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. Transition to Clean Technology

    We develop a microeconomic model of endogenous growth where clean and dirty technologies compete in production and innovation, in the sense that research can be directed to either clean or dirty technologies. If dirty technologies are more advanced to start with, the potential transition to clean technology can be difficult both because clean research must climb several rungs to catch up with dirty technology and because this gap discourages research effort directed towards clean technologies. Carbon taxes and research subsidies may nonetheless encourage production and innovation in clean technologies, though the transition will typically be slow. We characterize certain general properties of the transition path from dirty to clean technology. We then estimate the model using a combination of regression analysis on the relationship between R&D and patents, and simulated method of moments using microdata on employment, production, R&D, firm growth, entry and exit from the US energy sector. The model's quantitative implications match a range of moments not targeted in the estimation quite well. We then characterize the optimal policy path implied by the model and our estimates. Optimal policy makes heavy use of research subsidies as well as carbon taxes. We use the model to evaluate the welfare consequences of a range of alternative policies.

    Keywords: Technological Innovation; Entrepreneurship; Environmental Sustainability; Green Technology Industry;

    Citation:

    Acemoglu, Daron, Ufuk Akcigit, Douglas Hanley, and William R. Kerr. "Transition to Clean Technology." Harvard Business School Working Paper, No. 15-045, December 2014. View Details
  2. Disrupting the Meat Industry: Tissue Culture Beef

    Jose B. Alvarez and Matthew G. Preble

    Dr. Mark Post and his team at Maastricht University were perfecting their tissue culture beef product—made entirely from muscle grown in his lab—to give it the same taste, texture and appearance of a traditional beef hamburger. A previous iteration of this product had been taste tested live, with good results, and Sergey Brin, a co-founder of Google, had provided Post with much of the funding to make the burgers. The next step was to form an independent company around this technology and take it to market. This innovative product could both radically disrupt the existing beef production and supply chain, and provide an animal welfare and environmentally-friendly food that had far less of an environmental impact than traditional beef products.

    Post faced several challenges in making this a commercially viable product though. He had to get price down, as it currently cost roughly $330,000 to make a single burger. He also had to find the right partner(s) to help him bring the product to market, but who should he work with: someone from the established beef production and supply system, a retailer, or someone entirely outside the traditional beef system? How could he expect established companies to react to this disruption of the status quo?

    Messaging around this product was critical: How should Post communicate with the public to convey that this was a natural product—the way muscle tissue grew in his lab was the same way it developed in cattle—and overcome public skepticism of overt scientific involvement in their food?

    Keywords: Agribusiness; innovation; Beef Production; Environmental impacts of food production; Agribusiness; Animal-Based Agribusiness; Disruptive Innovation; Innovation and Invention; Environmental Sustainability; Food; Agriculture and Agribusiness Industry; Food and Beverage Industry; Netherlands; United States; United Kingdom;

    Citation:

    Alvarez, Jose B., and Matthew G. Preble. "Disrupting the Meat Industry: Tissue Culture Beef." Harvard Business School Case 515-001, November 2014. View Details
  3. The Impact of Corporate Sustainability on Organizational Processes and Performance

    Robert G. Eccles, Ioannis Ioannou and George Serafeim

    We investigate the effect of corporate sustainability on organizational processes and performance. Using a matched sample of 180 U.S. companies, we find that corporations that voluntarily adopted sustainability policies by 1993—termed as High Sustainability companies—exhibit by 2009 distinct organizational processes compared to a matched sample of companies that adopted almost none of these policies—termed as Low Sustainability companies. The boards of directors of High Sustainability companies are more likely to be formally responsible for sustainability, and top executive compensation incentives are more likely to be a function of sustainability metrics. High Sustainability companies are more likely to have established processes for stakeholder engagement, to be more long-term oriented, and to exhibit higher measurement and disclosure of nonfinancial information. Finally, High Sustainability companies significantly outperform their counterparts over the long-term, both in terms of stock market and accounting performance.

