Abstract:

This paper examines how UK medium-sized enterprises (MSEs) identify and interpret
climate risks, addressing a critical gap in climate risk research that has largely focused on large
corporations or small firms. We conceptualise climate risk identification not as a purely technical
task, but as a cognitive and socially situated process through which managers interpret ambiguous
climate-related cues and translate them into organisational actions. Drawing on sensemaking
theory and the Enactment–Selection–Retention framework, we investigate how managers enact,
select, and retain interpretations of climate risk in organisational contexts characterised by their
position being squeezed between the demands of large corporate customers and the limited
capabilities of smaller suppliers. The study employs a qualitative, inductive design based on 33
semi-structured interviews with owners and senior managers of MSEs, complemented by expert
practitioners across the UK manufacturing and service sectors. We uncover a process in which
climate risks are enacted through three dominant triggers: supply chain vulnerability, energy
infrastructure, and regulatory uncertainty, which constructs a distinctive climate risk domain for
MSEs. During selection, managers continuously negotiate between heuristic judgements and
formal tools when constructing plausible narratives for action under uncertainty. Retention occurs
when these interpretations are anchored in leadership commitment and personal values, enabling
the internalisation of climate risk identification within MSEs. Our findings contribute to
sensemaking and climate risk literatures, theorising climate risk identification in MSEs as an
ongoing sensemaking process, identifying heuristics as the cognitive engine of selection,
conceptualising MSEs as a distinctive organisational form that blends heuristic agility with
formalisation.

Please choose your submission type: Developmental Paper

Primary Track: Corporate Governance

Keywords: Dynamics and Strategic Leadership ;External Corporate Governance Mechanisms ;Boards of Directors and Top Management Teams ;Sustainable governance (SDG goals) ;Evolving Governance (fit for future)

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Ms. Cece Koczias