Tackling Climate Change Requires Organizational Purpose

Rebecca   Henderson; George  Serafeim

Article | AEA Papers and Proceedings | May 2020

Tackling Climate Change Requires Organizational Purpose

by Rebecca Henderson and George Serafeim

Abstract

Unchecked climate change presents a profound threat to economic growth and political stability but despite widespread public concern about the issue, global emissions of greenhouse gases have not declined. Indeed current “business as usual” predictions imply that average global temperatures will rise by more than 4⁰C by 2100, with potentially catastrophic results. In this paper, we argue that while putting in place an effective regime for pricing GHG emissions is more essential than ever, it is unlikely to be sufficient. It is in this context that we hypothesize that increasing the fraction of commercial firms who are “authentically purpose-driven” might have a very significant effect on the problem of climate change.

Keywords: corporate purpose; purpose; sustainability; environment; Climate Change; Organizations; Mission and Purpose; Environmental Sustainability; Strategy; Leadership;

Format: Print

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Citation:

Henderson, Rebecca, and George Serafeim. "Tackling Climate Change Requires Organizational Purpose." AEA Papers and Proceedings 110 (May 2020): 177–180.

Jarrid Tingle and Henri Pierre-Jacques had spent the summer between their first and second years of their MBA program fund raising for their start-up venture capital (VC) firm, Harlem Capital Partners. Harlem Capital was founded upon the principle that addressing the VC funding gap for minorities and women—who received only 3% of total VC funding—could produce superior returns. Tingle and Pierre-Jacques were passionate about the mission of Harlem Capital to change the face of entrepreneurship. However, despite generating significant media attention, Harlem Capital had only raised a few million dollars over the summer, not nearly enough for the fund to be financially viable as a career path for Tingle and Pierre-Jacques. Should Tingle and Pierre-Jacques commit to Harlem Capital despite the serious roadblocks on their path? Or should they capitalize on their pre-MBA private equity experience and attempt to be impactful through a more traditional career post-MBA graduation?

We develop a methodology that calculates the impact that organizations have on the environment through their water consumption relating to water stress risk. Using the methodology, we derive estimates for four companies that show how assumptions on the geographic location of the water withdrawal and use of different prices for water across geographies lead to variation in these estimates. We conclude with a framework guiding a user to understand the conditions under which a methodology might lead to over- or underestimation of water costs.

Impact transparency will reshape capitalism. By shifting the pursuit of profit away from negligently creating problems to purposefully creating valuable solutions for the world, it will redefine success, so that its measure is not just money, but the positive impact we make during our lives.

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Tackling Climate Change Requires Organizational Purpose

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