Business and climate change: emergent institutions in global governance Ans Kolk and Jonatan Pinkse Abstract Purpose – This paper aims to explore how multinational corporations (MNCs) may operate in the context of a so-called emergent institution which is not yet settled and taken for granted, thus helping to shape a new form of governance with considerable private involvement. The case used to illustrate emergent institutions involves market mechanisms for climate change, particularly emissions trading. This instrument is a crucial component of the Kyoto Protocol, which has started to be implemented, but is still surrounded by uncertainty and diversity across countries/regions. Design/methodology/approach – Information from MNCs’ responses to the Carbon Disclosure Project is used to shed light on their bargaining and nonbargaining activities and how these seem to relate to their overall strategy and location. Findings – Both with regard to nonbargaining and bargaining strategies MNCs’ prevailing view seems that they have to deal with distinctive national patterns, adopting a multidomestic, frequently home-country-focused approach. Their responses vary according to the national situation, with the level of activity in emissions trading frequently shaped by local management. Yet, the type of corporate structures created by some MNCs indicates that they take into account that EU-ETS may form the onset for a more global emissions trading scheme. Research limitations/applications – Since market mechanisms for climate change are just unfolding, follow-up studies into larger numbers of firms would be worthwhile to unravel the dynamics. The aspects identified in this paper can be used as starting point for such analyses. Practical implications – The information and corporate considerations regarding market mechanisms for climate change can be helpful for both managers and policymakers in designing future approaches and reflecting upon the limitations and opportunities for MNC involvement in global governance. Originality/value – The paper explores how MNCs may help shape an emergent institution, considering the fact that they face the dualility of managing a global context and multiple local contexts. Keywords Global warming, Organizations, Multinational companies, Governance Paper type Research paper Introduction In recent years it has been argued that governance patterns are changing as a result of internationalization and the concomitant emergence of non-state, private actors (e.g. Arts, 2006; Knill and Lehmkuhl, 2002; Pattberg, 2005). Such new ‘‘arrangements beyond the state’’ include a variety of governance concepts (public, private and mixed). Particularly global environmental issues have been used to illustrate the rise of this new global governance, with biodiversity and forestry as main examples where private involvement has played a role in furthering implementation and consensus-building on international frameworks adopted earlier in the process (Arts, 2006; Meidinger, 2006; Pattberg, 2005). Climate change can be mentioned as another case in point. Although the Kyoto Protocol entered into force in 2005, some countries including the US have not ratified, while others such as Japan, Canada and Russia are still unclear about their exact plans on how to implement it. This especially applies to the market mechanisms as DOI 10.1108/14720700810899167 VOL. 8 NO. 4 2008, pp. 419-429, Q Emerald Group Publishing Limited, ISSN 1472-0701 j CORPORATE GOVERNANCE j PAGE 419 Ans Kolk and Jonatan Pinkse are based at the University of Amsterdam Business School, Amsterdam, The Netherlands. Since March 2006, the research on climate change by both authors has been supported by The Netherlands Organisation for Scientific Research (NWO).