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. Chapter | Climate Change: The Insights You Need from Harvard Business Review | 2020

    Climate Change Is Going to Transform Where and How We Build

    John D. Macomber

    As fires, floods, and droughts increasingly threaten homes, businesses, and other institutions, climate risk has become financial risk. This implies that homeowners and investors have been making location decisions without properly pricing the cost of potential peril, and that the government has been enabling the oversight.
    It’s not just homeowners investing recklessly—many businesses have been equally short-sighted in where they place new assets, such as factories, and what to do with existing assets in once-safe areas now threatened by these perils. While laudatory efforts continue to mitigate climate change at the international level, it’s long past time to accept that the climate is already irreversibly changing, and we must adjust our mindset accordingly. We can’t just keep piling sandbags, pumping basements, dousing flames, and expecting government bailouts forever; a methodology is needed for homeowners, businesses, mortgage holders, governments—all of society—to figure out which assets to reinforce and what other courses of action are available.
    Alas, we seem to be headed in the wrong direction. While virtually no private insurance companies retain residential flood risk in Florida, Virginia, and other coastal states due to sea rise, government-subsidized programs such as NFIP continue to keep residences insured. Making things even worse is a general lack of restrictions on where one can build and what can be built. A society that prides itself on free will and self-determination is loath to say what a property owner can and cannot build on their own land as long as it meets rudimentary building and zoning codes: So more and more people move into harm’s way in flood plains, low-lying coastal areas, and tinder dry western landscapes.
    There are five basic choices in investing in resilience: reinforce, rebuild, rebound, restrict, and retreat. Together, they can be used as a decision-support tool for what to do with assets exposed to climate risk.

    Keywords: Climate Change; Housing; Mortgages; Geographic Location; Real Estate Industry;

    Citation:

    Macomber, John D. "Climate Change Is Going to Transform Where and How We Build." In Climate Change: The Insights You Need from Harvard Business Review. Vol. 12. HBR Insights Series. Boston, MA: Harvard Business Review Press, 2020.  View Details
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  2. Article | Foundations and Trends® in Accounting | 2020

    Research on Corporate Sustainability: Review and Directions for Future Research

    Jody Grewal and George Serafeim

    We review the literature on corporate sustainability and provide directions for future research. Our review focuses on three actions: measuring, managing and communicating corporate sustainability performance. Measurement is the least developed of the three and represents promising opportunities for research. Compelling evidence now exists on the role of management control systems, investor pressure and mandated disclosure in improving corporate sustainability outcomes. Research has moved beyond weighing the importance of all sustainability issues equally, with recent studies drawing distinctions between the financial materiality of different sustainability issues. Collectively, this new line of inquiry suggests that improving performance on material sustainability metrics is related to improved financial performance, helping to resolve four decades of inconclusive evidence on the relation between sustainability and financial outcomes. Finally, we review research on how disclosure mediums, accounting standards, information monitors and intermediaries shape the communication of sustainability performance. We conclude with a call for research on how to measure performance in the 21st century when corporate purpose extends beyond shareholder value maximization.

    Keywords: sustainability; sustainability reporting; Sustainability Management; nonfinancial disclosure; nonfinancial information; nonfinancial performance; materiality; ESG; ESG (environmental, social, governance) performance; ESG (environmental, social, governance) performance; ESG disclosure; ESG disclosure metrics; ESG ratings; ESG reporting; inequality; corporate social responsibility; Accounting; Finance; Management; Strategy; Environmental Sustainability; Climate Change; Diversity; Equality and Inequality; Corporate Disclosure; Measurement and Metrics; Corporate Governance; Corporate Accountability; Corporate Social Responsibility and Impact;

    Citation:

    Grewal, Jody, and George Serafeim. "Research on Corporate Sustainability: Review and Directions for Future Research." Foundations and Trends® in Accounting 14, no. 2 (2020): 73–127.  View Details
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  3. Article | Harvard Business Review | September–October 2020

    Social-Impact Efforts That Create Real Value

    George Serafeim

    Until the mid-2010s few investors paid attention to environmental, social, and governance (ESG) data—information about companies’ carbon footprints, labor policies, board makeup, and so forth. Today the data is widely used by investors. How can organizations create real value and impact from their ESG efforts? Too many companies have embraced a "box-ticking" culture and fail to see any value from their ESG efforts. I describe a five-pronged approach for companies to better manage and govern resources allocated to ESG issues.
    1) Think ESG as competitive advantage
    2) Create accountability for ESG throughout the organisation
    3) Identify a corporate purpose and build a culture around it
    4) Give ESG responsibilities to core business leaders
    5) Commit to transparency to ensure learning and continuous improvement

