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.

Featured Works

 

  1. Case | HBS Case Collection | January 2020

    Sunset Limited or Full Speed Ahead? Amtrak Talks to Congress

    John D. Macomber

    Richard Anderson took the helm of Amtrak in 2017 after leading a successful turnaround at Delta Airlines. Amtrak is a US state owned enterprise with about $3.5 bn in annual revenue (and a large operating loss) that is responsible for substantial segments of passenger rail travel across the United States. In 2019, Anderson has been called before Congress to explain and justify his capital spending plans for the rail carrier. He has to consider, among other topics: Rural services that are important but lose money; historically important long distance routes liked by Congress and which also lose money; new routes between growing city to city pairs; climate change and the impact of floods, washouts, and extreme heat; and the possibility of Amtrak participating in attractive new Transit-Oriented Development opportunities. Congress will presented with options ranging from halving the annual subsidy to doubling it; and whether to focus on maintaining the money losing constituent serving routes or focus on the geographies that have the most opportunity to ease road congestion and stimulate economic growth. Amtrak leadership must also evaluate whether to rebuild lines washed out by hurricanes, how to anticipate future natural events that threaten physical infrastructure, and where to build for tnext decades of service. Where should Anderson invest and where should he divest?

    Keywords: infrastructure; transition; transportation; railroad; passenger transportation; urbanization; climate change; cities; U.S. Congress; Transportation; Rail Transportation; Rail Industry;

    Citation:

    Macomber, John D. "Sunset Limited or Full Speed Ahead? Amtrak Talks to Congress." Harvard Business School Case 220-052, January 2020.  View Details
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  2. Case | HBS Case Collection | December 2019

    Mãe Terra and Unilever (A)

    Lynn S. Paine, Ruth Costas and Priscilla Zogbi

    The case concerns the sale of Mae Terra, one of Brazil's leading brands for packaged organic foods, to the consumer goods giant Unilever in 2017. Working with Unilever management, Mae Terra’s CEO Alexandre Borges must determine whether and how to keep Mae Terra's B Certification, which attests to its commitment to having a positive social and environmental impact, and what internal governance mechanisms will enable MaeTerra to maintain its mission, values, and practices even as it is integrated into a large volume-driven multinational whose governance follows standard listed company principles.

    Keywords: Mergers ＆ Acquisitions; brand management; sustainability; Mergers and Acquisitions; Mission and Purpose; Social Enterprise; Corporate Governance; Governing and Advisory Boards; Environmental Sustainability; Organizational Culture; Food and Beverage Industry; Agriculture and Agribusiness Industry; Brazil; Latin America;

    Citation:

    Paine, Lynn S., Ruth Costas, and Priscilla Zogbi. "Mãe Terra and Unilever (A)." Harvard Business School Case 320-075, December 2019.  View Details
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  3. Case | HBS Case Collection | December 2019

    Forecasting ClimaCell

    Joshua Lev Krieger, Christopher Stanton and James Barnett

    A weather technology startup, ClimaCell considers the R＆D trade-offs and financing implications of pursuing a proposed contract with a major automobile maker, rather than continuing its focus on building a scalable, all-purpose weather prediction engine.

    Keywords: Weather and Climate Change; Forecasting and Prediction; Technological Innovation; Research and Development; Finance; Cost vs Benefits; Decision Making; Strategy;

    Citation:

    Krieger, Joshua Lev, Christopher Stanton, and James Barnett. "Forecasting ClimaCell." Harvard Business School Case 820-044, December 2019.  View Details
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  4. Case | HBS Case Collection | November 2019

    Hapag-Lloyd AG: Complying with IMO 2020

    Benjamin C. Esty, Mette Fuglsang Hjortshoej and Emer Moloney

    A new environmental regulation known as IMO 2020 was creating what one industry analyst called “the biggest shakeup for the oil and shipping industries in decades.” According to the new regulation, all ocean-going ships would have to limit their sulfur emissions by January 1, 2020. Senior leaders at Hapag-Lloyd, one of the world’s largest shipping companies, were evaluating three ways their ships could comply with the new regulation: use low-sulfur fuel, use high-sulfur fuel but install scrubbers to clean the exhaust, or convert ships to use liquid natural gas (LNG) as fuel. Each of the options had its advantages and disadvantages, and the most attractive option depended on not only the values of key parameters (e.g., future fuel prices and equipment costs), but also the strategies adopted by the owners of the other 60,000 ocean-going ships subject to the regulation. For the industry as a whole, annual compliance could cost as much as $60 billion; for Hapag-Lloyd, annual compliance might cost as much as $1 billion or more. For a company with net income of $34 million (€28 million) in the prior year, and losses in two of the past four years, getting this decision right was of the utmost importance. Senior executives at Hapag-Lloyd had created a proposed compliance plan and were scheduled to present it to the firm’s supervisory board for approval in June 2018. Whether the team had the right plan and whether the board would approve it are the key questions in the case.

