Social Enterprise

Social Enterprise is a featured research topic and an initiative at Harvard Business School.

HBS pioneered the concept of “social enterprise” with the founding of its Social Enterprise Initiative (SEI) in 1993. Under the early leadership of James Austin on the importance of collaborative relationships to the success of nonprofits and Allen Grossman and V. Kasturi “Kash” Rangan on new directions in nonprofit strategy, we adopted a problem-focused approach toward understanding the challenges associated with driving sustained, high-impact social change. Current research focuses on leadership of socially mission-driven organizations; the role of business leaders and corporate citizenship in driving social change; business models that address poverty; management of high-performing K-12 public school districts; and financing models for the non-profit sector.

Featured Works

Article | Strategic Management Journal | April 2013
Who Is Governing Whom? Executives, Governance, and the Structure of Generosity in Large U.S. Firms
We examine how organizational structure influences strategies over which corporate leaders have significant discretion. Corporate philanthropy is our setting to study how a differentiated structural element—the corporate foundation—constrains the influence of individual senior managers and directors on corporate strategy. Our analysis of Fortune 500 firms from 1996 to 2006 shows that leader characteristics at both the senior management and director levels affect corporate philanthropic contributions. We also find that organizational structure constrains the philanthropic influence of board members but not of senior managers, a result that is contrary to what existing theory would predict. We discuss how these findings advance understanding of how organizational structure and corporate leadership interact and of how organizations can more effectively realize the strategic value of corporate social responsibility activities.
Keywords: Organizational Structure; Corporate Strategy; Philanthropy and Charitable Giving; Leadership; Governing and Advisory Boards; Corporate Social Responsibility and Impact; United States;

Citation:
Marquis, Christopher, and Matthew Lee. "Who Is Governing Whom? Executives, Governance, and the Structure of Generosity in Large U.S. Firms." Strategic Management Journal 34, no. 4 (April 2013): 483–497. (Earlier version distributed as Harvard Business School Working Paper No. 11-121.) View Details
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Article | Strategic Management Journal
Corporate Social Responsibility and Access to Finance
Beiting Cheng, Ioannis Ioannou and George Serafeim
In this paper, we investigate whether superior performance on corporate social responsibility (CSR) strategies leads to better access to finance. We hypothesize that better access to finance can be attributed to a) reduced agency costs due to enhanced stakeholder engagement and b) reduced informational asymmetry due to increased transparency. Using a large cross-section of firms, we find that firms with better CSR performance face significantly lower capital constraints. Moreover, we provide evidence that both of the hypothesized mechanisms, better stakeholder engagement and transparency around CSR performance, are important in reducing capital constraints. The results are further confirmed using an instrumental variables and a simultaneous equations approach. Finally, we show that the relation is driven by both the social and the environmental dimension of CSR.
Keywords: corporate social responsibility; sustainability; capital constraints; ＂ESG (environmental, social, governance) performance; stakeholder engagement; disclosure; Corporate Disclosure; Corporate Social Responsibility and Impact; Environmental Sustainability; Capital;

Citation:
Cheng, Beiting, Ioannis Ioannou, and George Serafeim. "Corporate Social Responsibility and Access to Finance." Strategic Management Journal 35, no. 1 (January 2014): 1–23. View Details
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Article | California Management Review | Spring 2014
What Impact? A Framework for Measuring the Scale & Scope of Social Performance
Alnoor Ebrahim and V. Kasturi Rangan
Organizations with social missions, such as nonprofits and social enterprises, are under growing pressure to demonstrate their impacts on pressing societal problems such as global poverty. This article draws on several cases to build a performance assessment framework premised on an organization's operational mission, scale, and scope. Not all organizations should measure their long-term impact, defined as lasting changes in the lives of people and their societies. Rather, some organizations would be better off measuring shorter-term outputs or individual outcomes. Funders such as foundations and impact investors are better positioned to measure systemic impacts.
Keywords: Nonprofit Organizations; Performance Evaluation;

