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. Spectio: A Digital Lighting Company

    Rajiv Lal and Sarah McAra

    Spectio Tech, founded in 2005, developed and implemented intelligent LED lighting solutions for the industrial market. Sensors and wireless connectivity embedded in its LED fixtures not only significantly reduced lighting-related energy use—by up to 90% in some cases—but also served as a tool for the Internet of Things (IoT) to expose powerful insights about facility use. Yet in 2016, few of Spectio’s customers were fully embracing the system as an IoT product. Both LED lighting and IoT were rapidly evolving markets, and Spectio had to decide if it should focus on driving down lighting hardware costs to expand its total addressable market or on improving the software controls to enhance the system’s IoT functionality.

    Keywords: Internet of Things; IoT; LED Lighting; technology adoption; technological innovation; start-up; energy efficiency; Technology;


    Lal, Rajiv, and Sarah McAra. "Spectio: A Digital Lighting Company ." Harvard Business School Case 517-002, September 2016. (Revised September 2016.) View Details
  2. Joan Bavaria and Multi-Dimensional Capitalism

    Geoffrey Jones and Seema Amble

    The case examines the career of Joan Bavaria, a pioneer of Socially Responsible Investing,and founder of Trillium Asset Management and Ceres, the non-profit organization advocating for sustainability leadership. It describes her personal journey from art student and college drop out to financier and campaigner for corporate sustainability. Trillium grew out of Bavaria's initial work in Boston-based Franklin Research and Development Corporation, and became an independent entity in 1982. Bavaria argued that investment houses could use their funds to promote corporate social responsibility, and that such investments could be profitable. This was considered extremely unorthodox in the industry at the time. In the wake of the giant oil spill from the tanker Exxon Valdez in Alaska in 1989, Bavaria launced the Ceres Principals aimed to generate standardized corporate reporting on enviromental performance. Ceres grew as an organization and launched the Global Reporting Initiative in 1997. The case provides an opportunity to explore the opportunities and challenges of both SRI and corporate environmental reporting.

    Keywords: Integrated Corporate Reporting; Corporate Social Responsibility and Impact; Personal Development and Career;


    Jones, Geoffrey, and Seema Amble. "Joan Bavaria and Multi-Dimensional Capitalism." Harvard Business School Case 317-028, September 2016. View Details
  3. ESG Integration in Investment Management: Myths and Realities

    Sakis Kotsantonis, Christopher Pinney and George Serafeim

    The authors’ aim in this article is to set the record straight on the financial performance of sustainable investing while also correcting a number of other widespread misconceptions about this rapidly growing set of principles and methods. Myth Number 1: Environmental, social, and governance (ESG) programs reduce returns on capital and long-run shareholder value. Reality: Companies committed to ESG are finding competitive advantages in product, labor, and capital markets, and portfolios that have integrated “material” ESG metrics have provided average returns to their investors that are superior to those of conventional portfolios, while exhibiting lower risk. Myth Number 2: ESG is already well integrated into mainstream investment management. Reality: The UNPRI signatories have committed themselves only to adhering to a set of principles for responsible investment, a standard that falls well short of integrating ESG considerations into their investment decisions. Myth Number 3: Companies cannot influence the kind of shareholders that buy their shares, and corporate managers must often sacrifice sustainability goals to meet the quarterly earnings targets of increasingly short-term–oriented investors. Reality: Companies that pursue major sustainability initiatives, and publicize them in integrated reports and other communications with investors, have also generally succeeded in attracting disproportionate numbers of longer-term shareholders. Myth Number 4: ESG data for fundamental analysis is scarce and unreliable. Reality: Thanks to the efforts of reporting and investor organizations such as SASB and Ceres, as well as CDP data providers like Bloomberg and MSCI, much more “value-relevant” ESG data on companies has become available in the past 10 years. Myth Number 5: ESG adds value almost entirely by limiting risks. Reality: Along with lower risk and a lower cost of capital, companies with high ESG scores have also experienced increases in operating efficiency and expansions into new markets. Myth Number 6: Consideration of ESG factors might create a conflict with fiduciary duty for some investors. Reality: Many ESG factors have been shown to have positive correlations with corporate financial performance and value, prompting ERISA in 2015 to reverse its earlier instructions to pension funds about the legitimacy of taking account of “non-financial” considerations when investing in companies.

    Keywords: ESG; sustainability; investment management; finance; corporate social responsibility; Integrated Corporate Reporting; Corporate Social Responsibility and Impact; Investment; Environmental Sustainability; Corporate Governance;


    Kotsantonis, Sakis, Christopher Pinney, and George Serafeim. "ESG Integration in Investment Management: Myths and Realities." Journal of Applied Corporate Finance 28, no. 2 (Spring 2016): 10–16. View Details
  4. 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% 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
  5. 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 that environmental organizations choose to employ are sometimes starkly different. This case 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
  6. Defining Innovative Approaches to Inclusive and Sustainable Economic Growth

    Michael E. Porter

    Nestle's CSV global forum entitled 'Investing in Sustainable Development in Africa,' brought together business, civil society and government leaders from Africa and beyond to discuss a range of key topics affecting the African continent. This video clip highlights some of the main sessions at the forum.

    Keywords: Society; Africa; shared value; Côte d'Ivoire; Civil Society or Community; Environmental Sustainability; Economic Growth; Africa;


    Porter, Michael E. "Defining Innovative Approaches to Inclusive and Sustainable Economic Growth." In Investing in Sustainable Development in Africa. Creating Shared Value Global Forum, Nestlé, Abidjan, Côte d'Ivoire, June 21, 2016. (Video clip.) View Details
  7. 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
  8. 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
  9. 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
  10. Olivia Lum: Wanting to Save the World

    Geoffrey Jones and Essie Alamsyah

    This case considers the entrepreneurial career of Olivia Lum, who founded the Singaporean water company Hyflux in 1989. An orphan born in Malaysia, Lum provides a rare case of an entrepreneurial success in a country whose economic success has primarily rested on state-owned and foreign firms. The case describes the formidable challenges she initially faced, her subsequent breakthrough in China, and the subsequent growth as a global water treatment company employing membrane technology. In 2004 the company entered the large Middle Eastern market for water treatment but soon encountered problems, including political turbulence. The case ends with demonstrations and an emergent crisis in Libya in 2011, a country in which Hyflux had recently invested. The case offers opportunities to explore the nature of entrepreneurship in Southeast Asia, the business importance of relationships between overseas Chinese and mainland China, and the challenges faced by female entrepreneurs. More broadly, it serves as vehicle for teaching students about the global water crisis and the role of business in helping to resolve it.

    Keywords: entrepreneurship; industrial organization; Chinitz; agglomeration; clusters; cities; mine; environmental management; operations management; Sustainable Operations; environmental regulation; Entrepreneurship; Globalization; History; Green Technology Industry; Utilities Industry; China; Singapore;


    Jones, Geoffrey, and Essie Alamsyah. "Olivia Lum: Wanting to Save the World." Harvard Business School Case 316-178, May 2016. View Details
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