    Keywords: Valuation; Ship Transportation; Strategic Planning; Game Theory; Pollution and Pollutants; Supply Chain; Corporate Accountability; Capital Budgeting; Environmental Sustainability; Shipping Industry; Transportation Industry; Germany;

    Citation:

    Esty, Benjamin C., Mette Fuglsang Hjortshoej, and Emer Moloney. "Hapag-Lloyd AG: Complying with IMO 2020." Harvard Business School Case 220-003, November 2019.  View Details
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  5. Case | HBS Case Collection | November 2019 (Revised December 2019)

    Indigo Agriculture: Harnessing Nature

    Marco Iansiti, Michael W. Toffel and James Barnett

    Indigo Agriculture used a digital-enabled research and development (R&D) process to launch its initial product, microbial coatings for agricultural seeds, which increase crop yields while reducing the need for fertilizers. In doing so, the company developed direct relationships with farmers, in contrast to typical agricultural supply chains that use intermediaries. The company then launched a marketplace platform to link growers directly to crop buyers, again disintermediating the market. Indigo Agriculture is now considering launching an initiative to incentivize farmers to engage in regenerative agricultural practices by setting up a carbon market that could pay them for sequestering carbon into their soils. If scaled globally, the idea could sequester as much as one trillion tons (a teraton) of carbon dioxide from the earth’s atmosphere into agricultural soils, but pursing the idea has many risks.

    Keywords: carbon sequestration; Agribusiness; Technological Innovation; Environmental Sustainability; Supply Chain; Market Platforms; Agriculture and Agribusiness Industry;

    Citation:

    Iansiti, Marco, Michael W. Toffel, and James Barnett. "Indigo Agriculture: Harnessing Nature." Harvard Business School Case 620-024, November 2019. (Revised December 2019.)  View Details
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  6. Working Paper | HBS Working Paper Series | 2019

    Pathways to Materiality: How Sustainability Issues Become Financially Material to Corporations and Their Investors

    Jean Rogers and George Serafeim

    As sustainability issues, also labelled environmental, social, and governance (ESG) issues, become financially material, companies, investors, and regulators are designing strategies and policies to improve sustainability disclosure and performance. In this paper, we outline a framework of how sustainability issues become financially material arguing that materiality is not a “state of being” but a “process of becoming.” Our framework could assist companies and investors to make resource allocation decisions based on expectations about future materiality, social entrepreneurs and NGOs to develop their theories of social change, and policy makers to design disclosure regulations. Moreover, our framework generates predictions about the conditions under which sustainability issues become financial material that could be empirically tested in the future.

    Keywords: materiality; ESG; Pharmaceutical Companies; Business ethics; sustainability; environment; finance; accounting; disclosure; disclosure and access; regulation; social impact; valuation; Environmental Sustainability; Social Issues; Corporate Governance; Ethics; Corporate Disclosure; Corporate Accountability; Resource Allocation;

    Citation:

    Rogers, Jean, and George Serafeim. "Pathways to Materiality: How Sustainability Issues Become Financially Material to Corporations and Their Investors." Harvard Business School Working Paper, No. 20-056, November 2019.  View Details
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  7. Working Paper | HBS Working Paper Series | 2019

    Intelligent Design of Inclusive Growth Strategies

    Robert S. Kaplan, George Serafeim and Eduardo Tugendhat

    Improving corporate engagement with society, as advocated in the Business Roundtable’s 2019 statement, should not be viewed as a zero-sum proposition where attention to new stakeholders detracts from delivering shareholder value. Corporate programs for sustainable and ethical sourcing practices, however, have fallen far short of solving the underlying causes of extreme poverty, extensive use of child labor, and threats to the environment and human health. We identify several causes to explain this disappointing shortfall in societal performance, including traditional company policies and incentives that inhibit the implementation of innovative, inclusive growth strategies. We propose the role for a new actor, a catalyst, to help companies forge new relationships with external funders, local intermediary companies, NGOs, and community leaders. The catalyst aligns the multiple stakeholders from multiple sectors into enduring, mutually beneficial relationships that produce more value than that currently produced when stakeholders connect only by transactional relationships. The catalyst attracts funding from public and private sources to invest in the new ecosystem, which can generate attractive financial returns while alleviating poverty and environmental degradation. Finally, the catalyst engages the multiple participants to collectively co-create explicit strategies and scorecards of metrics, which serve to motivate, create accountability, and enable an enduring governance model for a multi-stakeholder ecosystem.

