Actionable Intelligence
BOSTON – As the urgency of addressing climate change grows, new research from Harvard Business School reveals a significant shift in how U.S. public companies are tackling the issue and transforming it into a business opportunity. They are now pursuing 88 distinct, scientifically viable climate solutions aimed at reducing greenhouse gas emissions, new Harvard Business School research shows.
“Our findings support a narrative shift about what businesses are doing to commercialize products that could decrease carbon emissions and help the world transition to a sustainable economy,” George Serafeim a Harvard Business School professor, told The BiGS Fix. “The publicly held companies we studied using AI are increasingly innovating by treating climate change as a fundamental business opportunity rather than a moral or marketing concern.”
Specifically, Harvard Business School researchers discovered that companies are extending their efforts beyond typical green technologies like renewable energy to include more surprising options, such as nuclear power, biofuels, and advanced recycling efforts that surpass basic recycling to approach circular models.
To identify the 88 technologies, Harvard Business School researchers examined the regulatory filings of thousands of publicly traded companies between 2005 and 2022 with the help of AI tools. Among those, 879 companies devote at least 1 percent of the language in the relevant portion of their 10-K filings to a discussion of climate solutions.
The researchers then created an algorithm that produces a proprietary “climate solution measure,” allowing companies to be ranked and compared according to their climate-related work. The resulting data was used to generate the BiGS Climate Innovators 100 list, which ranks companies that generate more than $1 billion in revenue based on their climate solution measure.
When the scholars first started examining these solutions, they started with a list of 81 practical solutions to climate change developed by a nonprofit called Project Drawdown. The 11-year-old nonprofit was founded by scientists who focus on identifying and promoting solutions to climate change.
Climate solutions are technologies or services that aim to reduce greenhouse gas emissions, increase energy efficiency, or promote sustainable practices—and can be scaled globally. On a larger scale, these innovations can contribute to reaching "drawdown", a concept defined by the nonprofit organization Project Drawdown as the point in the future when atmospheric greenhouse gas levels stop rising and begin to decline steadily.
Harvard Business School researchers cross-referenced the general solutions identified by Project Drawdown with the products and services developed by publicly traded companies to help decarbonization.
Here are some of the researchers’ key findings:
Nuclear: In the decades after the Three Mile Island incident in 1979 and the Chernobyl disaster in 1986, nuclear power had fallen out a favor. In addition to safety risks, building nuclear reactors required a tremendous amount of capital, not to mention intense regulatory scrutiny.
But given the threat posed by climate change, nuclear power is making a comeback. Morgan Stanley, for example, recently issued a report that estimates the sector could attract $1.5 trillion in investments by 2050. Among those interested in nuclear reactors are tech giants like Google and Amazon, whose data centers require significant amounts of power.
Among BiGS Climate Innovators 100 list are 12 companies, mostly utilities, that are investing in nuclear energy.
Minnesota-based Xcel Energy, for instance, said its latest 10-K filing that it wants to extend the life of its Monticello and Praire Island nuclear power plants through the early 2050s. Nuclear power already accounts for 10 percent of Xcel’s overall energy mix and nearly a quarter of power production the Upper Midwest.
Biofuels: Jet fuel made from fossil fuels accounts for about 25 to 30 percent of an airline’s annual operating costs. So naturally, the aviation industry is a big investor in biofuels, which are made from renewable biological sources, like plant and algae.
For example, United Airlines, a member of the BiGS Climate Innovators 100 list, is betting big on sustainable aviation fuel (SAF) made from renewable biomass and other waste products that produce 85 percent less greenhouse gas emissions than conventional jet fuel.
In its filing, the company is working hard to create a sustainable market for SAF.
“These challenges with present-day SAF have informed the Company's strategy of investing in SAF producers and technology to help scale the SAF market and unlock future supply for the Company,” the filing said.
In 2022, the airline signed a contract with Neste, an oil refining company located in Espoo, Finland, to buy up to 52.5 million gallons of SAF. United Airlines also launched a $200 million venture capital fund to finance the development of SAF-related technologies.
Biofuels will make up 8% of shipping fuel and 10% of aviation fuel by 2030, up from nearly zero in 2022, according to the International Energy Agency.
Recycling: While only four companies in the BiGS Climate Innovators 100 list are pursuing this solution, these companies might surprise you: DuPont and Dow Chemical Company, multinational chemical and materials science companies.
In its 10-K filing, Dow said it wants to become “the most sustainable materials science company, with a strategy to advance the well-being of humanity by helping lead the transition to a sustainable planet and society.”
“This includes lowering energy and greenhouse gas emissions and further enabling a shift to a circular economy for plastics by focusing on resource efficiency and integrating recycled content and renewable feedstocks into its production processes.”
Dow’s 10-K filing says it is collaborating with London-based Mura Technology to develop ways to convert feedstocks into recyclable plastics. Mura plans to construct a new facility at Dow's Böhlen site in Germany.
The Azek Company, which makes building materials, is only in the beginning stages of converting its manufacturing operations towards recycled materials and has yet to realize financial benefits from its investments.
Although the strategy carries “significant risk,” according to Azek’s latest 10-K filing, its future rests on using recycled materials.
“Our future financial performance depends in part on our management’s ability to successfully implement our strategic initiatives related to developing our recycling capabilities, increasing the recycled content of our products, and other cost savings measures, with an aim to reduce our material costs, improve net manufacturing productivity and enhance our business operations.”
Electric vehicles: Electric vehicle manufacturers’ attempts to sell EVs initially benefited from the two-year-old Inflation Reduction Act, which provides billions of tax credits for consumers to buy them. But consumer demand for the vehicles has considerably slowed.
Nevertheless, eight companies in the BiGS Climate Innovators 100 list such as Tesla and General Motors are focusing on electric vehicles.
In its 10-K filing, GM spoke about transitioning out of making cars and trucks based on the internal combustible engine, which relies on fossil fuels, towards electric vehicles.
But GM notes that it still needs profits from sales of traditional cars and trucks to fund investment in its EV business. Yet, the filing said, climate change and resulting regulations and shifting consumer demands could weigh down ICE vehicle sales.
“Part of our strategy to address these risks includes our transition to EVs, which presents additional risks, including reduced demand for, and therefore profits from, our [internal combustion engine] ICE vehicles, which we are using to fund our growth strategy and transition to EVs,” the filing said.
“Our long-term strategy is dependent upon our ability to profitably deliver a strategic portfolio of EVs. And our near-term profitability is dependent upon the success of our current line of full-size ICE SUVs and full-size ICE pickup trucks.”