Introduction

Concern is growing that as a civilisation we are exceeding the planetary boundaries that sustain life (Rockström et al., 2009). In December 2015, the 21st Conference of Parties (COP 21) delivered a global agreement for countries to reduce emissions to keep temperature increases below 2 °C, with an aspirational target of 1.5 °C (United Nations, 2015) with moral and legal cases raised to support this action. Despite this positive development in the movement against climate change there are no clearly developed paths for most countries to achieve the pledged reductions (United Nations, 2018). Further within countries where emission trading schemes are in place many organisations are yet to make the transformational changes required to decarbonise their operations (Laing et al., 2013; Okereke & Kung, 2013; Wade & Rekker, 2020). Wright and Nyberg (2015) have argued that organisations are actively locked into a process of creative self-destruction, exploiting the earth’s resources at their own risk and the risk of civil societies; however, practical alternative solutions are not forthcoming. With close to unanimous scientific consensus on the anthropogenic nature of climate change (Cook et al., 2013, 2016) achieving change to halt the further degradation of the earth’s atmosphere must be considered the salient wicked management challenge of the next decade. Given this overwhelming evidence on the need to act on climate change we ask why do decision makers remain complacent? Understanding the process of decision-making for or against action on climate change and sustainability is a vital step in overcoming long standing inertia in many organisations on the issue.

Management studies has evolved over the last 75 years to include cognitive perspectives in addition to the dominant economic view (Fassin et al., 2011). Increasingly management researchers are looking to the foundations of strategy which focus not on the actions and strategies themselves but on individuals and their interactions to comprehend the decision-making process (Felin et al., 2015; Gond & Moser, 2019; Gond et al., 2017; Groschl et al., 2019; Hahn et al., 2014). A branch of CSR research has recently emerged termed micro-CSR to capture research in these areas with streams identified as psychological or sociological (Gond & Moser, 2019). Reaching back for over three decades academics such as Weick (1988, 1993), Sharma (2000), and Kaplan (2008, 2011) have provided insight into the cognitive processes that occur when decisions are made in complex environments through research on cognition, sensemaking and managerial interpretation. Linked to Herbert Simon’s (1957) concept of bounded rationality, research on cognitive processes acknowledge the difficulty in accounting for multiple factors from a diverse array of areas (Fassin et al., 2011) including, operational, financial, strategic and stakeholder factors when making a decision.

Despite the excellent body of research that has being amassed further work remains. Gond et. al. (2017) presented six research deficits through their insightful review of psychological microfoundations of corporate social responsibility. This article will seek to address two of these challenges relating to “mechanisms of reactions” and “new and more relevant individual differences that operate as drivers”, while seeking to establish why managers remain complacent on the issue of climate change despite the clear imperative for action. Informed by the work of Gond et al. (2017), Gond and Moser (2019) and Groschl et al. (2019) our research, through a systematic review, will establish a clear understanding of the theoretical constructs of cognition, sensemaking and managerial interpretation, their relation to each other and to the issues of climate change, before examining the complexity of factors shaping these constructs. The scope of the research presented in our paper will be broadened beyond that of Gond et al. (2017) to consider both positive and negative influences that herein have been termed ‘factors’ rather than ‘drivers’. A systematic review is appropriate to establish a synthesis of existing literature based on the rigourous assembly, analysis and interpretation (Rousseau et al., 2008) of the three foundational cognitive research areas to provide an understanding of the current state of research.

Through this research we will make three key contributions. Our first contribution will be to develop a systematic analysis of research on cognition, sensemaking and managerial interpretation linked contextually to sustainability and climate change with concept clarification as it relates to levels of analysis (the individual, organisation or general population). The second contribution is through the development of a construct specific, multilevel review of the factors which shape each of these cognitive foundational areas grouped into individual, organisational and societal levels. Our third contribution is a framework demonstrating the interplay between the cognitive perspectives, their construction and their relationship to outcomes (further cognitive change or behavioural action). Finally, a discussion based on this research presents three key issues leading to complacency and three paths to overcoming the inaction of decision makers on climate change.

The Systematic Review

The research problem addressed within this article has been examined through a systematic review of business and management literature. The method was chosen to provide rigour to the data gathering process ensuring that the data analysed came from high-quality, peer-reviewed prior research, that it was collected in an unbiased manner and analysed to interpret the state of research on foundations of managerial decisions (Rousseau et al., 2008; Tranfield et al., 2003; Williams et al., 2017). The methodology applied within the systematic review followed an established process based on the structure of past reviews by Williams et. al. (2017) combined with recommendations from Rousseau et. al. (2008) and Tranfield et. al. (2003) on the technical aspects to ensure rigour in the review process. The methodology has been broken into seven key steps under three broad categories (Tranfield et al., 2003; Williams et al., 2017):

  1. 1.

    Planning:

    1. a.

      evaluating the methodological appropriateness;

    2. b.

      developing the protocol including establishing boundaries (time period; journals including quality assurance); establishing search terms; determining search engine.

  2. 2.

    Executing the review:

    1. a.

      data extraction and assurance of suitability;

    2. b.

      collating database;

  3. 3.

    Analysis and reporting:

    1. a.

      conducting descriptive analysis

    2. b.

      conducting thematic analysis.

    3. c.

      reporting and recommendations

Planning the Systematic Review

A systematic review of literature relating to managerial cognitive processes applied when dealing with sustainability issues was required to address the lack of comprehensive academic frameworks through which to interpret decisions on sustainability and climate change. Searches of google scholar and Scopus revealed that no such review existed linking cognition or sensemaking with climate change or sustainability.

Examining the methodologies of past reviews of research conducted on sustainability topics a decision was made to commence the review from 1990 and continue to the date the review was conducted in May 2020 (Williams et al., 2017). The 1990 date reflected a point of time subsequent to the UN Brundtland Report (1987), and prior to the commencement of other key events in global environmental management such as the Earth Summit (1992). It was also timed to reflect early progress within the academic community on the natural environment including the Talloires Declaration (1990), and the establishment of the Organisation and the Natural Environment Division at the Academy of Management (1990) (Williams et al., 2017).

