Business and Environment

Business and Environment is a featured research topic and an initiative at Harvard Business School.
The vital connection between the natural environment and the business world has long been a central focus of our research at HBS – from Richard Vietor’s study of business-government relations in U.S. energy policy in the 1980’s to Michael Porter’s new concept of the relationship between the environment and competition in the 1990’s. Today, our faculty members focus on corporate environmental strategy, operations and reporting; sustainable cities and infrastructure; the role of government and environmental policy; clean energy generation and demand-side energy efficiency; and the effective management of natural resources essential to human prosperity.
  1. Profits and Sustainability: A History of Green Entrepreneurship

    G. Jones

    This book explores the question whether profits and sustainability are compatible through the lens of a history of green entrepreneurship worldwide between the nineteenth century and today. It tells the story of the extraordinary and often eccentric men and women who defied convention and imagined that business could help save the planet, rather than consume it. The social and religious beliefs that drove many of these individuals are explored, as the book looks at how they overcame huge obstacles to execute their strategies in industries as diverse as renewable energy, organic food, natural beauty, eco-tourism, recycling, architecture, and finance. The pioneering efforts to build certification schemes and environmental reporting are examined, alongside the contested relationship between green business and governments. The struggles of early pioneers appear to have been rewarded by the growth of environmental awareness among consumers, business leaders, and others in recent years, but the Earth's environmental health continues to deteriorate. If profits and sustainability have proved challenging to reconcile, the book argues that one reason was how they were both defined.

    Keywords: Environmental Entrepreneurship; business history; Green Business; sustainability; Entrepreneurship; Ethics; Business History; Religion; Environmental Sustainability; Agriculture and Agribusiness Industry; Banking Industry; Beauty and Cosmetics Industry; Consumer Products Industry; Alternative Energy Industry; Financial Services Industry; Food and Beverage Industry; Green Technology Industry; Tourism Industry; Africa; Asia; Europe; Latin America; North and Central America; Oceania;


    Jones, G. Profits and Sustainability: A History of Green Entrepreneurship. New York: Oxford University Press, 2017. View Details
  2. Stock Price Synchronicity and Material Sustainability Information

    Jody Grewal, Clarissa Hauptmann and George Serafeim

    We examine if, and under what conditions, disclosure of sustainability information identified as investor relevant by market-driven innovations in accounting standard setting is associated with stock prices reflecting more firm-specific information and thereby lower synchronicity with market and industry returns. We find that firms voluntarily disclosing more sustainability information, identified as material by the Sustainability Accounting Standards Board (SASB), have lower stock price synchronicity. This result is stronger for firms with higher exposure to sustainability issues, institutional and socially responsible investment fund ownership, and coverage from analysts with less firm-specific experience and lower portfolio complexity. Moreover, we find intra-industry information transfers to firms with low sustainability disclosure within industries with high sustainability disclosure. We also document that sustainability information not identified by the accounting standard setting process is not associated with stock price synchronicity.

    Keywords: sustainability; sustainability reporting; corporate accountability; corporate social responsibility; corporate governance; asset pricing; stock price; information; Voluntary Disclosure; accounting; accounting standards; Environmental Sustainability; Corporate Disclosure; Corporate Accountability; Stocks; Price; Corporate Social Responsibility and Impact; Accounting; Standards;


    Grewal, Jody, Clarissa Hauptmann, and George Serafeim. "Stock Price Synchronicity and Material Sustainability Information." Harvard Business School Working Paper, No. 17-098, May 2017. View Details
  3. Entrepreneurship, Policy, and the Geography of Wind Energy

    G. Jones

    This study examines the geography of the global wind energy industry before 2000. Between 1980 and 2000, the global generating capacity of wind power grew from 13 megawatts to 17,400 megawatts, but two-thirds of that capacity was in Denmark, Germany, Spain, and the United States. Wind turbine manufacture was clustered in Denmark and the United States through to the late 1980s, when there was a sudden rise of new entrants, especially Germany. The study shows that natural resource endowment is a poor explanatory variable for this geographical skewing. Public policy was a more important factor, although its impact was nuanced. The most important policy development was in California with the adoption of feed-in tariffs, subsidies, and tax credits in the 1980s. However the poor technological capabilities of U.S.-based firms meant that it was Danish and other foreign companies that benefitted most. Subsequently the combination of public policies to grow wind energy and local manufacturer requirements provided a major stimulus for the emergence of local firms in Germany and Spain. U.S. firms were unable to develop internationally competitive products partly because of a rush to capture lucrative contracts dependent on transient public policies and partly because of a failure to develop institutional structures for the industry as a whole.