Citation:
Ebrahim, Alnoor, and V. Kasturi Rangan. "What Impact? A Framework for Measuring the Scale & Scope of Social Performance." California Management Review 56, no. 3 (Spring 2014): 118–141. View Details
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Article | Harvard Business Review | July–August 2014
Sustainability in the Boardroom: Lessons from Nike's Playbook
Lynn S. Paine
One surprising role of Nike's corporate responsibility committee is to provide support for innovation. More and more companies recognize the importance of corporate responsibility to their long-term success—and yet the matter gets short shrift in most boardrooms, consistently ranking at the bottom of some two dozen possible priorities. Many years ago labor conditions in Asian contract factories prompted Nike board member Jill Ker Conway to lobby for a board-level corporate responsibility committee, which the company created in 2001. In the years since, the committee has steadily broadened its purview, now advising on a broad range of issues including innovation and acquisitions in addition to labor practices and resource sustainability. A close examination of Nike's experience has led the author to conclude that a dedicated board-level committee of this sort could be a valuable addition to many if not most companies in at least five ways: as a source of knowledge and expertise, as a sounding board and constructive critic, as a driver of accountability, as a stimulus for innovation, and as a resource for the full board. In an accompanying interview with Paine, Conway discusses the committee's creation and provides an insider's perspective on what has made it so effective.
Keywords: Corporate Governance; Corporate Accountability; Globalized Firms and Management; Corporate Social Responsibility and Impact; Environmental Sustainability; Apparel and Accessories Industry; Sports Industry;

Citation:
Paine, Lynn S. "Sustainability in the Boardroom: Lessons from Nike's Playbook." Harvard Business Review 92, nos. 7/8 (July–August 2014): 87–94. View Details
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Article | Organization Science | 2014
Corporate Social Responsibility Reporting in China: Symbol or Substance?
Christopher Marquis and Cuili Qian
This study focuses on how and why firms strategically respond to government signals regarding appropriate corporate activity. We integrate institutional theory and research on corporate political strategy to develop a political dependence model that explains (a) how different types of dependency on the government lead firms to issue corporate social responsibility (CSR) reports and (b) how the risk of governmental monitoring affects the extent to which CSR reports are symbolic or substantive. First, we examine how firm characteristics reflecting dependence on the government—including private versus state ownership, executives serving on political councils, political legacy, and financial resources—affect the likelihood of firms issuing CSR reports. Second, we focus on the symbolic nature of CSR reporting and how variance in the risk of government monitoring through channels such as bureaucratic embeddedness and local government institutional development influences the extent to which CSR communications are symbolically decoupled from substantive CSR activities. Our database includes all CSR reports issued by the approximately 1,600 publicly listed Chinese firms between 2006 and 2009. Our hypotheses are generally supported. The political perspective we develop contributes to organizational theory by showing (a) the importance of government signaling as a mechanism of political influence, (b) how different types of dependency on the government expose firms to different types of legitimacy pressures, and (c) that firms face a decoupling risk that leads them to be more likely to enact substantive actions in situations where they are likely to be monitored.
Keywords: institutional theory; political strategy; Non-market Strategy; emerging markets; China; corporate social responsibility; Corporate Disclosure; Corporate Social Responsibility and Impact; Emerging Markets; Government and Politics; China;

Citation:
Marquis, Christopher, and Cuili Qian. "Corporate Social Responsibility Reporting in China: Symbol or Substance?" Organization Science 25, no. 1 (January–February 2014): 127–148. View Details
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Working Paper | HBS Working Paper Series | 2014
The Role of the Corporation in Society: An Alternative View and Opportunities for Future Research
George Serafeim
A long-standing ideology in business education has been that a corporation is run for the sole interest of its shareholders. I present an alternative view where increasing concentration of economic activity and power in the world's largest corporations, the Global 1000, has opened the way for managers to consider the interests of a broader set of stakeholders rather than only shareholders. Having documented that this alternative view better fits actual corporate conduct, I discuss opportunities for future research. Specifically, I call for research on the materiality of environmental and social issues for the future financial performance of corporations, the design of incentive and control systems to guide strategy execution, corporate reporting, and the role of investors in this new paradigm.
Keywords: corporate accountability; corporate social responsibility; corporate social responsibility and impact; corporate governance; environment; environmental and social sustainability; sustainability; sustainability reporting; Sustainability Research; sustainability targets; Corporate performance; Corporate Accountability; Corporate Social Responsibility and Impact;

Citation:
Serafeim, George. "The Role of the Corporation in Society: An Alternative View and Opportunities for Future Research." Harvard Business School Working Paper, No. 14-110, May 2014. View Details
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Recent Publications

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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Case | HBS Case Collection | March 2020
The Working Circle: Wolves, Ranchers, and Karin Vardaman’s Pursuit of the ‘Radical Middle’
Francesca Gino and Jeffrey Huizinga
Karin Vardaman, a lifelong conservationist now committed to protecting wolves in the American West, finds herself unexpectedly allied with the one of the species' most fervent opponents: cattle ranchers.
Keywords: non-profit; conservation intervention; Agriculture; environment; social impact; Leadership; Nonprofit Organizations;

