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 | March 2020

    Generation Investment Management

    Vikram S. Gandhi and Sarah Mehta

    In January 2020, sustainable investment firm Generation Investment Management (Generation), was debating whether to terminate coverage of John Deere, one of its 47 portfolio companies. Generation believed that the type of mechanized agriculture enabled by John Deere’s products was a vital tool for improving crop yield and farm productivity, and for feeding the world’s growing population at scale. As time had passed, however, Generation’s partners and analysts had grown increasingly concerned about the broader impacts of agriculture, which accounted for up to 90% of freshwater consumption and generated about 24% of greenhouse gas emissions worldwide. These concerns, coupled with emerging consumer trends that might reduce long-term demand for John Deere’s products, had led Generation to consider removing the company from its focus list of potential portfolio companies.

    Keywords: Climate Change; Environmental Sustainability; Finance; Equity; Governance; Private Equity; Public Equity; Financial Markets; Investment; Investment Return; Investment Activism; Investment Funds; Investment Portfolio; Institutional Investing; Corporate Social Responsibility and Impact; Financial Services Industry; United Kingdom; England; London;

    Citation:

    Gandhi, Vikram S., and Sarah Mehta. "Generation Investment Management." Harvard Business School Case 820-033, March 2020.  View Details
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  2. Article | Accounting Horizons | March 2020

    Voluntary, Self-Regulatory, and Mandatory Disclosure of Oil and Gas Company Payments to Foreign Governments

    Paul M. Healy and George Serafeim

    Concerns about high rates of government corruption in resource-rich countries have led transparency advocates to urge oil and gas firms to disclose payments to host governments for natural resources. Transparency, they argue, can increase government accountability and mitigate corruption. However, we find a low frequency of voluntary disclosures of payments by oil and gas firms and negative stock price reactions for affected firms at the announcement of regulations mandating disclosure. This suggests that sample firm managers and their investors perceive that such disclosures generate private costs, despite any public benefits. We document that industry self-regulation has generated information to substitute for the gap in voluntary company disclosure and that such disclosures are accompanied by lower country corruption ratings. This suggests that collective action could be an effective way for companies to manage the private costs of disclosure and respond to public pressure for transparency that could provide public benefits.

    Keywords: oil ＆ gas; corruption; transparency; self-regulation; industry self-regulation; regulation; disclosure; disclosure regulation; Energy Sources; Crime and Corruption; Corporate Disclosure; Governing Rules, Regulations, and Reforms; Energy Industry;

    Citation:

    Healy, Paul M., and George Serafeim. "Voluntary, Self-Regulatory, and Mandatory Disclosure of Oil and Gas Company Payments to Foreign Governments." Accounting Horizons 34, no. 1 (March 2020): 111–129.  View Details
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  3. Case | HBS Case Collection | February 2020

    Rotoplas: Bringing More and Better Water

    John D. Macomber and Carla Larangeira

    Private companies were being turned to for potable water in the world’s megacities due to impacts of climate change including droughts and flooding. Mexico City had endured several water-related crises, with its population suffering from floods, droughts, water shutoffs and disease. Although some access to piped water services was practically universal for Mexico City residents, services were limited or discontinuous. An accommodation that most households had made was in purchasing and installing a water holding tank on the roof or in the ground, with Rotoplás, a Mexican based water product and services provider, enjoying more than 55% of tank market share in Mexico.
    Rotoplás had ventured into wastewater treatment and recycling in 2016 with the acquisition of Sytesa, a design, construction, financing, operation, and maintenance business for wastewater management for industry and businesses. Market segments included lighter corporate users like shopping malls and heavy users like food processors or mining companies, and maybe “water as a service” would also end up as the place to be to supplement and assist homeowner associations and even municipal governments. However, services revenue was today a tiny fraction of overall cash flow at Rotoplás. The presence of larger competitors like Suez and Veolia and as well as unfavorable pricing and regulations could potentially slow down future growth. Could Rotoplás services be part of the solution to the water crisis in the nation’s capital? Or was the situation too intractable for even this local champion company to tackle? What pricing and regulatory changes might lead to financial and technical solutions for Mexico City’s water crisis?