    Keywords: renewable energy; wind power; entrepreneurship; Business and Government; business history; Renewable Energy; Entrepreneurship; Geography; Business and Government Relations; Policy; Business History; Energy Industry; Green Technology Industry; Asia; Europe; United States;


    Jones, G. "Entrepreneurship, Policy, and the Geography of Wind Energy." Chap. 12 in Green Capitalism? Business and the Environment in the Twentieth Century, edited by Hartmut Berghoff and Adam Rome, 206–231. Hagley Perspectives on Business and Culture. Philadelphia, PA: University of Pennsylvania Press, 2017. View Details
  4. CEO Activism (A)

    Michael W. Toffel, Aaron K. Chatterji and Julia Kelley

    This case introduces CEO activism, a phenomenon in which business leaders engage in political or social issues that do not relate directly to their companies. The case uses several examples to describe why business leaders are engaging in CEO activism and the potential benefits and drawbacks: (1) how Angie’s List’s CEO responded to the state of Indiana passing a controversial religious freedom law; (2) how Duke Energy’s CEO supported pending U.S. legislation addressing climate change, and (3) how Chobani Yogurt’s CEO publicly supported refugees. Students are then provided with the situation faced by PayPal CEO Dan Schulman after North Carolina passed House Bill 2, which Schulman perceived as discriminatory against LGBTQ (lesbian, gay, bisexual, transgender, and queer) individuals. Students are asked to consider whether Schulman should engage in CEO activism and, if so, how best to approach the situation. The (B) case provides an update on Schulman’s decision.

    Keywords: Leadership & Corporate Accountability; leadership; environmental and social sustainability; environment; climate change; Gender equality; Communication Strategy; Moral Sensibility; Values and Beliefs; Leadership; Law; Rights; Risk Management; Media; Corporate Social Responsibility and Impact; Religion; Expansion; Strategy; Social Issues; Consumer Products Industry; Electronics Industry; Technology Industry; United States; Indiana; North Carolina;


    Toffel, Michael W., Aaron K. Chatterji, and Julia Kelley. "CEO Activism (A)." Harvard Business School Case 617-001, March 2017. View Details
  5. Creating Ecotourism in Costa Rica, 1970–2000

    G. Jones and Andrew Spadafora

    Between the 1970s and the 2000s, Costa Rica became established as the world’s leading ecotourism destination. This article argues that although Costa Rica benefited from biodiversity and a pleasant climate, the country’s preeminence in ecotourism requires more than a natural resource endowment explanation. While previous literature has emphasized the efforts of the government and nongovernment organizations, this article demonstrates the critical role of small entrepreneurs in the co-creation of the industry. Making extensive use of oral history, the article explores the role of tour companies in drawing affluent Western ecotourists to the country, and of the creators of ecolodges and other forms of accommodation in providing them with somewhere to stay. Clustering created positive externalities drawing new entrepreneurs into the industry who could also learn from knowledge spillovers. There were downsides to the new industry. The creation of the national image of a natural paradise enabled many businesses that were not environmentally sustainable to freeride on the green image.

    Keywords: ecotourism; Entrepreneurship in emerging markets; sustainable business and innovation; tourism; Green Business; Entrepreneurship; Growth and Development; History; Business History; Tourism Industry; Latin America; Costa Rica;


    Jones, G., and Andrew Spadafora. "Creating Ecotourism in Costa Rica, 1970–2000." Enterprise & Society 18, no. 1 (March 2017): 146–183. View Details
  6. Advancing Conservation by Understanding and Influencing Human Behavior

    Sheila M. Reddy, Jensen Montambault, Yuta J. Masuda, Ayelet Gneezy, Elizabeth Keenan, William Butler, Jonathan R. Fisher and Stanley T. Asah

    Behavioral sciences can advance conservation by systematically identifying behavioral barriers to conservation and how to best overcome them. Behavioral sciences have informed policy in many other realms (e.g., health, savings), but they are a largely untapped resource for conservation. We propose a set of guiding questions for applying behavioral insights to conservation policy. These questions help define the conservation problem as a behavior change problem, understand behavioral mechanisms and identify appropriate approaches for behavior change (awareness, incentives, nudges), and evaluate and adapt approaches based on new behavioral insights. We provide a foundation for the questions by synthesizing a wide range of behavior change models and evidence related to littering, water and energy conservation, and land management. We also discuss the methodology and data needed to answer these questions. We illustrate how these questions have been answered in practice to inform efforts to promote conservation for climate risk reduction. Although more comprehensive research programs to answer these questions are needed, some insights are emerging. Integrating two or more behavior change approaches that target multiple, context-dependent factors may be most successful; however, caution must be taken to avoid approaches that could undermine one another (e.g., economic incentives crowding out intrinsic incentives).