Consistent with the necessity for literature included in the systematic review to be of the highest academic rigor a list of quality journals was completed. To identify appropriate journals initially a list of 49 potential journals was compiled based on past high quality reviews (Kaplan, 2011; Williams et al., 2017). This list was then compared to the Australian Business Dean’s Council (ABDC) quality list. Where journals were ranked A or A* they were automatically included. Five journals received a lower rank on the ABDC list so their Scientific Journal Ranking (SJR) was examined. Where the SJR was over the level of one the journal was included; however, three of the five fell below this level and were excluded from the analysis. The final list is provided in Table 1 below.

Table 1 Journals included in the systematic review
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The management database Scopus was selected as the search engine to be used to locate the appropriate articles based on its potential to include high ranking, peer-reviewed journals. Search terms were expanded beyond cognition to include sensemaking and managerial interpretation to capture core cognitive process literature in the review. The initial search included the terms cognit*; sensemak*; or manager* interpret* within the title, abstract and keywords and the results for these searches were then further filtered for terms of sustain*; natural environ*; or climate change within the article.

Executing the Systematic Review

Conducting the initial review returned 724 articles within the Scopus database. Details of these articles (including title, abstract, author, journal, year of publication) were downloaded into an Excel file. This initial number of articles was examined for duplication of entries. There were multiple instances where articles contained references to both sustainability and one or both of the other search references. Once duplicates were removed 567 articles remained to be considered for analysis. All 567 articles were downloaded and reviewed to verify that they actually contained the search terms in the appropriate context. Articles were excluded from the data set for several reasons including not actually relating to sustainability (e.g. content about sustainable competitive advantage) or containing a general reference to cognitive/cognition without any depth (e.g. a mention of cognitive bias) or where the concept was not a key aspect of the article.

Analysing and Reporting on the Results of the Review

After the initial review for relevance 219 articles were deemed appropriate out of the initial 567 articles located. The full text PDF of these 219 articles was loaded into an NVivo database. The articles were then thematically hand coded for the following key areas:

Key Coding Categories:

  • Cognitive process focus*: Articles were coded depending on whether their content was mainly linked to cognition (or cognitive framing); sensemaking; or, managerial interpretation.

  • Level of Research: Articles were coded by whether their content related to managerial populations (individual decision makers); general organisational research; or the general population (outside an organisation e.g. customers).

  • Type of Research: Articles were coded by whether the research presented was theoretical or empirical in nature.

  • Theme of Research: Each article was examined for its overarching theme of research.

  • Core Concepts: Articles were examined for their core concepts for example how the cognitive process was structured, processed or mobilised.

  • Factors: Where articles presented factors behind the cognitive process the factors were also coded and later thematically categorised by whether they related to the individual, the organisation or society.

*Note: Articles were coded by whether cognition, sensemaking, or managerial interpretation was the central focus of the study. Where article content crossed between perspectives they were coded for their dominant focus.

Coding for Categories, Research Themes and Factors

Although all article included in the initial review contained some discussion of cognition, sensemaking or managerial interpretation in many these references were not consequential to the overall research. Articles were only categorised as cognition, sensemaking or managerial interpretation when the article contained a substantial section of content on the category and applied it theoretically to the research. Where cognition, sensemaking or managerial interpretation were identified as a central focus of the article under examination the theme for study was also recorded. As understanding the foundations was critical to answering the research question factors identified as impacting the individual’s cognition, sensemaking or managerial interpretation were coded for all articles.

Description of the Systematic Review Articles

Within the 219 articles coded a trend in publishing was observed over the last decade with increasing numbers of articles either focussing on, or mentioning, cognition, sensemaking or managerial interpretation. During this ten year period article numbers have grown from around five articles per year to over forty such articles being published on the topics in 2019. Journal of Business Ethics; Journal of Cleaner Production; and, Business Strategy and the Environment have consistently been the main journals publishing on the topics over the period examined. Details of this analysis are presented within Fig. 1 below. Further, the vast majority of the articles published have been empirical with only 18% theoretical in nature.

Fig. 1
figure 1

Articles published linking to cognition, sensemaking or managerial interpretation; and climate change, sustainability or natural environment

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Of the 219 articles coded, 61 were found to contain either cognition, sensemaking or managerial interpretation as a key conceptual focus (34 cognition; 22 sensemaking; 5 managerial interpretation). Originally only two articles were located with a focus on managerial interpretation. Due to the low numbers of articles being returned a second separate review was completed examining the articles which referenced the original Sharma article from the year 2000. Of the 966 articles which cited Sharma (2000) in Scopus, 299 articles came from the journals considered in this review. The abstracts of each of these 299 articles were then reviewed to establish whether they were in fact about managerial interpretation or whether it was a minor citation within the text. Only two of the articles contained the complete term ‘managerial interpretation’ in their abstract, title or key words in addition to containing content on a sustainability-related topic; however, the simplified term ‘interpret’ identified 14 articles. The sustainability-related topic verification resulted in five remaining articles of which two were already contained in the data set. This process resulted in an additional three files which were included in the review.

These 61 articles have been the subject of further focussed analysis with details provided in Fig. 2 below. Examining the distribution of the 61 articles shows that the Journal of Business Ethics and the Journal of Cleaner Production have dominated the discussion in question consistently over the last decade. Consistent with the larger data set just 10 out of the 61 (16%) were theoretical in nature highlighting the need for further theoretical investigation to support this growing research focus.

Fig. 2
figure 2

Publication of articles in key journals by year

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Research Results

The results of the systematic analysis will be presented below.

Summary of Research Themes

Within the articles examined the majority considered cognition (either the topic in general or through the view of cognitive framing) with 36% examining sensemaking and 8% managerial interpretation. Articles in each of these cognitive process categories were examined for the level of research, type of research, key theme of their research, core concept and the factors that affected each category. Figure 3 highlights the relative numbers of articles coded to each category by level and type of research.

Fig. 3
figure 3

High level overview of articles coded on cognition, sensemaking and managerial interpretation

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The detailed results of the review as they relate to each cognitive process (cognition, sensemaking and managerial interpretation) will now be presented in further detail. The factors shaping each process will also be outlined before the study results are integrated into a framework illustrating the cognitive processes of decision-making on climate change/sustainability. The role played by each cognitive process will be highlighted including their interactions and feedback mechanisms. Finally, a discussion on the potential reasons for inaction and avenues for future research will be presented.

