Polycentric Business Governance and Climate Risk Mitigation

Abstract

Governments and markets have thus far failed to adequately address the growing global threat to climate stability from human activity. Some businesses are emerging as active leaders in the mitigation of this threat, but they are hampered by incentives that work against their efforts to reduce greenhouse gas emissions. This paper argues that businesses may best protect climate stability, a common-pool resource, when their collaboration is organized by a set of design principles that was developed for collective action to govern our commons. Allowing businesses to cooperate for the purpose of mitigating climate risks may not be anti-competitive, and may enhance long-term business performance. Additionally, collective climate action may create spillover effects that advance United Nations Sustainable Development Goals beyond those directly related to climate and environmental issues.