Do firms in climate‐vulnerable countries engage more in CSR decoupling?

Extant literature on CSR shows that firms strategically engage in CSR decoupling, which is defined as the misalignment between external and internal CSR actions of the firms. However, less is known about the relationship between climate vulnerability and CSR decoupling. Drawing on legitimacy and agency theories, this study investigates the relationship between country‐level exposure to climate vulnerability and CSR decoupling. Utilizing a large dataset of firms from 34 countries for the period 2011–2020, we find that greater exposure to climate vulnerability significantly increases CSR decoupling practices of the firms. Further analysis suggests that both internal and external governance mechanisms mitigate the positive impact of climate vulnerability and CSR decoupling. Overall, our study offers valuable insights concerning how firms strategically manage their CSR practices when they are exposed to climate‐related risks.