Cognitive Foundations of Managerial Decision-Making

The three perspectives on cognitive processes: cognition, sensemaking and managerial interpretation will be discussed in detail within this section. Initially a general description of the concept will be provided, followed by a discussion of the themes and core concepts contained within the research.

Cognition

Combined within this section two theoretical concepts will be presented, that of cognition and cognitive framing. The concept of managerial cognition has been defined in a variety of ways from the simplistic view of “how and what managers think about and understand various firm issues that require action” (p533) by Madhavaram et. al. (2011) to more complex discussions including the process of executive attention and interpretation by others such as Gavetti and Levinthal (2000) and Ocasio (2011). This prior research supports the assumption that managers are limited by bounded rationality when making sense of complex, unpredictable environments and that managerial cognition is subjective to factors such as prior experience and individual characteristics which shape cognitive frames of reference (Lin & McDonough, 2014; Shang et al., 2010). Similarly managerial decision-making on climate change is defined by just such complexity and uncertainty.

Cognitive frames, shaped by managerial cognition, have been presented by academics as a concept to represent the generalised views used by managers to understand their environment (Barr et al., 1992; Goffman, 1974; Hahn et al., 2014; Kaplan, 2011; Walsh, 1995). Within research examining cognition of individual managers it can be viewed as a process combining subconscious and directed attention shaped by an array of elements from an individual’s background and experience including factors within the organisation in which they work and the society in which they live. An individual’s cognitive frame shapes their view of a given situation in terms of the way they look for and assimilate knowledge (Kaplan, 2008). A manager’s frame dictates their ability to manage potentially conflicting management pressures or issues. Research has been conducted into the orientation of a manager’s cognitive frame and its implications for strategic management styles such as the degree of ambidexterity (Hahn et al., 2014; Sharma & Jaiswal, 2018). The greater the experience of an individual in a given organisational environment, the greater the complexity of frame, directing their search for information under the scanning process of sensemaking (Hahn et al., 2014; Schaltenbrand et al., 2018). Further, recent studies have specifically considered the direction of an individual manager’s cognitive frame for making sense of sustainability issues, consequences for action and the management of tensions in decision makers (Hahn et al., 2014; Sharma & Jaiswal, 2018). For a given change event a series of frames are possible dependent on factors such as an individual’s knowledge, prior experience and alliances. These links between frame complexity and the path dependency of frame development have considerable implications for understanding managerial complacency on climate change issues. The question remains as to whether managers with little experience of the complex and transformational nature of changes arising through climate impacts and decarbonising reform have the complexity of frame to consider solutions to act.

Research Themes: Articles examined through the systematic review provide a comprehensive view of cognition through research conducted at the level of the individual, the organisation and within the general population, see Table 2 below. Although all results have been provided summarised within the table, only the themes relating to the individual level cognition will be discussed in depth below, in keeping with the research question to examine managerial decisions linked to climate change. Research themes identified in the articles were:

  • Factors Shape Cognition

  • Cognition Shapes Decisions/ Action

  • Cognitive Factors Shape Action

  • Cognition Shapes Frame

  • Cognitive Framing Shapes Decisions

  • Cognitive Frames Enable Sensemaking

Table 2 Research themes and core concepts identified within key research focussing on ‘Cognition’ presented for each focus level (whether the articles examined the managerial, organisational or general societal populations)
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These research themes will now be discussed, commencing with cognition, then cognitive framing, before the core concepts of the articles are presented.

Articles describing cognition at a managerial level focus on the role of cognition in shaping the decision-making process and outcomes, and factors shaping cognition itself. The existence of tensions and trade-offs in the management of sustainability issues has been well established (Hahn et al., 2014; Pinkse & Kolk 2010). Cognition has been presented in the articles reviewed as shaping the way individuals deal with tensions. Examples can be identified in the development of a corporate climate change strategy where a multistage process was adopted balancing local knowledge and capabilities in a multinational organisation (Lei et al., 2017), or, where managerial cognition on environmental factors was balanced with external resource acquisitions in the development of eco-innovation activities within a company (Peng & Liu, 2016). These two examples demonstrate the complexity of factors challenging corporate action on climate change, including variations in knowledge, culture and resources, as well as the temporality of progress on sustainability.

Further tightening the lens on processes forming cognition on sustainability/climate change several articles discussed the dual process shaping an individual’s cognition. Researchers Eberhardt-Toth and Wasieleski (2013) and Zollo (2021) highlighted the two aspects of cognition in the explicit (conscious and effortful) and the implicit (effortless automatic) aspects that combine to shape an individual’s cognition. The implicit aspect is actioned automatically to evaluate a problem with the explicit aspect able to override the automatic reaction through effortful thought and problem solving (Eberhardt-Toth & Wasieleski, 2013). Both studies link decisions to moral development with Zollo (2021) presenting the role of moral intuition and intuitive moral judgement (affect laden intuition), including emotion processing, underlying ethical decisions. Although factors (individual, organisational and societal) shaping cognition are often considered in academic literature the intuitive process including emotions is only occasionally included presenting an avenue for future research in progressing decision-making on sustainability and climate change. Gond et. al. (2017), also identified the knowledge deficit relating to the role of affective processes and emotions in engagement with CSR, further supporting continued research in this area.

Many articles have specifically examined cognition through the lens of framing. Research has defined frames as cognitive ‘‘knowledge structure that directs and guides information processing’’ (Cornelissen & Werner, 2014, p. 184; Haney, 2017). Formed by and informing the process of cognition and sensemaking, cognitive frames are an integral part of the interpretations and overall decision-making process relating to sustainability and climate change. Frames play a central role in directing strategic decisions within organisations (Kaplan, 2008). Hahn et. al. (2014) found, when regarding sustainability issues, managers may take either a business or a paradoxical frame. They further proposed that these frames shape decision-making in terms of its scope, level of innovation, speed and risk intensity. Under cognitive framing theory once managers have interpreted a situation based on their individual frame, they will adopt a certain decision with regards to an issue. A manager’s frame may alter over time due to the influence of experience (Bergman et al., 2019; Grewatsch & Kleindienst, 2018; Liao, 2016; Zuzul, 2019) on the complex combinations of factors which form cognition. Research suggests that managerial responses to given situations highlight how the frames used and the decisions made by management are highly dependent on previous experience (Hahn et al., 2014). Again, raising the role of experience, this time with reference to frame formation, strongly supports the connection between complacency and inexperience of climate change/sustainability action.

