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

    Daron Acemoglu, Ufuk Akcigit, Douglas Hanley and William R. Kerr

    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;


    Acemoglu, Daron, Ufuk Akcigit, Douglas Hanley, and William R. Kerr. "Transition to Clean Technology." Special Issue on Climate Change and the Economy. Journal of Political Economy 124, no. 2 (February 2016): 52–104. View Details
  2. Executive Compensation and Misconduct: Environmental Harm

    Dylan Minor

    We explore the relationship between managerial incentives and misconduct using the setting of environmental harm. We find that high-powered executive compensation can increase the odds of environmental law-breaking by 40-60% and the magnitude of environmental harm by over 100%. We document similar results for the setting of executive compensation and illegal financial accounting. Finally, we outline some managerial and policy implications to blunt these adverse incentive effects.

    Keywords: Executive Compensation; corporate governance; Misconduct; environmental performance; accounting scandal; sustainable finance; Crime and Corruption; Corporate Social Responsibility and Impact; Executive Compensation; Environmental Sustainability; Corporate Governance;


    Minor, Dylan. "Executive Compensation and Misconduct: Environmental Harm." Harvard Business School Working Paper, No. 16-076, January 2016. View Details
  3. Woolf Farming and the California Water Crisis

    Forest Reinhardt, David Bell, Natalie Kindred, Mary Shelman and Laura Winig

    This case highlights the tough choices, competing interests, and decision-making mechanisms involved in California's management of its severe drought, entering its fifth year in 2015. Stuart Woolf, CEO of Woolf Farming, a grower and processor of almonds, tomatoes, and other crops in California's Central Valley, must decide how to respond to the changing operating environment. Scarce water resources—and institutional constraints on the use of water—have forced many producers, including Woolf, to fallow farmland. Meanwhile, competing demands for water from municipalities and environmental interests have raised the public's scrutiny of agricultural water use. This case describes farming in California's Central Valley and reviews the state's complicated system for managing water rights and resources. It invites students to analyze the relative merits of competing perspectives on how to allocate water, the institutional mechanisms for doing so, and the potential responses of agricultural producers to the changing marketplace. Is now the time to double down on farming in the Central Valley, shift to a higher-value-added crop portfolio (e.g., organics), or retreat from this challenging business?

    Keywords: Plant-Based Agribusiness; Natural Disasters; Weather and Climate Change; Resource Allocation; Environmental Sustainability; Government and Politics; Economics; Agriculture and Agribusiness Industry; California;


    Reinhardt, Forest, David Bell, Natalie Kindred, Mary Shelman, and Laura Winig. "Woolf Farming and the California Water Crisis." Harvard Business School Case 716-038, December 2015. (Revised January 2016.) View Details
  4. Lipman: Vertical Integration in Fresh Tomatoes

    Jose B. Alvarez and Carin-Isabel Knoop

    Lipman, the largest open field fresh tomato grower and marketer in the United States, has been successfully pursuing an aggressive strategy of acquisitions over the last several years. End market consolidation in the retail space has driven vertical integration in the extremely competitive fresh tomato business, where farm gate prices have not changed in 30 years. The company is facing pressure from climate change, alternative uses for farm land, and a transition to the next generation of family ownership of the business.

    Keywords: Vertical Integration; Agribusiness; tomatoes; Fresh produce; Vertical Integration; Agribusiness; Agriculture and Agribusiness Industry; United States; Cuba; Central America;


    Alvarez, Jose B., and Carin-Isabel Knoop. "Lipman: Vertical Integration in Fresh Tomatoes." Harvard Business School Case 516-053, November 2015. View Details
  5. Peru: Economic Miracle or Just a Mirage

    Richard H.K. Vietor, Fernando A. D'Alessio and Ricardo M. Pino

    After years of rapid growth, Peru's economy had recently slowed. Mineral prices were down and the current President, Humala, had only a year remaining in office before the next election. And he could not run again. While the country had many strengths, especially in minerals, natural resources and tourism, infrastructural problems, corruption, drugs, and inequality continued to plague its growth.
    The next election would help determine Peru's future growth.

    Keywords: country; economic growth; resources; internal security; politics; Peru;


    Vietor, Richard H.K., Fernando A. D'Alessio, and Ricardo M. Pino. "Peru: Economic Miracle or Just a Mirage." Harvard Business School Case 716-028, October 2015. (Revised December 2015.) View Details
  6. Clearwater Seafoods

    Forest L. Reinhardt

    Clearwater sought to market value-added shellfish products in a traditionally commodities based industry, while facing supply uncertainties and regulatory, environmental, and foreign exchange challenges. Clearwater harvested lobsters, clams, scallops, shrimp, and other marine creatures from the Canadian Atlantic, and sold the seafood all over the world. Although seafood buyers traditionally bought on price, Clearwater's innovations and technology investments enabled it to produce higher quality products; still, it faced the challenge of convincing buyers to pay a premium price. The firm's managers also prided themselves on their sustainable fishing practices, which were not the historical norm for the industry; here, again, translating these practices into increased willingness to pay was a challenge. As background, the case also discusses the challenges of fishery management at the national and international levels, using the collapse of the cod fishing industry as an example, and discussing the economics and politics of the fishery in classical terms of externalities and public goods.

