The Impact of Incentives for Managing Climate Change Issues on Greenhouse Gas Emissions: The Moderating Role of Firm Size

As global interest in sustainability practices in general—and climate change in particular—continues to grow, this study aims first to examine how corporate boards respond to this challenge by linking a portion of the incentives granted to executives to targeted climate protection practices and assessing the impact of this on total greenhouse gas emissions (GHGEs). The German context was chosen to test this relationship, as Germany is one of the most industrialized European countries that must pay close attention to the impact of its industries on climate change. This study applies a quantitative approach to a sample of 100 firms from 2017 to 2025, with a total of 486 observations. Depending on the Bloomberg database, the independent variable was measured as a dummy variable based on the presence of climate-related incentives for managing climate change issues (IMCCs). The dependent variable was measured using the natural logarithm GHGEs. The results showed that IMCCs have an insignificant association with a firm’s GHGEs (β2 = −0.106; t = −0.686; p-value = 0.493). The second objective of this paper is to test the moderating effect of firm size on this relationship. The interaction coefficient of firm size and IMCCs was negative and statistically significant (β10 = −0.255; t = −2.077; p-value = 0.038). This provides evidence of a moderating effect of firm size on the relationship between IMCCs and GHGEs. We demonstrated that IMCCs can simultaneously help to align management’s interests with those of shareholders, and act as mechanisms for strengthening stakeholder engagement, in large firms with the required resources and technical capabilities.