Reflecting the dynamism of the frame creation process within their study into cognitive frames Sharma and Jaiswal (2018) found that environmental events were triggers for frame changes. Their longitudinal study of a global Indian pharmaceutical company showed that unexpected events acted to change the temporal decision horizon altering the managerial cognitive frame applied to a given project. Temporal elements shaping frames were identified within several articles highlighting the evolutionary nature if progress on climate change (Gröschl et al., 2019; Sharma & Jaiswal, 2018).

In summary, experiential and evolutionary processes alter cognition and an individual’s frame with implications for the way they approach an issue, manage tensions and potential bias. Applying these principles to a corporate example a manager who has been involved in an unsuccessful investment attempt in an emerging renewable technology may adopt a business focussed, risk averse frame when faced by a similar investment opportunity. The reverse may be true where a successful attempt was made.

Core Concepts: The research relating to managerial level cognition and cognitive framing was analysed for the core concepts of how they were structured, acquired or mobilised. These core concepts, presented in Table 2, have been summarised below, grouped under shared concept areas with repartition removed.

  • Reductionist:

    1. o

      Dual process – Effortful (conscious thought) and effortless (automatic processing) aspects.

    2. o

      Tensions – Managing competing knowledge and views determines individual’s frame.

    3. o

      Thresholds to action – Support factors internal and external to organisation.

    4. o

      Paradoxical – Including multiple factors, with a range of rationales identified through a detailed search in decision-making. Acceptance of tensions.

  • Dynamic:

    1. o

      Evolving – Evolution of cognition and cognitive frames over time.

    2. o

      Co-evolution – Increased complexity of knowledge increases proactive initiatives.

    3. o

      Malleable – Cognition can be actively shaped e.g. through mindfulness training.

    4. o

      Interacting – Frames interact within an organisation.

    5. o

      Altered – Factors determine cognition towards sustainability, e.g. culture, cognitive complexity, morality.

  • Shaping

    1. o

      Determining – Frames determine decisions.

    2. o

      Shaping – Cognition shapes frames. Outcomes shaped by cognition/ cognitive frame.

    3. o

      Influencing – Frames influence sensemaking/interpretation process and outcomes.

    4. o

      Enabling – Frames enable sensemaking.

Examining the core concepts defining the process of developing and applying cognition and cognitive framing three key descriptive areas emerged from the analysis. An individual’s cognition and cognitive frame is dynamic. They continue to be modified in line with new experience, interactions and information, evolving over time. Cognition and cognitive frames are directive, with cognition developed through experience altering frames (Bergman et al., 2019) and shaping sensemaking, interpretation and ultimately decisions. Finally, cognition and cognitive frames are complex and reductionist. To this end they are shaped by factors at an individual level, through the organisation in which the individual works and the society in which they live, they also act to reduce complexity managing tensions and paradox. Understanding the core concepts of cognition and cognitive framing provides insight into potential reasons for complacency while also providing direction on intervention points to drive progress.

Sensemaking

The concept of sensemaking was first proposed then popularised by Weick (1988, 1993 and Weick et al., 2005) to describe the process by which individuals develop cognitive structures around the complex and unknown so that it can be acted upon (Ancona, 2011). The theory has become highly influential to researchers within the field of organisational studies (van der Heijden & Cramer, 2017). Managing to promote sustainability meeting the challenges of a climate change transition is defined by complexity and trade-offs. Events may occur contrary to an individual’s existing formation of meaning (Bien & Sassen, 2020). Sensemaking is a process of interpretation where organisational actors attach meaning to events to mediate uncertainty (Fontana, 2019; Tisch & Galbreath, 2018; Weick, 1993) forming a foundation frame for individuals to use as an established point of reference (van der Heijden et al., 2010). Three key sequential processes are reported to occur through sensemaking, specifically scanning, interpreting and responding (Hahn et al., 2014). When faced with a new situation to which they have no prior frame individuals cannot develop an interpretation without first understanding its content (van Der Heijden et al., 2010), in turn determining the adequacy of the response. The greater the level of sensemaking the higher the chance that the individuals involved will be able to successfully manage effects that arise, the reverse is also true that poor sensemaking may equate to suboptimal management (Tisch & Galbreath, 2018).

Often studied in the context of managers, sensemaking is regularly followed by a process of sensegiving, thereby enacting the realisation of the frame constructed through the sensemaking process (Fontana, 2019). Sensegiving occurs when an individual seeks to convey their sensemaking to relevant others (Tisch & Galbreath, 2018), a social interaction creating a shared meaning. Managers play a significant role in the change process as sensemakers and sensegivers as they are both in the position to promote their sensemaking to achieve a dominant frame but also more likely to have access to the slack resources required to invest in change (Schaltenbrand et al., 2018). Hahn et. al. (2014) highlight the connection between sensemaking and cognitive framing where an individual’s frame influences their scanning and in turn their interpretation of a given situation.

Research Themes: Articles examined through the systematic review provide an overview of research conducted at the level of the individual, the organisation and within the general population, see Table 3 below. Although all results have been provided in Table 3, only the themes relating to individual level sensemaking will be discussed in depth below, in keeping with the research question to examine managerial decisions linked to climate change. Research themes identified in the articles are:

  • Making Sense

  • Giving Meaning

  • Factors Influencing Sensemaking

  • Sensemaking in Investment

  • Patterns of Sensemaking

  • Sensemaking Leader

Table 3 Research themes and core concepts identified within key research focussing on ‘Sensemaking’ presented for each focus level (whether the articles examined the managerial, organisational or general societal populations)
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These research themes will now be discussed below, before the core concepts of articles are presented.

