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

Article | Journal of Marketing | July 2015
BYOB: How Bringing Your Own Shopping Bags Leads to Treating Yourself, and the Environment
Uma R. Karmarkar and Bryan Bollinger
As concerns about pollution and climate change have become more central in public discourse, shopping with reusable grocery bags has been strongly promoted as environmentally and socially conscious. In parallel, firms have joined policy makers in using a variety of initiatives to reduce the use of plastic bags. However, little is known about how these initiatives might alter consumers' in-store behavior. Using scanner panel data from a single California location of a major grocery chain, and completely controlling for consumer heterogeneity, we demonstrate that bringing your own bags simultaneously increases purchases of environmentally friendly as well as indulgent (hedonic) items. We use experimental methods to further demonstrate causality and to consider the effects of potential moderators. These findings have implications for decisions related to product pricing, placement and assortment, store layout, and the choice of strategies to increase the use of reusable bags.
Keywords: grocery shopping; reusable bags; licensing; priming; goals; hedonic; Marketing Strategy; Consumer Behavior; Environmental Sustainability; Retail Industry;

Citation:
Karmarkar, Uma R., and Bryan Bollinger. "BYOB: How Bringing Your Own Shopping Bags Leads to Treating Yourself, and the Environment." Journal of Marketing 79, no. 4 (July 2015): 1–15. View Details
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Article | Journal of Applied Corporate Finance
Integrated Reporting and Investor Clientele
George Serafeim
In this paper, I examine the relation between Integrated Reporting (IR) and the composition of a firm's investor base. I hypothesize and find that firms that practice IR have a more long-term oriented investor base with more dedicated and fewer transient investors. This result is more pronounced for firms with high growth opportunities, not controlled by a family, operating in 'sin' industries, and exhibiting commitment to IR. I find that the results are robust to the inclusion of firm fixed effects, controls for the quantity of sustainability disclosure, and alternative ways of measuring IR. Moreover, I show that investor activism on environmental or social issues or a large number of concerns about a firm's environmental or social impact leads a firm to practice more IR and that this investor or crisis-induced IR affects the composition of a firm's investor base. Finally, firms that report more information about the different forms of capital or follow more closely the guiding principles as described in the IR Framework of the IIRC exhibit a more long-term oriented investor base.
Keywords: integrated reporting; sustainability reporting; long-term investing; Short-termism; corporate governance; accounting; Integrated Corporate Reporting; Environmental Sustainability; Investment; Corporate Governance;

Citation:
Serafeim, George. "Integrated Reporting and Investor Clientele." Journal of Applied Corporate Finance 27, no. 2 (Spring 2015): 34–51. View Details
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Article | Harvard Business Review (website) | April 14, 2015
The Type of Socially Responsible Investments That Make Firms More Profitable
George Serafeim
Keywords: sustainability; corporate social responsibility; corporate sustainability; Investing; investment; investment management; Corporate Social Responsibility and Impact; Profit; Investment; Environmental Sustainability;

Citation:
Serafeim, George. "The Type of Socially Responsible Investments That Make Firms More Profitable." Harvard Business Review (website) (April 14, 2015). View Details
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Article | Journal of Political Economy
Transition to Clean Technology
Daron Acemoglu, Ufuk Akcigit, Douglas Hanley and William R. Kerr
We develop a microeconomic model of endogenous growth where clean and dirty technologies compete in production and innovation, in the sense that research can be directed to either clean or dirty technologies. If dirty technologies are more advanced to start with, the potential transition to clean technology can be difficult both because clean research must climb several rungs to catch up with dirty technology and because this gap discourages research effort directed towards clean technologies. Carbon taxes and research subsidies may nonetheless encourage production and innovation in clean technologies, though the transition will typically be slow. We characterize certain general properties of the transition path from dirty to clean technology. We then estimate the model using a combination of regression analysis on the relationship between R&D and patents, and simulated method of moments using microdata on employment, production, R&D, firm growth, entry and exit from the US energy sector. The model's quantitative implications match a range of moments not targeted in the estimation quite well. We then characterize the optimal policy path implied by the model and our estimates. Optimal policy makes heavy use of research subsidies as well as carbon taxes. We use the model to evaluate the welfare consequences of a range of alternative policies.
Keywords: Technological Innovation; Entrepreneurship; Environmental Sustainability; Green Technology Industry;