    Keywords: sustainability; Sustainability Management; Sustainability Research; sustainability reporting; sustainability targets; corporate social responsibility; corporate accountability; reporting; corporate governance; investor clientele; investor communication; stock market; Corporate Social Responsibility and Impact; Environmental Sustainability; Performance; United States;

    Citation:

    Eccles, Robert G., Ioannis Ioannou, and George Serafeim. "The Impact of Corporate Sustainability on Organizational Processes and Performance." Management Science 60, no. 11 (November 2014): 2835–2857. View Details
  4. Government Green Procurement Spillovers: Evidence from Municipal Building Policies in California

    Timothy Simcoe and Michael W. Toffel

    We study how government green procurement policies influence private-sector demand for similar products. Specifically, we measure the impact of municipal policies requiring governments to construct green buildings on private-sector adoption of the U.S. Green Building Council's Leadership in Energy and Environmental Design (LEED) standard. Using matching methods, panel data, and instrumental variables, we find that government procurement rules produce spillover effects that stimulate both private-sector adoption of the LEED standard and investments in green building expertise by local suppliers. These findings suggest that government procurement policies can accelerate the diffusion of new environmental standards, which require coordinated complementary investments by various types of private adopter.

    Keywords: Public procurement; green building; quality certification; environmental policy; Buildings and Facilities; Environmental Sustainability; Policy; Government and Politics; Green Technology Industry; Public Administration Industry; California;

    Citation:

    Simcoe, Timothy, and Michael W. Toffel. "Government Green Procurement Spillovers: Evidence from Municipal Building Policies in California." Journal of Environmental Economics and Management 68, no. 3 (November 2014): 411–434. (Lead article.) View Details
  5. Industrial Policy and the Creation of New Industries: Evidence from Brazil's Bioethanol Industry

    Santiago Mingo and Tarun Khanna

    Industrial policy programs are frequently used by governments to stimulate economic activity in particular sectors of the economy. This study explores how an industrial policy program can affect the creation and evolution of an industry and, ultimately, the long-term performance of firms. We examine the history of the Brazilian bioethanol industry, focusing on the industrial policy program implemented by the Brazilian government in the 1970s to develop the industry. We put together a novel data set containing detailed information about the history of bioethanol producers. Our findings show that plants founded during the industrial policy program tend to be, in the long run, more productive than those founded before the program was in place. Based on additional analyses and complementary fieldwork, we infer that the wave of acquisitions that occurred after the end of the industrial policy program had an important effect on the performance of the plants founded when the program was in place. Industrial policy, especially in conjunction with a competitive post-industrial policy business landscape, can succeed in nurturing competitive firms.

    Keywords: Economic Sectors; Policy; Economic Growth; Government and Politics; Energy Sources; Green Technology Industry; Energy Industry; Brazil;

    Citation:

    Mingo, Santiago, and Tarun Khanna. "Industrial Policy and the Creation of New Industries: Evidence from Brazil's Bioethanol Industry." Industrial and Corporate Change 23, no. 5 (October 2014): 1229–1260. View Details
  6. Sustainability at IKEA Group

    V. Kasturi Rangan, Michael W. Toffel, Vincent Dessain and Jerome Lenhardt

    By 2014, IKEA Group was the largest home furnishing company, with EUR28.5 billion of sales, and planned to reach EUR50 billion by 2020, mainly from emerging markets. At the same time, IKEA Group had adopted in 2012 a new sustainability strategy that focused the company's efforts on its entire value chain from its raw materials sourcing to the lifestyle of its end consumers. The plan especially centered on wood, which represented 60% of IKEA Group's total procurement in volume and constituted a key lever for the company to increase its positive impact on sustainability. IKEA Group Management therefore had to decide how to manage its portfolio of wood sustainability initiatives, especially in the context of the company's aggressive growth plan.

    Keywords: furnishing; sustainability; supply chain; wood; Customer Value and Value Chain; Supply Chain Management; Environmental Sustainability; Growth and Development Strategy; Consumer Products Industry;

    Citation:

    Rangan, V. Kasturi, Michael W. Toffel, Vincent Dessain, and Jerome Lenhardt. "Sustainability at IKEA Group." Harvard Business School Case 515-033, September 2014. View Details
  7. Chief Sustainability Officers: Who Are They and What Do They Do?

