Ambitious corporate climate action: Impacts of science-based target and internal carbon pricing on carbon management reputation-Evidence from Japan

Under national climate change countermeasures, some Japanese firms have set science-based targets (SBT) for carbon emission to achieve the goal of keeping global warming below 2 degrees C. Some scholars proposed that by implementing an internal carbon pricing (ICP) strategy, firms can prepare themselves for the uncertainties of external carbon pricing in advance. Can Japanese firms effectively utilize these practical carbon management tools (strategies) (i.e., SBT and ICP) to enhance their carbon management reputation (CMR)? CMR can be regarded as an important indicator of low-carbon competitiveness in future international trade. So far, this topic has never been explored. Based on this perspective, this study focuses on the period of 2016-2019 after the Paris Agreement went into effect. The full samples consist of 1,994 Japanese firms using ordinal logistic regression. The empirical results indicate that, overall, Japanese sample firms which set SBT or implemented ICP strategy have better CMR, but the odds ratio (OR) of setting SBT is higher than that of ICP on enhancing CMR. Besides, implementation of both SBT and ICP approaches can create a significant complementary or additional effect on the improvement of CMR for only firms in high carbon emission industries (HCEI). The practical implication of this study is that HCEI's managers are advised to adopt both SBT and ICP mitigating climate change risk in an ever-evolving regulatory. Further, it is not cost-effective for non-high carbon emission industries (NHCEI) to implement both SBT and ICP simultaneously. Instead, priority setting SBT will be more appropriate for NHCEI in improving CMR. How should firms' managers of different carbon emission attributes effectively utilize SBT and/or ICP to enhance their CMR in Japan? The aim of this study is to fill related evidences. (C) 2021 Institution of Chemical Engineers. Published by Elsevier B.V. All rights reserved.