In line with the overarching description of sensemaking, research concentrated on the making of sense, the giving of sense and factors associated with sensemaking. Research suggests that it is not just in new complex situations of external origin that sensemaking has benefits, sensemaking in the strategy formation and implementation process has been found to impact corporate reputation and performance (Khan, 2018). Sensemaking in a sustainability transition within the higher education sector was examined by Bien and Sassen (2020) identifying discourse strategies, triggers of resistance and determinants in the process of developing sense and giving meaning in conceptualising a sustainable future.

Organisational cognitive and linguistic processes are central to sensemaking and the construction of reality leading to certain actions (Basu & Palazzo, 2008; van der Heijden & Cramer, 2017). Industries can establish communal vocabularies, building connections and understandings (van der Heijden & Cramer, 2017) strengthening the role of the in situ change agent. Change agents are an important part of the sensemaking process within an organisation and feature in many of the articles reviewed highlighting another perspective through which to consider inaction and opportunities for intervention (van der Heijden & Crammer, 2017; Waddock, 2019).

The social context plus the leader’s self-identity shape the selection of sensemaking cues (Bien & Sassen, 2020). Once an executive manager has constructed meaning, potentially framing a new vision for the company, a process of sensegiving may follow through which the individual seeks bring the vision to reality through communication (Bien & Sassen, 2020; Fontana, 2019). Fontana (2019) in their research on diffusing environmental innovations in Bangladesh apparel companies provided an interesting analysis linking “patterns” of sensemaking, which we consider could be interpreted as frames, contextually shaped by past individual, environmental and social factors to investment decisions. While the situation was shaped by contextual events such as the Rana Plaza collapse disaster the study linked investment to the executive’s emotions and social status desires. Critically the results of the article found that although 90% of the 30 executives did not associate investment in environmental innovation to positive financial performance, or the expectation of any direct financial benefit, 70%, however, did associate the investment with higher social recognition (Fontana, 2019). Understanding this perceived lack of association between action on sustainability issues and financial benefit may elucidate part of the reason for managerial complacency particularly when considered through the traditional business lens of profit maximisation.

The unifying role of sensemaking is consistent with the work of Aguinis and Glavas (2019) where sensemaking, through a CSR perspective, is presented as a mechanism through which individuals can find meaning within their work. Connecting meaning, rather than, or in addition to, traditional economistic value was also raised within the article “Shaping the Shift: Shamanic Leadership, Memes, and Transformation” by Waddock (2019). Waddock’s article examined the role of the leader in redefining the organisation towards achieving a resolution of major problems, such as climate change, revisiting the position of shaman in traditional cultures. As sensemaker and sensegiver, an organisational leader has the potential to shift the conceptualisation of business and leadership, conveying a new vision through their communications, shaping strategy, values and systems of belief (Waddock, 2019).

Core Concepts: The research relating to managerial level sensemaking was analysed for the core concepts of how it was structured, acquired or mobilised. These core concepts, presented in Table 3, have been summarised below, grouped under shared concept areas with repartition removed.

  • Creating

    1. o

      Construction – Sense constructed and shared in a setting.

    2. o

      Ongoing – Ongoing process, dynamic and evolving, gradual cyclic change.

    3. o

      Creative – Constructing a new meaning requires active imagination.

  • Interpreting

    1. o

      Categorising – Fitting new information in new structures or categories for decision-making.

    2. o

      Shaped – Factors continuously shape the sensemaking process including by an individual’s knowledge structure and others.

    3. o

      Trade-offs – All issues cannot be prioritised at once.

    4. o

      Interpretation – The process of translation of new information into knowledge.

  • Leading

    1. o

      Sharing – Sense is shared through communication and action to give meaning and create a shared understanding.

    2. o

      Communicating – Language constructs and communicates reality. Common vocabulary enhances understanding e.g. along supply chain.

    3. o

      Acting – Action translates meaning and develops shared understanding.

    4. o

      Change Agents – Change agents shift action over time. A change agent is a sensemaker who’s actions and sensemaking process shape a shared view.

    5. o

      Transfer – Sense transferred between actors.

    6. o

      Influencing – An active, conscious process e.g. Executives influence from top down.

    7. o

      Redefining – Leaders can shift the discussion and culture towards sustainability and responsibility (from growth and profit), changing values, business strategy and culture.

    8. o

      Leading – Leading the change through capability development, investment and sensegiving.

In summary, core concepts identified within the literature on sensemaking relate to the construction of sense by seeking certain information linked to the individual’s cognition or cognitive frame, interpreting this complex information, making sense through a series of trade-offs. This sense is then communicated to others, sharing a vision or view through which the individual can act as a change making leader, redefining an aspect of the organisation.

Managerial Interpretation

Managerial interpretation in the context of environmental strategy is linked back to Sanjay Sharma’s (2000) article Managerial interpretations and organisational context as predictors of corporate choice of environmental strategy. Within the article Sharma outlines a model where managerial interpretation is linked to issue legitimation, discretionary slack, and employee performance evaluation with feedback loops between environmental strategy and issue legitimation and managerial interpretation. Based on data from firms within the Canadian oil and gas industry, the overall findings of the article proposed an association between the way managers interpreted an issue as a threat or opportunity and the strategies taken by the firm. Examining interpretation in greater detail literature proposes that managers apply frames, or categories to uncertain events or issues, shaping the ongoing process (Haney, 2017).

Since Sharma published the foundational article in 2000, it has been highly cited; however, few articles have a central focus on managerial interpretation in the context of sustainability, climate change or the natural environment. Further, many citations do not reflect an overall article focus on interpretation.

Research Themes: Articles examined through the systematic review provide an overview of research conducted on managerial interpretation relating to a sustainability context, see Table 4 below. All themes relate to individual level interpretation, providing a direct link with the research question examining managerial decisions linked to climate change.

Table 4 Research themes and core concepts identified within key research focussing on ‘Managerial Interpretation’
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Research themes identified in the articles are:

  • Frames Shape Interpretation

  • Interpretation Impacts Decision

  • Factors Influencing Interpretation

These research themes will now be discussed below, before the core concepts of articles are presented.

