CLIMATE CHANGE RISK AND CORPORATE RESILIENCE: THE ROLE OF SUSTAINABILITY STRATEGIES

The impacts of climate change are making corporate resilience a key strategic capability, given the growing risks that firms are facing, stemming from both physical and non-physical factors. Climate change is increasingly exposing firms to physical, regulatory, and operational risks, as well as market risks, and corporate resilience is becoming a key strategic capability. In this study, climate change risk's impact on corporate resilience is explored, and sustainability strategies are considered as a mediator between the two. Based on dynamic capability theory and the natural resource-based view, the study posits that companies with higher climate risks are more likely to engage in sustainability practices and that this would enhance their ability to predict, absorb, adapt, and rebound from environmental shocks. The present study adopts a quantitative, cross-sectional study with data gathered from a structured questionnaire filled out by managers and decision-makers from industries that are sensitive to climate change. Climate risk, sustainability measures, and corporate resiliency are assessed with well-validated multi-item scales. The proposed relationships are tested by Partial Least Squares – Structural Equation Modeling (PLS-SEM), which can be used to test the measurement model, direct effects, and mediation effects simultaneously. The study shows that climate change risk is an important driver of corporate resilience and that sustainability strategies have an important mediating role, as they increase the companies' preparedness, resource efficiency, adaptability, and strategic flexibility. The study brings together three fields of inquiry, namely “climate risk”, “sustainability strategy” and “corporate resilience” in one empirical context, which is a novelty compared to the other streams of literature. It also provides implications for managers, policymakers, and investors, identifying sustainability as an important inclusion in corporate strategy to help organizations decrease their susceptibility to climate change and improve their resilience over time.