    Keywords: inclusion; sustainability; performance measures; Environmental Sustainability; Social Issues; Strategy; Governance; Corporate Social Responsibility and Impact; Business and Stakeholder Relations;

    Citation:

    Kaplan, Robert S., George Serafeim, and Eduardo Tugendhat. "Intelligent Design of Inclusive Growth Strategies." Harvard Business School Working Paper, No. 20-050, October 2019.  View Details
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  8. Chapter | The Oxford Handbook of Corporate Social Responsibility | 2019

    The Consequences of Mandatory Corporate Sustainability Reporting

    Ioannis Ioannou and George Serafeim

    A key aspect of the governance process inside organizations and markets is the measurement and disclosure of important metrics and information. In this chapter, we examine the effect of sustainability disclosure regulations on firms’ disclosure practices and valuations. Specifically, we explore the implications of regulations mandating the disclosure of environmental, social, and governance (ESG) information in China, Denmark, Malaysia, and South Africa using differences-in-differences estimation with propensity score matched samples. We find that relative to propensity score matched control firms, treated firms significantly increased disclosure following the regulations. We also find increased likelihood by treated firms of voluntarily receiving assurance to enhance disclosure credibility and increased likelihood of voluntarily adopting reporting guidelines that enhance disclosure comparability. These results suggest that even in the absence of a regulation that mandates the adoption of assurance or specific guidelines, firms seek the qualitative properties of comparability and credibility. Instrumental variables analysis suggests that increases in sustainability disclosure driven by the regulation are associated with increases in firm valuations, as reflected in Tobin’s Q. Collectively, the evidence suggest that current efforts to increase transparency around organizations’ impact on society are effective at improving disclosure quantity and quality as well as corporate value.

    Keywords: mandatory disclosure; mandatory reporting; sustainability; corporate social responsibility; social impact; valuation; corporate governance; China; South Africa; Europe; Asia; regulation; Corporate Disclosure; Integrated Corporate Reporting; Corporate Social Responsibility and Impact; Governing Rules, Regulations, and Reforms; Corporate Governance; China; Denmark; Malaysia; South Africa;

    Citation:

    Ioannou, Ioannis, and George Serafeim. "The Consequences of Mandatory Corporate Sustainability Reporting." In The Oxford Handbook of Corporate Social Responsibility: Psychological and Organizational Perspectives, 452–489. Oxford University Press, 2019.  View Details
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  9. Working Paper | HBS Working Paper Series | 2019

    Shareholder Activism and Firms' Voluntary Disclosure of Climate Change Risks

    Caroline Flammer, Michael W. Toffel and Kala Viswanathan

    This paper examines whether—in the absence of mandated disclosure requirements—shareholder activism can elicit greater disclosure of firms’ exposure to climate change risks. We find that environmental shareholder activism increases the voluntary disclosure of climate change risks, especially if initiated by investors who are more powerful (institutional investors) or whose request has more legitimacy (long-term institutional investors). We also find that companies that voluntarily disclose climate change risks following environmental shareholder activism achieve a higher valuation, suggesting that investors value transparency with respect to climate change risks.

    Keywords: Corporate Accountability; Corporate Disclosure; Corporate Social Responsibility and Impact; Business and Shareholder Relations; Risk and Uncertainty; Natural Environment; Environmental Sustainability; Weather and Climate Change; Financial Services Industry; United States;

    Citation:

    Flammer, Caroline, Michael W. Toffel, and Kala Viswanathan. "Shareholder Activism and Firms' Voluntary Disclosure of Climate Change Risks." Harvard Business School Working Paper, No. 20-049, October 2019.  View Details
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  10. Article | Institutional Investor | October 16, 2019

    Where ESG Fails

    Michael E. Porter, George Serafeim and Mark Kramer

    We are entering a new stage of understanding of the linkage between investment performance and social impact. Previous approaches, such as socially responsible investing and environmental, social, and governance (ESG) screening, have obscured the opportunities for higher growth, profitability, and competitive advantage that come from creating shared value: addressing social and environmental issues as integral to a company’s core strategic positioning. A shared value approach to investing can deliver superior shareholder returns, but capturing that value will require very different practices on the part of both corporate leaders and investors.

    Keywords: ESG; sustainability; environment; social impact; impact investing; ESG (environmental, social, governance) performance; ESG reporting; shared value; Environmental Sustainability; Social Issues; Investment; Value; Strategy;

    Citation:

    Porter, Michael E., George Serafeim, and Mark Kramer. "Where ESG Fails." Institutional Investor (October 16, 2019).  View Details
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    11.  
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Initiatives & Projects

  • Business & Environment

    The Business and Environment Initiative seeks to deepen business leaders' understanding of today’s environmental challenges and to assist them in developing effective solutions.

  • Social Enterprise

    The Social Enterprise Initiative at HBS applies innovative business practices and managerial disciplines to drive sustained, high-impact social change.

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Faculty

HBS Working Knowledge

Pic
re Ray A. Goldberg
The public is losing trust in many institutions involved in putting food on our table, says Ray A. Goldberg, author of the new book Food Citizenship. Here's what needs to be done.
Pic
re Jose B. Alvarez
Up to 40 percent of food grown in the United States for human consumption is wasted. But solutions are starting to come together from retailers, farmers, academics, policy makers, and social service
Government agencies can be "captured" by the very companies or industries they regulate. Looking at how genetically altered food products are approved, Assistant Professor Shon R. Hiatt finds unexpec

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Harvard Business Publishing

Article
by Michael E. Porter and Mark R. Kramer
Case
by Benjamin C. Esty, Mette Fuglsang Hjortshoej and Emer Moloney

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