The research reviewed on managerial interpretation illustrate the shaping of interpretation by factors in an individual’s background and environment as well as the influence of their cognitive framing of an issue, demonstrating a link between the managerial interpretation and cognition literature. As mentioned earlier Sharma (2000) tied a firm’s awareness of environmental issues to positive environmental activities (Zhou et al., 2020). Examining this link, Zhou et. al. (2020) examined whether low-carbon awareness promoted hard and soft environmental behaviours. The study, conducted within Chinese firms, found the latter association held with the effect stronger in companies that were not state owned (Zhou et al., 2020).

Exploring past this simple association between interpretation and action, two of the articles consider the interpretation in connection to dynamic capabilities. Zhou et al., (2018a, 2018b) find that dynamic capabilities support the managerial interpretation process. Haney (2017) examined the proposed link between threat perception and innovation in relation to climate change, with interpretation associated with the microfoundations of dynamic capability development. The article finds that two mechanisms positively impact the association between these factors, responsibility to society and moral legitimacy (Haney, 2017).

Core Concepts: The research relating to managerial interpretation was analysed for the core concepts of how it was structured, acquired or mobilised. These core concepts, presented in Table 4, have been summarised below collected under core concept areas.

  • Dependent:

    1. o

      Shaped – Interpretations shaped by factors at the individual, organisational and wider environmental level including framing.

  • Directing:

    1. o

      Advancing or constraining – Frames determine subsequent search parameters.

    2. o

      Determining – Interpretation shapes subsequent action.

Conceptually managerial interpretation is a process shaped by factors in an individual’s background (personal, organisational or societal), and an individual’s cognitive frame which then directs the choice and degree of managerial action on sustainability issues.

Understanding Factors Shaping the Cognitive Process

To understand the reasons for managerial inaction, despite the individual’s knowledge of climate change, necessitates an examination of the factors that underpin the cognitive process. To gain this understanding the articles that related to the managerial level cognitive processes were examined further for any mention of factors that shaped the process. Table 5 below is constructed grouping the factors by their source, specifically whether they relate to the individual, the organisation or society.

Table 5 Key ‘Factors’ identified within articles divided by cognitive themes and their origination
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The cognition literature relating to the managerial cognitive processes revealed significantly more factors shaping the cognitive process than the sensemaking or managerial interpretation literature. The factors within cognition literature were also comparatively broad taking into account both background factors, including motivational and attitudinal, and factors relating to an individual’s experience.

Individual factors are characteristics predominantly shaped by a decision makers life experience to date from inherent abilities and motivations, to their upbringing. Key factors were found to include ethics (Eberhardt-Toth & Wasieleski, 2013), culture (Aguinis & Glavas, 2019; Liang et al., 2019), morality (Aguinis & Glavas, 2019; Eberhardt-Toth & Wasieleski, 2013), language (Liang et al., 2019), environmental awareness (Peng & Liu, 2016), emotion (Eberhardt-Toth & Wasieleski, 2013), and many others. Morality and values featured within the many factors shaping sensemaking, as did those relating to social interactions. Emotional factors were only raised twice within the data set supporting past findings by Gond et al., 2017 that affective processes have been under researched in terms of how they shape evaluations.

Organisations themselves were also found to shape managerial decisions. A manager’s experience guides their perception of a given situation, their ability to accommodate new knowledge and their likelihood of action. The organisation shapes action through its systems, culture and availability of slack resources, a factor often dependent on financial performance. The managers ability to scan the environment is proposed to increase in complexity the longer the individual is employed in a single industry (Schaltenbrand et al., 2018). Scholars have suggested that experienced individuals, with more advanced cognitive structures, approach a problem in a different way to their less experienced counterparts (Schaltenbrand et al., 2018). Factors including the company’s financial situation (Peng & Liu, 2016; Schaltenbrand et al., 2018), CSR policies (Aguinis & Glavas, 2019), and an individual’s work orientation (Eberhardt-Toth & Wasieleski, 2013) contribute to cognition, sensemaking and cognitive framing. Research has suggested that managers within different positions within a company differ in their cognitive development (Eberhardt-Toth & Wasieleski, 2013; Hahn et al., 2014). Eberhardt-Toth and Wasieleski (2013) were surprised to find that contrary to their expectations, the financial managers scored higher in their cognitive moral development than their non-financial counterparts. Other researchers have proposed that when a manager’s functional background in internally focussed areas such as engineering or accounting they may be more interested in internal factors, whereas managers from externally focussed areas such as marketing are more likely to look to stakeholder demands (Hahn et al., 2014). Considering the high cognitive moral development in financial managers Eberhardt-Toth and Wasieleski (2013) identified that they may have underestimated the boundary spanning activities of the individuals.

The society an individual inhabits also plays an important role in shaping that individual’s cognitive processes. Research suggests that elements including community values (Lopez-Navarro et al., 2016), legal/regulatory environment, physical environment (Sharma, 2000), environmental values (Peng & Liu, 2016), national culture (Liang et al., 2019), the political environment (Starbuck, 2009) and stakeholders all contribute to shaping a manager’s cognitive processes.

Gaining an awareness of the factors that contribute to the way an individual understands and acts in decisions linked to climate change and sustainability issues is important if we are to promote accelerated action. Commonality can be seen within literature on cognition, sensemaking and managerial interpretation. This cross-over will be discussed further in the next section as the integrated model if presented.

An Integrated Perspective to Understand Climate Inaction

Although a theoretical link between knowledge, engagement and the commitment of managers on climate change with action, has been made by prior research (Furrer et al., 2012; León & Arana, 2015; Linnenluecke et al., 2015; Okereke et al., 2012) a thorough examination of the state of research on the topic has been lacking to date. This article has set out to establish underlying reasons for managerial inaction on climate change despite a recognition of the seriousness of the issue and the imperative for action. An integrated, dynamic, multi-conceptual model will now be presented (Fig. 4 below) synthesising the review results (summarised in Table 6 below) to identify interactions and potential intervention points. The concept of sensitive intervention points and tipping points has become recognised in natural and socioeconomic systems linked to climate change (Farmer et al., 2019; Lenton et al., 2019) and provides a lens through which to interpret our review results.