    Kathleen Miller and George Serafeim

    While a number of studies document that organizations go through numerous stages as they increase their commitment to sustainability over time, we know little about the role of the Chief Sustainability Officer (CSO) in this process. Using survey and interview data we analyze how a CSO's authority and responsibilities differ across organizations that are in different stages of sustainability commitment. We document increasing organizational authority of the CSO as organizations increase their commitment to sustainability moving from the Compliance to the Efficiency and then to the Innovation stage. However, we also document a decentralization of decision rights from the CSO to different functions, largely driven by sustainability strategies becoming more idiosyncratic at the Innovation stage. The study concludes with a discussion of practices that CSOs argue to accelerate the commitment of organizations to sustainability.

    Keywords: sustainability; Change; change management; Organizational change; organizational culture; innovation; Performance; leadership; Leadership & Corporate Accountability; Organizational Change and Adaptation; Leadership; Change Management; Environmental Sustainability; Innovation and Invention;

    Citation:

    Miller, Kathleen, and George Serafeim. "Chief Sustainability Officers: Who Are They and What Do They Do?" Harvard Business School Working Paper, No. 15-011, August 2014. View Details
  8. Husk Power

    Joseph B. Lassiter III and Sid Misra

    In late 2013, Husk Power Systems found itself falling further and further behind plan. The founding CEO had decided to resign. His co-founder is faced with the decision of quitting his corporate job in the US to head to India and help form a new management team. Husk is an Indian startup founded in 2007 with the goal of global rural electrification. The company has decided to pivot from operating biomass gasification plants towards developing solar microgrids in India and East Africa.

    Keywords: Plant-Based Agribusiness; Business Model; Business Startups; Energy Generation; Renewable Energy; Social Entrepreneurship; Foreign Direct Investment; International Finance; Globalized Markets and Industries; Crime and Corruption; Employee Relationship Management; Independent Innovation and Invention; Employment; Leadership Style; Leading Change; Management Practices and Processes; Management Style; Management Succession; Management Skills; Emerging Markets; Social Psychology; Culture; Business Strategy; Agriculture and Agribusiness Industry; Energy Industry; Green Technology Industry; Utilities Industry; Africa; India; United States;

    Citation:

    Lassiter, Joseph B., III, and Sid Misra. "Husk Power." Harvard Business School Case 815-023, August 2014. (Revised November 2014.) View Details
  9. Promoting Corporate Sustainability through Integrated Reporting: The Role of Investment Fiduciaries and the Responsibilities of the Corporate Board

    Robert G. Eccles, J. Herron and George Serafeim

    This book is a comprehensive reference work exploring recent changes and future trends in the principles that govern institutional investors and fiduciaries. A wide range of contributors offer new perspectives on dynamics that drive the current emphasis on short-term investment returns. Moreover, they analyze the forces at work in markets around the world, which are bringing into sharper focus the systemic effects that investment practices have on the long-term stability of the economy and the interests of beneficiaries in financial, social, and environmental sustainability. This volume provides a global and multi-faceted commentary on the evolving standards governing institutional investment, offering guidance for students, researchers, and policy makers interested in finance, governance, and other aspects of the contemporary investment world. It also provides investment, business, financial media, and legal professionals with the tools they need to better understand and respond to new financial market challenges of the twenty-first century.

    Keywords: Governance; Integrated Corporate Reporting; Institutional Investing; Financial Services Industry;

    Citation:

    Eccles, Robert G., J. Herron, and George Serafeim. "Promoting Corporate Sustainability through Integrated Reporting: The Role of Investment Fiduciaries and the Responsibilities of the Corporate Board." Chap. 31 in Cambridge Handbook of Institutional Investment and Fiduciary Duty, edited by James P. Hawley, Andreas G.F. Hoepner, Keith L. Johnson, Joakim Sandberg, and Edward J. Waitzer, 403–415. Cambridge University Press, forthcoming. (Due in July 2014.) View Details
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