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. Shareholder Activism on Sustainability Issues

    Jody Grewal, George Serafeim and Aaron Yoon

    Shareholder activism on sustainability issues has become increasingly prevalent over the years, with the number of proposals filed doubling from 1999 to 2013. We use recent innovations in accounting standard setting to classify 2,665 shareholder proposals that address environmental, social and governance (ESG) issues as financially material or immaterial, and we analyze how proposals on material versus immaterial issues affect firms’ subsequent ESG performance and market valuation. We find that 58 percent of the shareholder proposals in our sample are filed on immaterial issues. We document that filing shareholder proposals is effective at improving the performance of the company on the focal ESG issue, even though such proposals nearly never received majority support. Improvements occur across both material and immaterial issues. Proposals on immaterial issues are associated with subsequent declines in firm valuation while proposals on material issues are associated with subsequent increases in firm value. We show that companies increase performance on immaterial issues because of agency problems, low awareness of the materiality of ESG issues, and attempts to divert attention from poor performance on material issues.

    Keywords: sustainability; activism; Activist Investors; Activist shareholder; corporate social responsibility; corporate accountability; environment; Corporate performance; corporate governance; Corporate Accountability; Corporate Social Responsibility and Impact; Performance; Environmental Sustainability; Corporate Governance; Business and Shareholder Relations; Investment Activism;


    Grewal, Jody, George Serafeim, and Aaron Yoon. "Shareholder Activism on Sustainability Issues." Harvard Business School Working Paper, No. 17-003, July 2016. View Details
  2. World Wildlife Fund (WWF)

    Ramon Casadesus-Masanell and Jordan Mitchell

    Nearly all environmental organizations have a similar aim: to stop the degradation of the natural environment. However, the strategies which environmental organizations choose to employ are sometimes starkly different. Compares the models of two dissimilar environmental powerhouses: Greenpeace and World Wildlife Fund for Nature (WWF). Active in 100 countries, WWF works with governments, businesses, other NGOs, and communities to set up conservation programs to preserve natural habitat. In contrast, Greenpeace works to campaign for environmental change against governments and corporations and accepts funding only through individuals and foundation grants. Explores the detailed history and business models of both organizations.

    Keywords: Business Model; Business and Community Relations; Business and Government Relations; Environmental Sustainability; Non-Governmental Organizations; Business Strategy;


    Casadesus-Masanell, Ramon, and Jordan Mitchell. "World Wildlife Fund (WWF)." Harvard Business School Case 716-468, June 2016. View Details
  3. Entrepreneurs and the Co-Creation of Ecotourism in Costa Rica

    Geoffrey Jones and Andrew Spadafora

    Between the 1970s and the 2000s, Costa Rica became established as the world’s leading ecotourism destination. This working paper suggests 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. The paper argues that the ecotourism industry was a co-creation of the public, private, and tertiary sectors. While the role of the government and conservation NGOs is acknowledged in the existing literature, this study draws attention to the critical role of small entrepreneurs. Making extensive use of oral history, this working paper demonstrates the role of tour companies in drawing affluent Western ecotourists to the country, as well as profiling the creators of ecolodges and other forms of accommodation in providing them with a place to stay. These entrepreneurs, many of them expatriate Americans, helped ensure that formally protected areas remained sustainable parks and reserves by providing revenues, conservation education to tourists, and community development and jobs. Clustering created positive externalities for new entrepreneurs to enter the industry who could also learn from knowledge spillovers. There were downsides to the new industry, however. The creation of the national image of a natural paradise enabled many businesses that were not environmentally sustainable to free-ride on the green image. Even values-driven ecotourism entrepreneurs faced questions about their impact as they expanded the scale of their operations. While scaling was a sign of success and delivered many benefits to Costa Rica, there were distinct drawbacks from a sustainability perspective.

    Keywords: tourism; Latin America; business history; sustainable strategy; sustainability; nonprofit; entrepreneurs; environment; Entrepreneurship; History; Tourism Industry; Costa Rica;


    Jones, Geoffrey, and Andrew Spadafora. "Entrepreneurs and the Co-Creation of Ecotourism in Costa Rica." Harvard Business School Working Paper, No. 16-136, June 2016. View Details
  4. Technology Choice and Capacity Portfolios under Emissions Regulation

    David Drake, Paul R. Kleindorfer and Luk N. Van Wassenhove

    We study the impact of emissions tax and emissions cap-and-trade regulation on a firm's technology choice and capacity decisions. We show that emissions price uncertainty under cap-and-trade results in greater expected profit than a constant emissions price under an emissions tax, which contradicts popular arguments that the greater uncertainty under cap-and-trade will erode value. We further show that two operational drivers underlie this result: i) the firm's option not to operate, which effectively right-censors the uncertain emissions price and ii) dispatch flexibility, which is the firm's ability to first deploy its most profitable capacity given the realized emissions price. In addition to these managerial insights, we also explore the effect of investment and production subsidies. Through an illustrative example, we show that production subsidies of higher investment and production cost technologies (such as carbon capture and storage technologies) have no effect on the firm's optimal total capacity when firms own a portfolio of both clean and dirty technologies. On the other hand, investment subsidies of these technologies increase the firm's total capacity, conditionally increasing expected emissions. Subsidization of a lower production cost technology has no effect on the firm's optimal total capacity in multi-technology portfolios.