Fig. 4
figure 4

An integrated model of decision-making on climate change and sustainability issues

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Table 6 Summarising the themes and core concepts of the processes of cognition, sensemaking and managerial interpretation
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Integrated Model

Decisions made by managers on issues and investments linked to climate change have been broken down into foundational factors and cognitive processes within this review, with components linked through a dynamic and interactive process. Commencing with foundational factors, individual, organisational or societal in nature, the model presented in Fig. 4, illustrates the influence of experience and an individual’s background on cognitive processes related to climate change. These processes, represented as an interconnection between cognition, cognitive framing, sensemaking and interpretation (discussed further below) have been reported to shape each other determining the eventual managerial decision, the outcomes of which may either be behavioural or cognitive, either facilitating or inhibiting further action on climate change (demonstrated in the model through dashed feedback lines). These feedback loops are supported by the references to temporal and spatial aspects impacting an individual’s cognitive process (Haider & Mariotti, 2016; Plewnia & Guentha, 2018). We now discuss each model component further before raising issues that may be leading to a lack of action, identifying intervention points and potential tipping point characteristics.

Factor Foundation: The factors shaping an individual’s cognitive process are linked to the individual themselves, through their inherited traits and their lives to date; their organisational environment; and, the society in which they live. Each area is represented as overlapping within the model, to demonstrate the interconnection and influence of factors on one another, for example societal norms will shape both organisational and individual values. Examining these factors, some, such as an individual’s abilities, may be difficult to alter; however, other factors can be influenced to promote greater action on climate change such as emotion (Eberhardt-Toth & Wasieleski, 2013), national culture (Liang et al., 2019), or an organisations financial situation (Peng & Liu, 2016; Schaltenbrand et al., 2018).

The Cognitive Process: Research on cognition, sensemaking and managerial interpretation is growing in frequency. Although often presented in isolation each plays an interconnected role in the cognitive process of decisions making on climate change with feedback, and at times cross-over, between the concepts. Diagrammatically, the concept of cognition has been separated into the processes of cognition and cognitive framing.

Examining the themes and core concepts from the literature we can make the following observations which have been utilised to construct the model:

  • Cognition and cognitive framing are dynamic and complex processes which can shape action directly or via sensemaking by influencing attention, interpretation and response (Peng & Liu, 2016). Influenced by fixed and flexible factors cognition and cognitive framing are unique to an individual based on their nature and their experience including interactions with others (Haney, 2017). In addition to forming a foundation (as illustrated by references to cognition within other process literature), cognition itself shapes an individual's cognitive frame (Sharma & Jaiswal, 2018). Cognitive frames form filtering devices through which an individual can reduce complexity, guiding their sensemaking and interpretation processes (Groschl et al., 2019; Purdy et al., 2019).

  • Sensemaking, contrary to its name refers to a biphasic process which involves both sensemaking and sensegiving. Although undoubtedly including the process of scanning, as highlighted by Hahn et al. (2014), the core concepts outlined in this review can be grouped under the headings of creating, interpreting and leading. Sensemaking has been reported to be the link between cognition and action (Wang, 2011), and is integrated with the process of interpretation (Fassin et al., 2011). The concept of interpretation is often discussed in the sensemaking literature, and although examined separately in the review process, it has been identified as an area of conceptual cross-over. Cognitive framing has also been reported to shape the sensemaking process by directing attention when scanning. Sensing new information gained through learning leads to new interpretation (Angus-Leppan et al., 2010). The process of sensemaking reshapes an individual’s cognition and framing, increasing complexity as greater experience is gained by the individual.

  • Managerial interpretation was observed to be a core part of the cognitive process (Haney, 2017) impacted by and impacting the cognitive framing and sensemaking processes. Once an interpretation has been made by an individual, they can commence action, taking the interpretation to be reality (Fassin et al., 2011). The question needs to be considered as to whether the research on interpretation should be considered separately or incorporated as an area within the growing literature on sensemaking.

Unpacking the role of each cognitive process in decision-making can be challenging. From the systematic review we can see the concept of cognition underpins all aspects of the process, cognitive framing shapes sensemaking and ultimately interpretation, which is followed by a process of decision and sensegiving. An example from the authors professional experience is provided below to demonstrate the interactions and evolution within the cognitive process. The case is of a manager within an electricity utility. Where a manager has experience in the realities of managing carbon emissions within its organisational environment, experienced exposure to market trends and opportunities to purchase the credits from or work with developers of large-scale renewable generation assets, they will have an existing cognitive frame which they will apply when exploring another similar opportunity. This cognition and frame will assist them in knowing where to scan for information, make sense of it, interpret the option, and eventually decide whether or not to act. As decisions such as this are not made in isolation the process will also involve sensegiving prior to action. The outcome of this process will evolve the individual’s cognition and initial cognitive frame on the issue. The evolved frame will then shape the individual’s future strategic choices.

Management Complacency and Opportunities to Promote Action

This article has sought to understand why managers remain complacent given the accepted need for accelerated action on climate change. We find that given the complexity and interconnected nature of the cognitive decision process there are issues (and therefore potential intervention points) presented at the individual, organisational and societal levels.

All cognitive processes identified the role of experience in the decision-making process, particularly linked directly to cognition and cognitive framing (Hahn et al., 2014), through threat interpretation (Haney, 2017) and the scanning/ sensemaking process (Fontana, 2019). Through this research we may propose that a lack of experience in decision-making on climate change to date may be restricting further decision-making by limiting the cognitive process. The situation, however, is not so simple. Gond et al. (2017) referred to the role of affective process and emotion in CSR evaluations. In our review we found that very few of the articles examining managerial level processes, other than Eberhardt-Toth and Wasieleski (2013) and Zhou et al., (2018a, 2018b) who made significant reference to emotion. This lack of inclusion of emotion may indicate a second significant issue preventing meaningful corporate action against climate change. Zollo (2021) and Eberhardt-Toth and Wasieleski (2013) discussed the formation of cognition through directed and automatic components. Without an emotional connection, the implicit aspect may be limited leaving individuals to fall back on the purposeful, directed cognitive process. Considering past social responsibility issues such as child labour, which was once seen by some as acceptable, but is now widely rejected, evoking an automatic emotion of disgust we can understand the power of emotion in strong action. The question remains whether action on climate change would be accelerated if damaging activities elicited a stronger negative emotion.

