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. 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; 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
  2. 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
  3. 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; 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
  4. 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
  5. Turkey and Russia: Dangerous Liaisons

    Rawi Abdelal, Esel Çekin, Eren Kuzucu and Gamze Yucaoglu

    Turkey and Russia were two countries with close political and economic ties. Starting from late 2015, the dialogue between Ankara and Moscow was suspended for several months. Although the initial steps for a rapprochement were taking place as of June 2016, there were many uncertainties remaining: In light of the developments, could companies resume their investments and commercial activities or should decisions be put on hold? What was the strategy during such turbulent times? Could companies bet that the reunion would last?

    Keywords: Russia; Turkey; Business & government relations; politics; energy policy; infrastructure; energy; Natural Gas; natural resources; nuclear power; international relations; strategy; Business and Government Relations; Energy; Strategy; International Relations; Russia; Turkey;


    Abdelal, Rawi, Esel Çekin, Eren Kuzucu, and Gamze Yucaoglu. "Turkey and Russia: Dangerous Liaisons." Harvard Business School Case 717-035, January 2017. View Details
  6. Managing Risk in Reinsurance: From City Fires to Global Warming

    Niels Viggo Hauter and Geoffrey Jones

    This is the first book to provide a comprehensive history of the reinsurance industry from the nineteenth century to the present day. Reinsurance developed at the fringe of financial services and, for most of its existence, was largely unnoticed outside the expert community. However more recently public and professional sensitivity towards managing risks has increased. This book traces the global development of reinsurance and explores how the nature of risk itself has changed over time. It highlights key aspects that have shaped the evolving industry, including shifts in risk engineering and risk management, the development of actuarial science, and the impact of changes in political and regulatory contexts. The authors point to the special role reinsurers have played in the capitalist system. As the industry developed, it had a vested interest in preventing excessive risks, while also providing complex societies with a mechanism to limit the damage that natural and other catastrophes inflicted. This has led reinsurers, once a very secretive industry, to take increasingly public stances on the risk of human-induced climate change and the need to take urgent action to contain it.

    Keywords: globalization; Insurance; risk management; business history; Globalization; Risk and Uncertainty; Financial Services Industry; Insurance Industry; Africa; Europe; Latin America; North and Central America; Asia;


    Hauter, Niels Viggo and Geoffrey Jones, eds. Managing Risk in Reinsurance: From City Fires to Global Warming. New York: Oxford University Press, 2017. View Details
  7. Africa's New Generation of Innovators

    Clayton M. Christensen, Efosa Ojomo and Derek van Bever

    With a young, urbanizing population, abundant natural resources, and a growing middle class, Africa seems to have all the ingredients necessary for huge growth. Nevertheless, a number of multinationals have recently left the continent, discouraged by widespread corruption, a lack of infrastructure and ready talent, and an underdeveloped consumer market. Some innovators, however, have succeeded by building franchises to serve poorer consumer segments; tapping the vast opportunity represented by nonconsumption; internalizing risk to build strong, self-sufficient, low-cost enterprises; and integrating operations to avoid corruption. The difference, the authors believe, lies in the choice between “push” and “pull” investment. MNCs seek growth by pushing current products onto emerging middle-class consumers. They retain some large portion of their existing cost structure and operating style, and thus set prices that limit market penetration. The winning strategy diverges from this approach in almost every respect. When innovators develop products that people want to pull into their lives, they create markets that serve as a foundation for sustainable growth and prosperity.

    Keywords: Innovation Strategy; Multinational Firms and Management; Economic Growth; Africa;


    Christensen, Clayton M., Efosa Ojomo, and Derek van Bever. "Africa's New Generation of Innovators." Harvard Business Review 95, no. 1 (January–February 2017): 129–136. View Details
  8. 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
  9. BASF: Co-Creating Innovation (A)

    V. Kasturi Rangan, Emilie Billaud and Vincent Dessain

    In 2016, BASF's Chief Executive Officer and Chief Technology Officer reflected on the co-creation innovation program started almost 18 months ago as part of BASF's 150th anniversary celebration. 500 project ideas had been created, of which 100 had already moved to the company's conventional R&D funnel. 34 had been short-listed for further consideration. At least 10, if not more of these projects would receive "landmark" funding running at an average of 1 million Euro each. Beyond selecting the right projects, how could the CEO and CTO ensure that a complex organization such as BASF would encourage such fresh ideas to be developed and nurtured in the future? Was this experiment something that BASF should do again in the future?

    Keywords: Innovation Strategy; collaborative Innovation and Invention; Innovation and Management; chemicals; sustainability; knowledge sharing; Knowledge Sharing; Innovation Strategy; Innovation and Management; Chemicals; Environmental Sustainability; Collaborative Innovation and Invention; Consumer Products Industry; Europe;


    Rangan, V. Kasturi, Emilie Billaud, and Vincent Dessain. "BASF: Co-Creating Innovation (A)." Harvard Business School Case 517-073, December 2016. (Revised December 2016.) View Details
  10. Elon Musk's Big Bets

    David B. Yoffie and Eric Baldwin

    Between late 2014 and late 2016, Tesla CEO Elon Musk undertook several major, and risky, initiatives that would dramatically expand the scale and scope of Tesla’s business. In late 2014, Tesla began construction on a $5 billion “gigafactory” that would manufacture lithium-ion batteries used in Tesla’s electric vehicles on an unprecedented scale. In early 2015, Tesla announced a new product line of battery packs designed for large-scale energy storage for residential, commercial, and utility-scale installations. In 2016, the company acquired SolarCity, a leading solar energy firm, creating what Musk called “a vertically integrated energy company.” These moves, representing billions of investment and extension into new industries, came at a time when Tesla was still losing money and struggling to scale up production of its electric vehicle lines to meet ambitious delivery targets. Meanwhile, Musk was also CEO of SpaceX, which was, while growing its business of launching satellites and cargo into space for commercial and governmental clients, preparing to take astronauts into space, pioneering the use of reusable rockets and announcing plans to colonize Mars. Would Musk be able to realize his ambitious goals or was he taking too many risks with his investors’ money?

    Keywords: electric vehicles; batteries; solar power; renewable energy; strategy; Execution; technology; space flight; Tesla; SolarCity; SpaceX; Elon Musk; Technology; Risk and Uncertainty; Expansion; Renewable Energy; Investment; Manufacturing Industry; Green Technology Industry; Auto Industry; Aerospace Industry; Battery Industry;


    Yoffie, David B., and Eric Baldwin. "Elon Musk's Big Bets." Harvard Business School Case 717-431, November 2016. View Details
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