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As governments around the world struggle to agree on climate action, the private sector—and especially large multinational companies—is quietly emerging as key players in tackling global warming.

New in the Journal of International Business Studies from Alberta School of Business finance professor suggests that while multinational enterprises (MNEs) have historically contributed a large share of global greenhouse gas emissions, they are uniquely positioned to help solve the climate crisis. Thanks to their global reach, access to capital, and deep networks, these companies can drive climate-friendly practices faster and farther than most governments.

“MNEs are not only major contributors of global emissions, they are also in a position to become significant actors for decarbonization.” says Barbalau. “Their size and ability to coordinate efforts across countries put them in a unique position to drive climate action at scale.”

 

Why multinational firms matter

Unlike individual countries, multinationals operate seamlessly across borders. This means they can spread green policies and technologies through their operations and supply chains, often reaching developing countries where resources and technical expertise are scarce. They also have:

• Scale and reach – their operations and global supply chains give them the capacity to shape practices and policies worldwide. For instance, Mars Inc., one of the world’s largest food companies, has pledged $1 billion to halve emissions by 2030 across its operations in 100 countries.
• Resources and technology – they have the financial strength and dynamic capabilities to develop and deploy climate-relevant technologies. The Danish multinational Vestas, a global leader in wind turbines, illustrates this by transferring wind energy expertise and building local capacity in China, helping to establish the country’s domestic turbine industry.
• Collaborations and networks – through partnerships with peers, governments, and international organizations, they can share risks and coordinate large-scale solutions. Nestlé and other major cocoa buyers, for example, have coordinated to support fair pricing and climate adaptation for farmers in West Africa.
• Access to capital – their superior access to global markets and efficient internal capital allocation allow them to channel funds across borders. Energy multinationals such as Enel and Iberdrola have used sustainability-linked financing to expand renewable energy projects in Latin America.

Innovative tools and incentives

The research highlights that innovative tools can realign MNE incentives toward climate action. These include:

• Financial innovations – outcome-based contracts such as sustainability-linked loans and bonds, where borrowing costs adjust depending on emission targets, effectively replicating the incentives of a carbon tax.
• Governance mechanisms – shareholder engagement and executive compensation schemes tied to environmental performance, which embed climate goals in firms’ decision-making.
• Collaborative frameworks – public–private partnerships and industry coalitions that pool resources and share risks, enabling large-scale deployment of green technologies.

The bigger picture

While international climate agreements often stall due to politics, multinationals have resources and networks that can cut through these barriers. The authors argue that with the right incentives—regulation, targeted subsidies for green technology, and pressure from shareholders or consumers—big firms could lead the way to a low-carbon future, especially in parts of the world that need help most.

 “With the right incentives, these companies can reduce emissions at a scale few governments can match,” notes Barbalau. “The key step is ensuring that business incentives are aligned with society’s climate goals.”

Read Barbalau’s full research article at DOI:

This article was co-written using perplexity.ai.