A third issue identified through the literature is associated with dominant market logics and cognitive framing. This area is linked to the work of Hahn et al. (2014) and Sharma and Jaiswal (2018) on cognitive framing and Waddock (2019) on sensemaking and leadership. While organisations continue to operate under a conceptualisation of value primarily linked to financial returns the cognitive decision-making process of managers will continue to be shaped away from significant proactive climate action.

Reviewing these three issue areas we propose below three potential tipping point situations linked to the issues above that may lead to overcoming managerial inaction on climate change each directed at a different level of intervention.

  1. 1.

    Requiring individual managerial level change: The conceptualisation of "leadership" is altered to the extent that maximising profit without action is personally catastrophic from a social and moral perspective.

    Self-identity and the conceptualisation of what it is to be a leader may provide an avenue to trigger further decision-making. In our review we have seen a recent focus on leadership by Groschl et.al. (2019) and Waddock (2019). Outside academia we have also recently seen leadership called into question on ethical matters through the #BlackLivesMatter campaign. In line with increased links between company valuation and corporate social responsibility, sustainability actions and changes to expected gender and race representation in corporate leadership it is time to also reconsider what is good leadership. Waddock (2019) presented a view of a leader as a shaman. “Traditional shamans typically work on healing individuals or aspects of the community that have fallen sick or are perceived to be dis-eased—out of ease or unharmonious, where cultural mythologies are no longer working well (Dow 1986; Walsh 1989).” As we seek to address climate change it seems we need more leaders bearing the traits outlined by Waddock (2019).

  2. 2.

    Requiring organisational level change: The conceptualisation of what a successful business is altered to the extent that profit without action on climate change is highly socially unacceptable so much so that it is catastrophic from an investor (and therefore business) perspective.

    Fontana (2019) demonstrated the potential for managers to override financial considerations where social recognition benefits could be achieved. The situation described by Fontana is linked to the particular context of the Bangladesh garment industry, whereas the wider moves to alter the expectations of business require extensive industry and investor led change in expectations. The challenge remains as to how to trigger this change. How can we as a society establish an emotional connection with the natural environment rather than wealth?

    The process of altering societal norms and institutional logics may be time consuming, however, recent experience with adjustments to the COVID-19 crisis has demonstrated the potential for widespread change on an accelerated basis. Additionally, as change is anticipated, but not yet enacted, sectorial stakeholder groups work to develop opinions on possible policy options (Buysse & Verbeke, 2003; Clark & Crawford, 2012; Martin & Rice, 2010) potentially changing institutional logics in advance of policy enactment. The process of developing progressive policy, not just the policy itself, can have positive impacts on achieving cognitive reform.

  1. 3.

    Requiring societal level change: The standard parameters which measure and lead to business success are altered to the extent that action is inevitable (e.g. through pricing carbon, divestment, or new technology).

    Altering the standard parameters and increasing transparency on an organisations impact and activities will force action to be taken even by conservative organisations. Action shapes cognition with cognitive progress developed through experiential engagement in the management of climate change issues, including reporting and stakeholder engagement programs. With frame complexity linked to prior experience, successful solutions will likely be perceived as less risky to the managers involved with sustainability programs resulting in increased positivity regarding outcomes (Hahn et al., 2014). Engaging in these activities will naturally orient the cognitive process towards future action. The parameter adjustment may occur through government action to introduce a price on carbon or support clean-tech innovation. There is an established relationship between regulatory environmental reform and greater levels of environmental engagement (Dahlman & Brammer, 2011). It can also be supported by initiatives such as the Task Force on Climate-Related Financial Disclosures (TCFD).

To be successful all of these options require a paradigm shift in the way we manage ourselves, our businesses and our society. We will need to care more about and value non-financial impacts and outcomes. We will need to expect more from our leaders and companies.

Areas for Future Research

Through this analysis we have identified three areas that should be addressed by future research.

Research Challenge 1: Clarification of the Role Played by Affective Processes, Including Emotion, in Shaping Cognitive Evaluations.

As indicated by Gond et al. (2017), Eberhardt-Toth and Wasieleski (2013) and Zollo (2021) concentrating on the rationalist process of decision-making fails to account for the intuitive process. Seeking process clarity on the relative strength and operation of the intuitive rather than the directed will elucidate whether this process provides a potential avenue to accelerate change. This research can include retrospective analysis of progress on the normalisation of action on past sustainability-related issues and organisations where pro-climate change progress has been made.

Research Challenge 2: Evaluation of the Process of Interpretation Within Cognitive Dynamics.

Despite the extensive citations of Sharma’s (2000) article on managerial interpretation and its linkage within literature to complementary cognitive processes, further examination is necessary to unpack the process of interpretation in relation to climate change and sustainability. Particular reference should be made to the connections and cross-over between the processes of sensemaking and interpretation.

Research Challenge 3: Understand the Dynamics of Climate Leadership at the Level of the Individual.

Examining the cognitive framing of proactive leadership on climate change issues within executive managers will assist with forming a baseline and identify any exemplars on which to mimic action in other organisations. Waddock (2019) focussed on leadership through sensemaking, while other researchers identified it as a key factor in the cognitive process of decision-making [either working for or against action, for example, where individuals overly rely on past experience (Schaltenbrand et al., 2018)].

Limitations

Due to the exact nature of phrasing used in the search terms some articles may have been overlooked and therefore excluded from the review process. Further, some articles will exist in journals not included in the review process.

Conclusions

Understanding cognitive processes that shape decision-making on sustainability and climate change is vital to assist companies in their transition to a low-emissions sustainable future. It has become clear through this review that these decisions challenge managers on multiple fronts, largely going against the business-as-usual operation of a firm, requiring the ambidexterity to manage potentially conflicting short- and long-term drivers. Requiring long-term investment under increasingly uncertain conditions, existing frames constructed during stable market conditions are proving insufficient to enable climate-related action (Slawinski et al., 2015). It is now time for academics to also break our own cognitive frames to consider how we cannot just promote sustainability, but a step change towards a paradigm shift in action.