Organizational heuristics and firms' sensemaking for climate change adaptation

Abstract

AbstractThe complexity and uncertainty of climate change pose unique challenges to the development of corporate adaptation strategies. Climate adaptation requires organizations to rely on sensemaking to understand climate events, implications for their operations, and develop a response. Organizational heuristics can support sensemaking by simplifying decisions and reducing cognitive effort but also hinder it by creating bias and errors that lead to inefficient decisions. This paper analyzes how firms use organizational heuristics when making decisions on climate change by empirically investigating the adaptation responses of key infrastructure providers in the United Kingdom. Looking at selection, prioritization, procedural, and temporal heuristics, we examine how firms make sense of climate events and develop their responses accordingly. The analysis shows that while these rules‐of‐thumb are sensible in some instances, they can create biases, too, that may deflect responsibility or create a false sense of security leading to inefficient adaptation decisions.