    Keywords: Agribusiness; Profit; Goods and Commodities; Governing Rules, Regulations, and Reforms; Product Marketing; Corporate Social Responsibility and Impact; Environmental Sustainability; Agriculture and Agribusiness Industry; Canada;


    Reinhardt, Forest L. "Clearwater Seafoods." Harvard Business School Case 716-023, October 2015. View Details
  7. UPower Technologies Inc.

    Joseph B. Lassiter III, William A. Sahlman and Liz Kind

    The UPower founders, Jake DeWitte and Caroline Cochran, were recent graduates from MIT's Nuclear Science and Engineering Department. They chose to attend Palo Alto–based Y Combinator's accelerator program to focus on building a "mini" nuclear reactor that would produce up to ten MWt and could fit in two 40-foot intermodal shipping containers. The UPower reactor was designed to serve the need for "off-grid" electric power. These off-grid customers were in remote locations such as mining operations, military bases, Arctic townships, or even island nations. While DeWitte and Cochran were ecstatic about the progress they had made and the enthusiastic open-mindedness of Bay Area investors to backing groundbreaking and even potentially contentious "big ideas," they wondered if their investors would have the patience to finance UPower over the long-term.

    Keywords: nuclear; nuclear energy; nuclear power; energy; energy markets; renewable energy; new nuclear; entrepreneurial finance; entrepreneurial marketing; Business & government relations; off-grid; Energy; Renewable Energy; Energy Generation; Energy Sources; Entrepreneurship; Marketing; Business and Government Relations; Energy Industry; Utilities Industry; United States;


    Lassiter, Joseph B., III, William A. Sahlman, and Liz Kind. "UPower Technologies Inc." Harvard Business School Case 816-054, October 2015. View Details
  8. Integrated Reporting for a Re-Imagined Capitalism

    Robert G. Eccles and Birgit Spiesshofer

    An essential element of capitalism is corporate reporting. Today's capitalism is supported by financial reporting. Critics of today's capitalism argue that it is too short-term oriented and rewards companies for creating negative externalities. Integrated reporting can play an important role in changing this since it is focused on the material issues that affect a company's ability to create value over the short, medium, and long term. Each country must take its own path to integrated reporting. This is illustrated by analyzing the different regulatory and legislative regimes in the United States and the European Union.

    Keywords: integrated reporting; materiality; Securities and Exchange Commission; European Union; Information and Transformation function; Integrated Corporate Reporting; United States; European Union;


    Eccles, Robert G., and Birgit Spiesshofer. "Integrated Reporting for a Re-Imagined Capitalism." Harvard Business School Working Paper, No. 16-032, September 2015. View Details
  9. Market Reaction to Mandatory Nonfinancial Disclosure

    Jyothika Grewal, Edward J. Riedl and George Serafeim

    This paper examines the equity market reaction to events associated with the passage of a directive in the European Union (EU) mandating increased nonfinancial disclosure, which affected firms listed on EU exchanges or having significant operations in the EU. The mandated disclosures relate to firms' environmental, social, and governance performance. Using a cross-country sample, we first document an on average negative market reaction to events increasing the likelihood of passage for this regulation, consistent with equity investors anticipating net costs with the directive's passage for most firms. Exploiting cross-sectional variation, we then predict and document a more negative market reaction for firms having: (i) low pre-directive nonfinancial disclosure levels, consistent with investors anticipating these future disclosures to reveal worse-than-expected news; (ii) weaker performance on nonfinancial issues, consistent with expectations for these firms to incur future costs to internalize current externalities; and (iii) lower ownership by institutional asset owners, consistent with such investors demanding further disclosures than mandated by the directive. The average market reaction for firms with superior nonfinancial performance and disclosure in our sample is positive, suggesting that investors expect net benefits from the passage of the directive for these firms.

    Keywords: accounting; disclosure; regulation; mandatory disclosure; mandatory reporting; sustainability; sustainability reporting; environmental and social sustainability; environment; environmental performance; corporate governance; corporate social responsibility; Corporate Disclosure; Corporate Social Responsibility and Impact; Accounting; Environmental Sustainability; Corporate Governance; European Union;


    Grewal, Jyothika, Edward J. Riedl, and George Serafeim. "Market Reaction to Mandatory Nonfinancial Disclosure." Harvard Business School Working Paper, No. 16-025, September 2015. View Details
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