic risks and how this perception influences their risk management strategies.