Citation:
Acemoglu, Daron, Ufuk Akcigit, Douglas Hanley, and William R. Kerr. "Transition to Clean Technology." Special Issue on Climate Change and the Economy. Journal of Political Economy 124, no. 2 (February 2016): 52–104. View Details
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Book | 2015
Leading Sustainable Change: An Organizational Perspective
Rebecca Henderson, Ranjay Gulati and Michael Tushman
The business case for acting sustainably is becoming increasingly compelling—reducing our global footprint to sustainable levels is the defining issue of our times, and it is one that can only be addressed with the active participation of the private sector. However, persuading well-established organizations to act in new ways is never easy. This book is designed to support business leaders and organizational scholars who are grappling with this challenge by pulling together leading-edge insights from some of the world's best researchers as to how organizational change in general—and sustainable change in particular—can be most effectively managed. The book begins by laying out the economic case for change, while subsequent chapters describe how leaders at firms such as Du Pont, IBM, and Cemex have transformed their organizations, exploring issues such as the role of the senior team and the ways in which firms shift their identities, build innovative cultures and processes, and begin to change the world around them. Business leaders will find the book a source of both powerful examples and immediately actionable ideas, while scholars will be deeply intrigued by the insights that emerge from the cross cutting exploration of one of the toughest challenges our society has ever faced.
Keywords: environmental sustainability;

Citation:
Henderson, Rebecca, Ranjay Gulati and Michael Tushman, eds. Leading Sustainable Change: An Organizational Perspective. Oxford University Press, 2015. View Details
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Case | HBS Case Collection | September 2014 (Revised November 2017)
Sustainability at IKEA Group
V. Kasturi Rangan, Michael W. Toffel, Vincent Dessain and Jerome Lenhardt
By 2014, IKEA Group was the largest home furnishing company, with EUR28.5 billion of sales, and planned to reach EUR50 billion by 2020, mainly from emerging markets. At the same time, IKEA Group had adopted in 2012 a new sustainability strategy that focused the company's efforts on its entire value chain from its raw materials sourcing to the lifestyle of its end consumers. The plan especially centered on wood, which represented 60% of IKEA Group's total procurement in volume and constituted a key lever for the company to increase its positive impact on sustainability. IKEA Group Management therefore had to decide how to manage its portfolio of wood sustainability initiatives, especially in the context of the company's aggressive growth plan.
Keywords: furnishing; sustainability; supply chain; wood; Customer Value and Value Chain; Supply Chain Management; Environmental Sustainability; Growth and Development Strategy; Consumer Products Industry;

Citation:
Rangan, V. Kasturi, Michael W. Toffel, Vincent Dessain, and Jerome Lenhardt. "Sustainability at IKEA Group." Harvard Business School Case 515-033, September 2014. (Revised November 2017.) View Details
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Recent Publications

Case | HBS Case Collection | May 2018
Environmental Platform LEEDership at USGBC
Michael W. Toffel, Timothy S. Simcoe and Aldo Sesia
By 2018, it was clear that U.S. Green Building Council (USGBC) had significantly contributed to the growth of green building, and over its 25-year history had become a powerful brand in the construction sector with its Leadership in Energy and Environmental Design (LEED) standard. Nonetheless, USGBC faced two significant challenges moving forward: maintaining LEED’s leadership position as the green building standard in the U.S., and increasing the proportion of building stock that met the LEED standard. The case provides background on the USGBC and the evolution of its LEED standard, including how the standards are set, and green building benefits and costs.
Keywords: Environmental Sustainability; Standards; Multi-Sided Platforms; Business Model; Leadership; Problems and Challenges; Construction Industry; Green Technology Industry;

Citation:
Toffel, Michael W., Timothy S. Simcoe, and Aldo Sesia. "Environmental Platform LEEDership at USGBC." Harvard Business School Case 618-027, May 2018. View Details
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Editorial | Harvard Business Review (website)
Elon Musk's Unusual Compensation Plan Isn't Really About Compensation at All
George Serafeim
Earlier this year, Tesla shareholders approved likely the largest compensation package ever awarded to a CEO—for a CEO who clearly doesn’t need the money. Elon Musk is already incredibly rich and also doesn’t seem particularly motivated by further wealth. So why do it? In fact, the design of the compensation plan and its announcement were not about compensation at all. They were about signaling a credible commitment to Tesla’s purpose: to become a clean energy giant that helps address climate change by transforming mobility. To get there, Musk needs not only the normal sort of investor confidence, but also for investors to buy into his radical vision for the company.
Keywords: Tesla; Elon Musk; innovation; investor communication; investor relations; Short-termism; long-termism; disruption; Executive Compensation; Business and Shareholder Relations; Communication Intention and Meaning; Mission and Purpose;