    Keywords: water supply; water management; Finance; Infrastructure; Urban Development; Latin America; Mexico;

    Citation:

    Macomber, John D., and Carla Larangeira. "Rotoplas: Bringing More and Better Water." Harvard Business School Case 220-064, February 2020.  View Details
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  4. Working Paper | HBS Working Paper Series | 2020

    A Preliminary Framework for Product Impact-Weighted Accounts

    George Serafeim, Katie Trinh and T. Robert Zochowski

    While there has been significant progress in the measurement of an organization’s environmental and social performance, metrics to evaluate the impact of products once they come to market lag far behind. In this paper we provide a framework for systematic measurement of product impact in monetary terms and delve into the rationale for the framework’s seven elements. We then apply the whole framework to two competitor companies and elements of the framework across companies in different sectors of the economy to show the feasibility of measuring product impact and the actionability of the framework. Not only does this application demonstrate feasibility, it also indicates the value of impact-weighted financial statement analysis. We see our results as a first step, rather than a definitive answer, towards more systematic measurement of product impact in monetary terms that can then be reflected in financial statements with the purpose of creating impact-weighted financial accounts.

    Keywords: social impact; product life cycle; environment; sustainability; measurement; metrics; impact investing; ESG; ESG (environmental, social, governance) performance; ESG reporting; Product; Environmental Sustainability; Measurement and Metrics; Framework; Financial Statements;

    Citation:

    Serafeim, George, Katie Trinh, and T. Robert Zochowski. "A Preliminary Framework for Product Impact-Weighted Accounts." Harvard Business School Working Paper, No. 20-076, January 2020. (Revised April 2020.)  View Details
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  5. Case | HBS Case Collection | February 2020 (Revised March 2020)

    Prime Coalition: Catalytic Capital for Climate Innovation

    Ramana Nanda, Benjamin N. Roth and Olivia Hull

    With long development timelines and high risk, new energy technologies were often left to languish in the “valley of death,” unable to raise enough funds to bring a product to market. In 2014, Sarah Kearney founded the nonprofit Prime Coalition to solve this problem. At the beginning, Prime’s role as a financial intermediary involved seeking out the most promising market-based technology solutions to climate change and recruiting foundations or philanthropists to fund them. In 2019, Prime changed course, adopting a portfolio approach with its Prime Impact Fund. By the end of the year, Prime had raised $40 million in philanthropic capital for its new fund. Once the funds were invested in promising energy startups, Prime planned to try its hand at recruiting traditional investors to back the same companies. Could Kearney convince traditional investors that these investments were worth the risks?

    Keywords: Energy Conservation; Renewable Energy; Social Entrepreneurship; Venture Capital; Investment; Innovation and Invention; Technological Innovation; Mission and Purpose; Science-Based Business; Nonprofit Organizations; Social Enterprise; Energy Industry; Technology Industry; Green Technology Industry; United States;

    Citation:

    Nanda, Ramana, Benjamin N. Roth, and Olivia Hull. "Prime Coalition: Catalytic Capital for Climate Innovation." Harvard Business School Case 820-007, February 2020. (Revised March 2020.)  View Details
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  6. Case | HBS Case Collection | January 2020

    Governing PG&E

    Lynn S. Paine and Will Hurwitz

    The five commissioners of the California Public Utilities Commission (CPUC) listened intently at a public forum in April 2019 as PG&E Corporation’s out-going chairman Richard Kelly described the company’s proposed new board. PG&E, which provided electricity and natural gas to millions of Californians, had once been recognized for its vision in foreseeing energy’s potential to reshape the state and power its economy. But PG&E was now in the crosshairs of investors, regulators, and the public for something else entirely: its role in a series of deadly and destructive wildfires that had ravaged the region and precipitated PG&E’s bankruptcy months earlier. Called “the first climate-change bankruptcy,” it was the largest utility bankruptcy in U.S. history. The commissioners at the CPUC, PG&E’s primary regulator, were particularly concerned about PG&E’s governance and had convened the forum to solicit opinions from experts and the public and to hear for themselves what steps the company was taking to improve it. The Commissioners are considering whether to make specific recommendations regarding the board’s composition and functioning, including how the board assesses and compensates PG&E’s CEO. A principal issue is the use of non-financial metrics to evaluate and reward CEO performance.

    Keywords: bankruptcy; board of directors; board dynamics; Business ethics; business model innovation; corporate boards; energy efficiency; environmental and social sustainability; government and business; hedge funds; Institutional investors; legal aspects of business; regulated monopolies; regulation; shareholders; stakeholder management; strategy and execution; utilities; Insolvency and Bankruptcy; Governing and Advisory Boards; Ethics; Capital Structure; Climate Change; Corporate Accountability; Corporate Governance; Environmental Sustainability; Executive Compensation; Leadership; Management; Safety; Business and Government Relations; Energy Industry; Utilities Industry; California; United States;

    Citation:

    Paine, Lynn S., and Will Hurwitz. "Governing PG&E." Harvard Business School Case 320-024, January 2020.  View Details
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  7. Case | HBS Case Collection | January 2020 (Revised March 2020)

    Fossil Fuel Divestment

    Michael W. Toffel and Sarah Gulick

    The president of Harvard University is facing growing pressure from students, alumni, and other climate change activists that are urging the university to divest its multi-billion dollar endowment from fossil fuel companies. The case summarizes the arguments for and against Harvard divesting, examining past examples of Harvard’s investment decisions and the financial implications of divestment.