    Keywords: adaptive management; awareness; Behavioral economics; behavioral science; conservation intervention; conservation planning; decision-making; incentives; nudge; Management; Motivation and Incentives; Behavior; Marketing; Decision Making; Environmental Sustainability; Economics;


    Reddy, Sheila M., Jensen Montambault, Yuta J. Masuda, Ayelet Gneezy, Elizabeth Keenan, William Butler, Jonathan R. Fisher, and Stanley T. Asah. "Advancing Conservation by Understanding and Influencing Human Behavior." Conservation Letters 10, no. 2 (March–April 2017): 248–256. (doi:10.1111/conl.12252. Pre-published online, October 2016.) View Details
  7. Why and How Investors Use ESG Information: Evidence from a Global Survey

    Amir Amel-Zadeh and George Serafeim

    Using survey data from a sample of senior investment professionals from mainstream (i.e., not SRI funds) investment organizations, we provide insights into why and how investors use reported environmental, social, and governance (ESG) information. The primary reason survey respondents consider ESG information in investment decisions is because they consider it financially material to investment performance. ESG information is perceived to provide information primarily about risk rather than a company’s competitive positioning. There is no one size fits all, with the financial materiality of different ESG issues varying across sectors. Lack of comparability due to the lack of reporting standards is the primary impediment to the use of ESG information. Most frequently, the information is used to screen companies, with the most often used method being negative screening. However, negative screening is perceived as the least beneficial investment while full integration into stock valuation and positive screening are considered more beneficial. Respondents expect negative screening to be used less in the future, while positive screening and active ownership to be used more.

    Keywords: investment management; sustainability; ESG; "ESG (environmental, social, governance) performance; investment fund; investment strategy; corporate accountability; Activist shareholder; engagement; environment; climate change; customers; customer satisfaction; employee engagement; global warming; Investment; Decision Making; Environmental Sustainability; Performance Expectations;


    Amel-Zadeh, Amir, and George Serafeim. "Why and How Investors Use ESG Information: Evidence from a Global Survey." Harvard Business School Working Paper, No. 17-079, February 2017. View Details
  8. GE Digital

    Rajiv Lal and Scott Johnson

    Known for manufacturing industrial equipment, GE has decided to invest in software and analytics capabilities to become a digital industrial company. They have also created a software platform that they hope will power the Industrial Internet. GE executives forecasted that the company will generate $15 billion in digital revenues by 2020. What steps does GE need to take to reach their goal?

    Keywords: GE; General Electric; manufacturing; industrial internet; software; wind power; digital manufacturing; renewable energy; energy; Renewable Energy; Innovation and Management; Innovation Strategy; Organizational Change and Adaptation; Organizational Culture; Software; Growth and Development Strategy; Transformation; Green Technology Industry; Technology Industry; Manufacturing Industry; North America;


    Lal, Rajiv, and Scott Johnson. "GE Digital." Harvard Business School Case 517-063, February 2017. View Details
  9. ExxonMobil: Business as Usual? (A)

    George Serafeim, Shiva Rajgopal and David Freiberg

    In September 2016, the U.S. Securities and Exchange Commission (SEC) launched an investigation into ExxonMobil’s accounting treatment of its oil and gas reserves. The SEC questioned the company’s decision to record no impairments of its reserves, although oil prices had declined by almost 60% since mid-2014 due to a mix of factors, including excess supply from the US, Russia and Middle East and slowing demand from China. Moreover, critics of ExxonMobil’s accounting noted that competitors, such as Chevron and Royal Dutch Shell, had impaired their reserves. This followed probes, by New York and Massachusetts Attorney Generals among other state Attorney Generals, which questioned whether ExxonMobil had, for decades, failed to inform investors about potential climate-change risks.
    As CEO Rex Tillerson stepped down to become the Secretary of State in the new Administration under President Donald Trump, the new CEO of ExxonMobil faced many strategic questions. How should ExxonMobil invest going forward? What were the capabilities that ExxonMobil needed to develop in order to be successful in the future? Did the accounting book value of the reserves reflect economic reality or was an impairment needed?

    Keywords: oil & gas; oil prices; valuation; climate change; renewable energy; oil companies; Asset impairment; accounting; predictive analytics; sustainability; Environmental Impact; innovation; Accounting; Valuation; Weather and Climate Change; Renewable Energy; Environmental Sustainability; Energy Industry;


    Serafeim, George, Shiva Rajgopal, and David Freiberg. "ExxonMobil: Business as Usual? (A)." Harvard Business School Case 117-046, February 2017. (Revised April 2017.) View Details
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