Citation:
Serafeim, George. "Elon Musk's Unusual Compensation Plan Isn't Really About Compensation at All." Harvard Business Review (website) (May 1, 2018). View Details
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Case | HBS Case Collection | April 2018
Wilderness Safaris: Ecotourism Entrepreneurship
James E. Austin, Megan Epler Wood and Herman B. "Dutch" Leonard
Wilderness Safaris sees itself as a conservation company that is built on a business model of providing high-end, premium-priced wildlife safaris in various locations in Africa. Dependent on functioning, healthy ecosystems for its long-term survivability as a business, it invests heavily in conservation efforts, both directly, with communities and governments, and with partners and competitors. It may be reaching saturation of the high-cost, high-priced, low-volume, luxury travel product in its existing locations; so to continue its growth, it is now trying to expand into East Africa, where the traditional safari approach by most providers has been a high-volume, low-cost, low-priced product. As a publicly listed company, can Wilderness Safaris find a sustainable growth path that will allow it to profitably expand its business and meet its shareholders’ interests while still achieving its priority purposes of protecting and investing in the ecosystems and communities on which its services are based?
Keywords: strategy; social enterprise; sustainability; social entrepreneurship; conservation planning; corporate social responsibility; ecotourism; Strategy; Social Enterprise; Social Entrepreneurship; Environmental Sustainability; Corporate Social Responsibility and Impact; Expansion; Growth and Development Strategy; Tourism Industry; Entertainment and Recreation Industry; Travel Industry; Africa; Botswana;

Citation:
Austin, James E., Megan Epler Wood, and Herman B. "Dutch" Leonard. "Wilderness Safaris: Ecotourism Entrepreneurship." Harvard Business School Case 318-040, April 2018. View Details
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Case | HBS Case Collection | April 2018 (Revised May 2018)
Goldman Sachs: Making an Imprint in Impact Investing
Shawn Cole, Vikram S. Gandhi, Caitlin Reimers Brumme and Lynn Schenk
Goldman Sachs acquired Imprint Capital Advisors, a small firm that specialized in advising clients on environmental/social/governance (ESG) and impact investments. The founders sold Imprint with the belief that joining a global financial firm would help to scale impact investing, if not bring it into the mainstream. The case is set two years after the acquisition. It describes impact investing, the founding of Imprint, and its evolution from serving foundations and home offices to financial institutions, and its sale to and integration within Goldman Sachs. The founders consider the past two years and whether the acquisition has, in fact, helped to scale ESG/impact investing.
Keywords: impact investing; ESG; Investment; Corporate Social Responsibility and Impact; Environmental Sustainability; Growth and Development Strategy; Acquisition; Integration;

Citation:
Cole, Shawn, Vikram S. Gandhi, Caitlin Reimers Brumme, and Lynn Schenk. "Goldman Sachs: Making an Imprint in Impact Investing." Harvard Business School Case 218-069, April 2018. (Revised May 2018.) View Details
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Article | Journal of Applied Corporate Finance
Investors as Stewards of the Commons?
George Serafeim
Over the past few years, there has been a significant increase in the number of initiatives seeking to mobilize investor voice towards positive social impact. In this paper, I provide a framework outlining the role of investors as stewards of the commons. While companies are increasingly addressing environmental and social issues that also improve their economic value, for some of these issues individual company action is costly. At the same time, for a further subset of those issues, company action coupled with collaboration between companies is value enhancing. However, collaboration between companies is notoriously difficult and fragile requiring commitment mechanisms. I suggest that a small set of large institutional investors, importantly, but not exclusively, index and quasi-index investors, could provide this commitment mechanism. Common ownership of competitors within industries and long-time horizons in ownership of shares are key characteristics for investors that could act as stewards of the commons. Social pressure fueled by socially responsible investment funds and non-profit organizations and customer pressure from individual investors are critical in mitigating free-rider problems among asset managers and sustaining engagement practices. Finally, I explore the limits and anticompetitive concerns to the theory of change presented here.
Keywords: collaboration; industry self-regulation; sustainability; ESG; capital markets; investor behavior; Investment Activism; Social Issues; Environmental Sustainability; Corporate Social Responsibility and Impact; Cooperation;

Citation:
Serafeim, George. "Investors as Stewards of the Commons?" Journal of Applied Corporate Finance 30, no. 2 (Spring 2018). View Details
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Case | HBS Case Collection | March 2018
Greenlight Biosciences: In Search of Impact Investment
Michael Chu, Annelena Lobb and Joni Coughlin
Greenlight Biosciences, a biotech company, is in search of impact investment for its next round of financing.
Keywords: Investment; Environmental Sustainability; Financing and Loans; Biotechnology Industry;

Citation:
Chu, Michael, Annelena Lobb, and Joni Coughlin. "Greenlight Biosciences: In Search of Impact Investment." Harvard Business School Case 318-072, March 2018. View Details
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Case | HBS Case Collection | March 2018 (Revised April 2018)
Morgan Stanley: Building Long-Term Sustainability
Vikram S. Gandhi and Lynn Schenk
This case focuses on the 10-year journey of one of the world's largest global financial institutions developing a sustainability strategy and integrating it across all of its business units. The case provides a deep dive into the challenges and successes of trying to integrate impact, sustainability, and ESG across the firm and how that strategy translates within each unit. The case delves into the topics of building out a wealth management platform that integrates products and advice focusing on impact, embedding ESG in research, and building a green bonds business.
Keywords: finance; sustainability; green bonds; ESG; Environmental Sustainability; Strategy; Business Units; Integration; Financial Institutions;

