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Introduction
The impact of climate change on businesses has been explored in various ways in the literature. It is generally recognized that this issue presents certain companies with threats, opportunities or both (Park, 2013). In conjunction with the World Climate Summit in Paris in 2015, national governments are increasing their commitments to controlling greenhouse gas (GHG) emissions. China and the USA reached an agreement to limit GHG ahead of the talks in 2014 (Nakamura and Mufson, 2014). Francis’ (2015) endorsement of the issue has imbued it with a spiritual imperative for some. With climate change presenting tangible risks to business, many studies have focused on the effects of legislation and regulation on business operations, with some attention on the physical consequences of climate change itself (Galbreath, 2011; Winn et al., 2011). Many managers, however, seem to be less concerned about these risks compared to the urgency felt by policymakers and sustainability advocates (Kiron et al., 2013). Whether this inertia is because of skepticism about climate change science, short-term business matters or lack of knowledge about the issue, it is critical for the highest levels of business leadership to instill among their managers the relevance of climate change to managerial decision-making. To help leadership in this task, this study proposes a framework adapted from the supply chain literature to illustrate the impact of climate change-related regulatory risk and weather-induced physical risks on a company’s suppliers, operations and markets. The utility of the framework is explored by linking it to climate change perceptions of US automotive and food retailers using evidence from the 10-K annual reports that they submitted to the US Securities and Exchange Commission in 2013. The same firms’ strategic responses to these risks are then noted from their 10-K filings in 2014 and 2015. Implications on how business leaders and academics can make the climate change issue more “real” for managers are then discussed.
Climate change and supply chain risks
Perceptual gap between institutions and business managers
The United Nations Framework Convention on Climate Change (2014) defines climate change as:
[…] a change of climate which is attributed directly or indirectly to human activity that alters the composition of the global atmosphere and which is in addition to natural climate variability observed...