    Keywords: divestment; Higher Education; Corporate Social Responsibility and Impact; Environmental Sustainability; Climate Change; Public Opinion; Education Industry;

    Citation:

    Toffel, Michael W., and Sarah Gulick. "Fossil Fuel Divestment." Harvard Business School Case 620-093, January 2020. (Revised March 2020.)  View Details
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  8. Case | HBS Case Collection | January 2020

    BlackRock: Linking Purpose to Profit

    Rohit Deshpandé, Aiyesha Dey and George Serafeim

    The case revolves around the actions that Barbara Novick, co-founder and Vice-Chair of Blackrock, and Michelle Edkins, Global Head of Investment Stewardship, would need to take in response to the controversial CEO letters from Laurence (Larry) Fink, Chairman and CEO of BlackRock. Fink’s letters focused on the importance of corporate purpose and investing considering environmental, social, and governance (ESG) issues. The case also discusses Blackrock’s plans for a new model of shareholder engagement to help drive the changes proposed in the letters. The case presents the opportunity to discuss the governance role played by major institutional investors as well as how the responsibilities and actions of one large investor, BlackRock, should evolve in this role going forward. It is not clear whether BlackRock should play such a role and, if so, whether they have the ability to enforce corporate compliance and to carry out this role given they are primarily an index investor. The case is likely to generate spirited debate about the merits of BlackRock’s pronouncements and the importance of corporate investments in ESG themes and allow for discussions on measurement and disclosure strategies that can judge progress on these dimensions.

    Keywords: boards of directors; Institutional investors; disclosure; transparency; corporate purpose; Corporate profits; ESG; ESG disclosure metrics; corporate sustainability; engagement strategy of institutions; stewardship role of institutions; Corporate Governance; Governing and Advisory Boards; Institutional Investing; Accounting; Corporate Disclosure; Mission and Purpose; Profit; Environmental Sustainability; Climate Change; Diversity; Corporate Accountability;

    Citation:

    Deshpandé, Rohit, Aiyesha Dey, and George Serafeim. "BlackRock: Linking Purpose to Profit." Harvard Business School Case 120-042, January 2020.  View Details
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  9. Case | HBS Case Collection | January 2020

    SK Group: Social Progress Credits

    George Serafeim, Ethan Rouen and David Freiberg

    SK Group was one of the largest companies South Korea. A family-run conglomerate consisting of around 120 subsidiaries and employing more than 100,000, SK was tightly knit into the fabric of Korean society. SK viewed their future success as contingent upon the strength of the societal ecosystem in which they operated. As such, the company had a long history of philanthropic giving. However, SK questioned if their donations were producing the desired impact, as many of the societal issues they, and the rest of Korean society, sought to address were not improving. In order to create a new system of generating social value, SK established the Social Progress Credit (SPC) initiative. The SPC initiative designed a measurement methodology that was used to measure the social value created by social enterprises – firms whose mission was to generate social value in conjunction with generating sustainable financial returns. Additionally, the SPC initiative provided monetary incentives to social enterprises in proportion to the social value generated by participating social enterprises. Looking to the future, SK envisioned a marketplace in which SPC’s were traded among investors and credits were priced by the market. Initial results of the SPC initiative were positive, showing positive growth in social value created and financial stability of social enterprises. How then could SK convince other public and private organizations to adopt the SPC model and promote social value? Moreover, how could SK convince mainstream capital markets to make investments into society enterprises on the basis of the social value creation? More importantly, was this attempt to enrich and grow the ecosystem of social value creation making a difference?

    Keywords: Impact; impact investing; impact measurement; social value; social development; conglomerates; measurement of purpose; ESG; ESG (environmental, social, governance) performance; capital markets; cooperation; innovation; Environmental Impact; collaboration; Social Enterprise; Social and Collaborative Networks; Social Issues; Measurement and Metrics; Value Creation; Environmental Sustainability; Employment; Accounting; Energy Industry; Telecommunications Industry; Chemical Industry; South Korea;

    Citation:

    Serafeim, George, Ethan Rouen, and David Freiberg. "SK Group: Social Progress Credits." Harvard Business School Case 120-071, January 2020.  View Details
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  10. 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 be 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: railroad; passenger transportation; urbanization; cities; U.S. Congress; Infrastructure; Transition; Transportation; Rail Transportation; Climate Change; Urban Scope; Strategic Planning; Rail Industry; United States;

    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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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 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.
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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 Michael W. Toffel and Sarah Gulick

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