Corporate Carbon Strategies in Responding to Climate Change Su‐Yol Lee * College of Business Administration, Chonnam National University, Gwang ju, South Korea ABSTRACT With climate change emerging as one of the most important issues affecting the business circle, companies have begun considering the carbon issue in their overall strategic positioning. However, few studies have examined the corporate carbon strategies in developing and advanced developing countries, where climate change regulation is extensive and market uncertainty is relatively high. In addition, there has been growing interest among researchers and practitioners concerning the relationship between the carbon strategy and firm performance. This paper presents a framework for identifying the corporate carbon strategy. The cluster analysis of 241 Korean companies indicates six types of corporate carbon strategy: ‘wait‐and‐see observer’, ‘cautious reducer’, ‘product enhancer’, ‘all‐round enhancer’, ‘emergent explorer’ and ‘all‐round explorer’. This study empirically examines whether there are differences between these carbon strategy types in terms of the sector, firm size and firm performance. The results indicate a significant relationship between a firm’s carbon strategy and its sector and size but a significant relationship between the carbon strategy and firm performance is not confirmed. Copyright © 2011 John Wiley & Sons, Ltd and ERP Environment. Received 7 July 2010; revised 2 March 2011; accepted 10 March 2011 Keywords: corporate carbon strategy; climate change; typology; firm performance; content analysis; South Korea Introduction C LIMATE CHANGE HAS EMERGED AS ONE OF THE MOST IMPORTANT ISSUES AFFECTING ECONOMIC AND BUSINESS CIRCLES in the past decade. The actual and potential strategic impacts of climate change on companies have been intensifying (Kolk and Pinkse, 2005). Increasing pressure from regulations, public opinion, environment‐ oriented consumers and financial institutions has led companies to consider climate change in their strategic management (Weinhofer and Hoffmann, 2010; Sprengel and Busch, 2010). In particular, the Kyoto Protocol, adopted in 1997 and entering into force in 2005, has been the main driver behind changes in corporate responses to climate change. The initial corporate response to climate change focused primarily on political and non‐market strategies, usually to oppose the adoption of unfavorable regulations. A range of market responses, however, began to play a role in companies’ overall strategic positioning concerning climate change as the market component clearly became increasingly important (Jones and Levy, 2007; Kolk and Pinkse, 2005). * Correspondence to: Su‐Yol Lee, College of Business Administration, Chonnam National University, Gwangju, South Korea. E‐mail: leesuyol@chonnam.ac.kr Copyright © 2011 John Wiley & Sons, Ltd and ERP Environment Business Strategy and the Environment Bus. Strat. Env. 21, 33–48 (2012) Published online 28 April 2011 in Wiley Online Library (wileyonlinelibrary.com) DOI: 10.1002/bse.711