Citation:
Gandhi, Vikram S., and Lynn Schenk. "Morgan Stanley: Building Long-Term Sustainability." Harvard Business School Case 318-103, March 2018. (Revised April 2018.) View Details
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Case | HBS Case Collection | February 2018 (Revised May 2018)
Blue Haven Initiative: The PEGAfrica Investment
Vikram S. Gandhi, Caitlin Reimers Brumme and Amram Migdal
This case examines Blue Haven Initiative (BHI), an impact investing fund and family office, and one of its investments, PEGAfrica (PEG). BHI founder Liesel Pritzker Simmons’ motivations for using her family wealth to start a family office focused on impact investing, as well as BHI’s approach and strategy, including direct and indirect investments, fund manager selection, total returns, sourcing and due diligence of direct investments, and other aspects. The case explores a specific investment decision in depth. In May 2017, Pritzker Simmons and BHI Director of Private Investments Lauren Cochran were considering whether to invest an additional $1 million in PEG’s upcoming $5 million Series B round, at a $20 million pre-money valuation. PEG offered pay-as-you-go (PAYG) financing plans that allowed customers to make small payments via mobile money to pay off financing for the solar equipment over time. The case details PEG’s business model, growth strategy, financial structure, and the landscape of investment capital in West Africa during the time of the case.
Keywords: impact investing; Family Office; Development; International Development; International Development Investing; Development Fund; sustainability; Solar Energy; solar; Pay as you go; PAYG; Microfinance; MFI; social venture; Business Ventures; Acquisition; Business Growth and Maturation; Business Startups; Economics; Development Economics; Energy; Energy Conservation; Energy Sources; Renewable Energy; Social Entrepreneurship; Finance; Assets; Asset Pricing; Capital; Capital Budgeting; Capital Structure; Venture Capital; Cash; Cash Flow; Currency; Currency Exchange Rate; Equity; Private Equity; Financial Instruments; Debt Securities; Stock Shares; Financing and Loans; Microfinance; International Finance; Investment; Investment Return; Investment Activism; Investment Funds; Investment Portfolio; Price; Geography; Geographic Location; Emerging Markets; Ownership; Ownership Stake; Private Ownership; Social Enterprise; Value; Valuation; Value Creation; Energy Industry; Financial Services Industry; Green Technology Industry; Africa; United States;

Citation:
Gandhi, Vikram S., Caitlin Reimers Brumme, and Amram Migdal. "Blue Haven Initiative: The PEGAfrica Investment." Harvard Business School Case 318-003, February 2018. (Revised May 2018.) View Details
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Case | HBS Case Collection | January 2018
Environmental Technology Fund Partners and E-Leather
Vikram S. Gandhi and Aldo Sesia
It is 2014 and Environmental Technologies Fund (ETF) Partners, a UK-based venture capital firm, has an opportunity to invest in a privately held UK company that manufactured engineered composition leather extracted from waste leather using an environmentally friendly process. The end product looked, smelled, and felt like natural leather. Scalable marketplace adoption of E-Leather’s products looked promising but was just that—promising. And the company’s success would largely depend on management’s ability to significantly improve the efficiency of its manufacturing operations. ETF needed to decide whether to invest in the company and, if so, at what valuation. In addition, ETF needed to decide the structure of the investment and how the firm would assess E-Leather’s environmental impact.
Keywords: sustainability; venture capital; investment strategy; Investment; Strategy; Ownership; Valuation; Energy Conservation; Equity; Technological Innovation; Environmental Sustainability; Performance Efficiency; Manufacturing Industry; Financial Services Industry; United Kingdom;

Citation:
Gandhi, Vikram S., and Aldo Sesia. "Environmental Technology Fund Partners and E-Leather." Harvard Business School Case 318-001, January 2018. View Details
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Case | HBS Case Collection | January 2018
Ørsted Goes Global
Joseph L. Bower and Elena Corsi
The European leader in offshore wind, the Danish Ørsted is building a global position and entering markets where offshore wind is nascent. The case examines the transformations in strategy leading to Ørsted’s success and the challenges of adopting that strategy in order to enter the U.S. market.
Keywords: Off-shore wind; managing global expansion; Business Strategy; Renewable Energy; Expansion; Global Range; Market Entry and Exit;

Citation:
Bower, Joseph L., and Elena Corsi. "Ørsted Goes Global." Harvard Business School Case 918-404, January 2018. View Details
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