An assessment of factors contributing to firms’ carbon footprint reduction efforts

In recent years, companies have increasingly been taking measures to reduce their carbon footprint to minimize environmental impact. However, research that looks at factors that influence carbon emissions is scarce. We address this gap by empirically examining the impact of internal and external initiatives on firms' carbon footprints, as captured by their Scope 1, 2 and 3 emissions. Using secondary data collected from CDP (formerly the Carbon Disclosure Project), we carry out an inductive analysis to understand the role of some of the more commonly adopted practices for carbon footprint reduction by non-financial companies in the Global 500 list, which represents the largest companies by market capitalization. Specifically, we investigate factors contributing to internal and external decarbonization efforts in a company's supply chain, and how they affect emissions and financial performance outcomes. Consistent with past sustainability research, we include financial and environmental motives as key considerations for assessing the usefulness of carbon reduction practices. However, we find limited support for the factors that we hypothesized to influence carbon footprint reduction and economic benefits, and most firms pursuing carbon reduction initiatives were yet to see the effectiveness of the initiatives. All internal initiatives, except the disclosure scores, were positively associated with Scope 1 emissions. The influence of supplier engagement on Scope 3 emissions was significant, but non-significant on Scope 1 and Scope 2 emissions. As such, rigorous and comprehensive reporting about sources and the management of emissions do not necessarily translate into lower emissions by external supply chain partners. Finally, reduction of emissions per se did not lead to superior financial performance. Theoretical and managerial implications of these results are discussed.