    Keywords: sustainability; Sustainability Management; ESG; ESG (environmental, social, governance) performance; ESG (environmental, social, governance) performance; ESG disclosure; ESG disclosure metrics; ESG ratings; ESG reporting; social impact; impact measurement; social innovation; purpose; corporate purpose; corporate social responsibility; Strategy; Social Enterprise; Society; Accounting; Investment; Environmental Sustainability; Climate Change; Corporate Strategy; Mission and Purpose; Corporate Social Responsibility and Impact; Financial Services Industry; Chemical Industry; Technology Industry; Consumer Products Industry; Pharmaceutical Industry; North America; Europe; Japan; Australia;

    Citation:

    Serafeim, George. "Social-Impact Efforts That Create Real Value." Harvard Business Review 98, no. 5 (September–October 2020): 38–48.  View Details
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  4. Case | HBS Case Collection | September 2020

    GreenFire Energy, 2020: Geothermal Innovation

    John R. Wells and Benjamin Weinstock

    In June 2020, GreenFire Energy Inc. (GreenFire) presented its report to the California Energy Commission indicating that its proof of concept project to demonstrate its new geothermal electricity generation technology, ECO2G™, had been a success. While conventional geothermal electricity only supplied 0.5% of US demand, the new technology promised to increase this to 25% by drilling much deeper. Moreover, it was a closed-loop system which didn’t involve fracking like conventional geothermal and promised to be much more cost effective. Unlike other renewables, ECO2G could also provide baseload power 24 hours a day and be adjusted quickly to match demand. CEO Joseph Scherer likened it to the beginning of the oil rush. “When the oil industry first started, prospectors focused on places where oil was seeping out of the ground. Now, they drill for it in deep oceans. Same with geothermal, but geothermal is much easier to find, and there is a lot more of it!” Now Scherer and John Muir, brother of founder Mark Muir, had to choose how they would commercialize the technology. They had many choices.

    Keywords: geothermal electricity; Renewable Energy; Energy Generation; Technological Innovation; Commercialization; Strategy; Decision Choices and Conditions;

    Citation:

    Wells, John R., and Benjamin Weinstock. "GreenFire Energy, 2020: Geothermal Innovation." Harvard Business School Case 721-392, September 2020.  View Details
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  5. Working Paper | HBS Working Paper Series | 2020

    Updating the Balanced Scorecard for Triple Bottom Line Strategies

    Robert S. Kaplan and David McMillan

    Many companies are now attempting to achieve triple bottom line performance on financial, environmental, and societal metrics. Successful strategies for such performance, however, generally require new relationships among multiple players in multiple sectors across a company’s supply chain for products and talent. The Balanced Scorecard (BSC), originally developed to describe and implement a single organization’s strategy, needs to be adapted to reflect such multi-stakeholder strategies for triple bottom line performance. The Financial perspective is replaced by “Outcomes” to encompass financial, environmental, and societal metrics; Customer becomes “Stakeholders” to reflect the interests of the multiple participants in the ecosystem; and Learning & Growth becomes “Enablers” to include the new capabilities for collaboration and alignment. The paper motivates and illustrates the new framework with examples from innovative agribusiness ecosystems.

    Keywords: Balanced Scorecard; Adaptation; Environmental Sustainability; Social Issues; Performance; Strategy;

    Citation:

    Kaplan, Robert S., and David McMillan. "Updating the Balanced Scorecard for Triple Bottom Line Strategies." Harvard Business School Working Paper, No. 21-028, August 2020.  View Details
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  6. Case | HBS Case Collection | July 2020

    CSL Capital Management: Patriot Proppants (A)

    Victoria Ivashina and Yury Kapko

    This two-part case series follows CSL Capital’s 2009 investment in the greenfield manufacturing company, Patriot Proppants. CSL, a recently established investment firm, employs a unique investment model, funding new ("green field") energy service businesses that serve Oil & Gas customers in the growing U.S. shale industry. This (A) case offers a perspective on CSL’s approach to deploying capital and the intricacies of the decision process as it relates to potential investment in Patriot. This case also offers insights into fundraising issues, asset-backed lending, and co-investments. Specifically, in addition to evaluating the investment opportunity, CSL must decide which co-investment partner to take on, should it advance with the investment. Students are presented with an opportunity to closely evaluate the terms of the co-investment proposals, particularly given that they came separately from strategic and financial co-investors with divergent objectives.

    Keywords: Investment; Renewable Energy; Business Model; Decision Making;

    Citation:

    Ivashina, Victoria, and Yury Kapko. "CSL Capital Management: Patriot Proppants (A)." Harvard Business School Case 220-094, July 2020.  View Details
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  7. Case | HBS Case Collection | May 2020 (Revised September 2020)

    Soofa: Displaying the Right Path?