    Keywords: technology management; Management; Technology; Service Operations; Environmental Sustainability;


    Drake, David, Paul R. Kleindorfer, and Luk N. Van Wassenhove. "Technology Choice and Capacity Portfolios under Emissions Regulation." Production and Operations Management 25, no. 6 (June 2016): 1006–1025. View Details
  5. How Consumers and Businesses are Reshaping Public Health

    John A. Quelch

    Healthcare and education are two issues in which citizens around the world, rich and poor, are passionately interested. It has long been appreciated that the way that a society treats its youngest and oldest members says much about its moral maturity. Economic development specialists also attest to the importance of health care in determining productivity. The connection between child health and nutrition and readiness to learn in schools is also well established. Forthcoming revisions to the Millennium Development Goals are expected to again highlight the importance of disease prevention and health care to the global community.

    Keywords: healthcare; Consumer Power; Innovation in healthcare delivery; Mobile Healthcare; Transition; Transformation; Trends; Customer Satisfaction; Customer Value and Value Chain; Health Care and Treatment; Information; Collaborative Innovation and Invention; Independent Innovation and Invention; Innovation and Management; Innovation Leadership; Management; Marketing; Markets; Planning; Problems and Challenges; Biotechnology Industry; Chemical Industry; Consumer Products Industry; Distribution Industry; Fashion Industry; Food and Beverage Industry; Green Technology Industry; Health Industry; Insurance Industry; Medical Devices and Supplies Industry; Pharmaceutical Industry; Public Administration Industry; South America; North and Central America; Middle East; Europe; Asia;


    Quelch, John A. "How Consumers and Businesses are Reshaping Public Health." Harvard Business School Working Knowledge (May 25, 2016). View Details
  6. The Power of C.E.O. Activism: How Politically Outspoken Executives Sway Public (and Consumer) Opinion

    Aaron K. Chatterji and Michael W. Toffel

    Some CEOs are making news by taking public stances on controversial social issues largely unrelated to their core business. This article summarizes the insights from our research paper that shows that such "CEO activism" can influence public opinion and consumer attitudes.

    Keywords: leadership; Leadership &Corporate Accountability; Non-market Strategy; corporate social responsibility; politics; political influence; political strategy; political risk; equity; gender; climate change; Communication Strategy; Law; Leadership; Brands and Branding; Media; Problems and Challenges; Civil Society or Community; Social Issues; Public Opinion; United States; Georgia (state, US); North Carolina; Indiana; Indianapolis;


    Chatterji, Aaron K., and Michael W. Toffel. "The Power of C.E.O. Activism: How Politically Outspoken Executives Sway Public (and Consumer) Opinion." Grey Matter. New York Times (April 3, 2016), SR10. View Details
  7. The Globalization of Corporate Environmental Disclosure: Accountability or Greenwashing?

    Christopher Marquis, Michael W. Toffel and Yanhua Zhou

    This article is a layman summary of "Scrutiny, Norms, and Selective Disclosure: A Global Study of Greenwashing," published in Organization Science 27, no. 2 (March–April 2016): 483–504.

    Keywords: reporting; environmental performance; environmental sustainability; civil society; Corporate Disclosure; Integrated Corporate Reporting; Corporate Social Responsibility and Impact; Civil Society or Community; Environmental Sustainability;


    Marquis, Christopher, Michael W. Toffel, and Yanhua Zhou. "The Globalization of Corporate Environmental Disclosure: Accountability or Greenwashing?" Work In Progress (American Sociological Association blog) (March 22, 2016). (Reprinted as Environmental disclosure: corporate accountability or greenwashing?” LSE Business Review, June 9, 2016.) View Details
  8. Do CEO Activists Make a Difference? Evidence from a Field Experiment

    Aaron K Chatterji and Michael W. Toffel

    Several CEOs are receiving significant media attention for taking public positions on controversial social and environmental issues largely unrelated to their core business, ranging from LGBT rights to race relations to gender equality to climate change. We provide the first evidence that such "CEO activism" can influence public opinion and consumer attitudes. Our field experiment examines the impact of Apple CEO Tim Cook’s public statements opposing a pending religious freedom law that critics warned would allow discrimination against same-sex couples. Our results confirm the influence of issue framing on public opinion and suggest that CEOs can sway public opinion, potentially to the same extent as prominent politicians. Moreover, Cook’s CEO activism increased consumer intentions to purchase Apple products, especially among proponents of same-sex marriage.

    Keywords: politics; policy; policy-making; corporate social responsibility; lobbying; campaign contributions; regulation; Leadership; Policy; Ethics; Governance; Social Issues; United States;


    Chatterji, Aaron K., and Michael W. Toffel. "Do CEO Activists Make a Difference? Evidence from a Field Experiment." Harvard Business School Working Paper, No. 16-100, March 2016. (Revised June 2016.) View Details
  9. Voluntary, Self-Regulatory and Mandatory Disclosure of Oil and Gas Company Payments to Foreign Governments

    Paul M. Healy and George Serafeim

    Transparency advocates argue that disclosure of oil and gas company payments to host governments for natural resources is a public good, helping to reduce corruption and increase accountability in resource rich countries. Yet we find a very low frequency of voluntary disclosures of payments to host governments by oil and gas firms, and negative stock price reactions for affected firms at the announcement of regulations mandating disclosure. This suggests that sample firm managers and their investors perceive that there are private costs of such voluntary disclosures, contributing to continued low transparency and weak governance in resource rich countries. However, we document that industry self-regulation has generated information to substitute for the gap in voluntary company disclosure. We also find some evidence that these disclosures are accompanied by lower country corruption ratings, suggesting that collective action may be an effective way for the industry to manage the private costs of disclosure and respond to public pressure to improve governance in resource rich countries.

    Keywords: transparency; regulation; industry self-regulation; disclosure; accountability; competition; Competition; Corporate Accountability; Corporate Disclosure;


    Healy, Paul M., and George Serafeim. "Voluntary, Self-Regulatory and Mandatory Disclosure of Oil and Gas Company Payments to Foreign Governments." Harvard Business School Working Paper, No. 16-099, March 2016. View Details
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