    Jeffrey J. Bussgang, Amy Klopfenstein and Amram Migdal

    In November 2019, Sandra Richter, co-founder and CEO of Soofa, a network of advertising-supported digital bulletin boards, must decide between two different fundraising and expansion plans for her company. One plan entails raising $15 million in a Series A round and pursuing an aggressive expansion strategy, while the other represents a more modest $3 million raise to bring the company to operating profitability. Richter had developed the $15 million plan with an executive introduced to her by her venture capital board members with extensive fundraising and startup experience; however, after months of pitching to investors, the aggressive expansion plan had failed to produce a term sheet. Richter must decide whether the rapid expansion is the right course of action for the company as she begins to question whether her business could realistically meet the plan’s projections even if she could secure the financing to fund it. Meanwhile, Soofa’s capital was rapidly dwindling. Richter must raise another round of capital by early 2020, or will be forced to lay off the majority of her staff and close her operations. Should she continue pursuing the aggressive expansion plan, pivot to the more modest plan based on operating profitability, or attempt to pursue both plans simultaneously? And how should she navigate the growing tension on her board given the company’s struggles?

    Keywords: Business Ventures; Business Model; Business Plan; Business Startups; Entrepreneurship; Decision Making; Decisions; Ethics; Geography; Geopolitical Units; Finance; Investment; Markets; Market Entry and Exit; Demand and Consumers; Network Effects; Media; Society; Urban Development; Sustainable Cities; Technology; Hardware; Technology Platform; Strategy; Business Strategy; Expansion; Relationships; Partners and Partnerships; Capital; Venture Capital; Advertising Industry; Technology Industry; Media and Broadcasting Industry; North and Central America; United States; Massachusetts; Cambridge;

    Citation:

    Bussgang, Jeffrey J., Amy Klopfenstein, and Amram Migdal. "Soofa: Displaying the Right Path?" Harvard Business School Case 820-098, May 2020. (Revised September 2020.)  View Details
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  8. Article | AEA Papers and Proceedings | May 2020

    Tackling Climate Change Requires Organizational Purpose

    Rebecca Henderson and George Serafeim

    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;

    Citation:

    Henderson, Rebecca, and George Serafeim. "Tackling Climate Change Requires Organizational Purpose." AEA Papers and Proceedings 110 (May 2020): 177–180.  View Details
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  9. Article | Financial Analysts Journal | 2020

    Public Sentiment and the Price of Corporate Sustainability

    George Serafeim

    Combining corporate sustainability performance scores based on environmental, social, and governance (ESG) data with big data measuring public sentiment about a company’s sustainability performance, I find that the valuation premium paid for companies with strong sustainability performance has increased over time and that the premium is increasing as a function of positive public sentiment momentum. An ESG factor going long on firms with superior or increasing sustainability performance and negative sentiment momentum and short on firms with inferior or decreasing sustainability performance and positive sentiment momentum delivers significant positive alpha. This low sentiment ESG factor is uncorrelated with other factors, such as value, momentum, size, profitability, and investment. In contrast, the high sentiment ESG factor delivers insignificant alpha and is strongly negatively correlated with the value factor. The evidence suggests that public sentiment influences investor views about the value of corporate sustainability activities and thereby both the price paid for corporate sustainability and the investment returns of portfolios that consider ESG data.

    Keywords: sustainability; ESG; ESG (environmental, social, governance) performance; investment management; investment strategy; big data; Machine learning; environment; Environmental Sustainability; Corporate Governance; Performance; Asset Pricing; Investment; Management; Strategy; Human Capital; Public Opinion; Value;

    Citation:

    Serafeim, George. "Public Sentiment and the Price of Corporate Sustainability." Financial Analysts Journal 76, no. 2 (2020): 26–46.  View Details
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  10. Case | HBS Case Collection | April 2020

    Middlebury College: Energy2028

    Brian Trelstad, Michael Norris and John McKinley

    In 2018, Middlebury College’s board of trustees is considering a proposal called Energy2028 that would push the small, liberal arts and sciences college in Vermont to become a net zero carbon emitter, decrease energy usage by 25%, divest fossil fuels from its endowment, and build new educational programming focused on energy and climate change. Building the Energy2028 proposal was a multistakeholder process that was guided by the college’s president, Laurie Patton. Patton and her team brought together student activists, faculty experts, board members, and financial experts to craft a proposal that was bold, yet achievable. Perhaps the most surprising element was the divestment pledge. Just five years earlier, the board had faced a similar decision on divestment and chose not to act. Had Patton done enough to convince the board to change their minds and support the complete package of Energy2028?

    Keywords: energy; divestment; higher education;

    Citation:

    Trelstad, Brian, Michael Norris, and John McKinley. "Middlebury College: Energy2028." Harvard Business School Case 320-029, April 2020.  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

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re A. Ray Goldberg
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re B. Jose 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 Victoria Ivashina and Yury Kapko

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