Citation:
Gino, Francesca, and Jeffrey Huizinga. "The Working Circle: Wolves, Ranchers, and Karin Vardaman’s Pursuit of the ‘Radical Middle’." Harvard Business School Case 920-047, March 2020. View Details
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Case | HBS Case Collection | February 2020
San Francisco Ballet: On 'Pointe' for the Future
Rohit Deshpandé and Nicole Tempest Keller
The SF Ballet was regarded as one of the top ballet companies in the world. It had an enviable earned revenue percentage of almost 50% and had an internationally recognized ballet school. However, by 2019 the Ballet faced a number of challenges. Ballet was a European art form that had gained popularity in the U.S. a century ago, but the demographics of the U.S. no longer reflected those European roots. In San Francisco, the Ballet had been a favorite pastime of the older, monied set, but the city's demographics had changed over the last few decades as young Millennials had flocked to San Francisco to join the burgeoning tech industry. The Ballet struggled to attract younger audiences and found itself competing with digital alternatives for how people spent their leisure time. Moreover, to make changes in programming, accessibility, and the Opera House venue to appeal to younger audiences, the Ballet risked alienating its loyal, older donors, who were the lifeblood of the Ballet's revenue model. Kelly Tweeddale, the newly hired Executive Director, had to consider the interests of various stakeholders - dancers, donors, audience, staff, board, and the local community - which often were at odds with one another. With limited resources, the Ballet needed to choose which changes to tackle first and those decisions were tied to how the organization prioritized its various constituents.
Keywords: Arts; Business and Stakeholder Relations; Demographics; Organizational Change and Adaptation; Strategic Planning; Social Enterprise; Cultural Entrepreneurship; United States; San Francisco;

Citation:
Deshpandé, Rohit, and Nicole Tempest Keller. "San Francisco Ballet: On 'Pointe' for the Future." Harvard Business School Case 520-054, February 2020. View Details
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Case | HBS Case Collection | February 2020
Mission Related Investments at the Ford Foundation (A)
Shawn Cole, Michael Norris and T. Robert Zochowski
In 2017, Darren Walker, the President of the Ford Foundation, one of the largest philanthropic foundations in the world, was preparing to meet with his board of directors to discuss beginning a mission related investments (MRI) program. Walker hoped to devote $1 billion of the Ford Foundation’s $13 billion endowment to the MRI program. The case explores the reasoning behind the program, design choices that were made in its development, and potential problems or tradeoffs to implementing such a program.
Keywords: Mission-Related Investing; philanthropy; foundation; endowments; socially responsible investing; Investment; Institutional Investing; Investment Activism; Governance; Corporate Social Responsibility and Impact; Mission and Purpose; Social Enterprise; Philanthropy and Charitable Giving; United States; New York (city, NY);

Citation:
Cole, Shawn, Michael Norris, and T. Robert Zochowski. "Mission Related Investments at the Ford Foundation (A)." Harvard Business School Case 220-026, February 2020. View Details
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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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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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Working Paper | HBS Working Paper Series | 2019
Impact Investing: A Theory of Financing Social Entrepreneurship
Benjamin N. Roth
I present a model of financing social enterprises to delineate the role of impact investors relative to “pure” philanthropists. I characterize the optimal scale and structure of a social enterprise when financed by grants, and when financed by investments. The analysis yields two heuristics to guide impact investors. First, investments allow a financier to discipline inefficient spending. Second, investments may enable a social enterprise to exploit new opportunities for profit, and may increase the enterprise’s scale relative to when grant financed. I quantify these heuristics for the case of Husk Power, a social enterprise that has received impact investment.
Keywords: impact investing; Social Entrepreneurship; Finance; Investment; Mathematical Methods;

Citation:
Roth, Benjamin N. "Impact Investing: A Theory of Financing Social Entrepreneurship." Harvard Business School Working Paper, No. 20-078, February 2020. View Details
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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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Case | HBS Case Collection | January 2020
Terra Nova: A Social Business Trying to Unlock Land Rights for the Urban Poor in Brazil
Julie Battilana, Ruth Costas, Marissa Kimsey and Priscilla Zogbi
Brothers André and Daniel Albuquerque founded the company Terra Nova in 2001 to mediate land disputes between poor families illegally living in urban areas and the official landowners—with the aspiration to improve the lives of the poor. A business-led approach to the issue, like Terra Nova’s, was innovative and contested amid the widespread belief that land disputes fell solely within the public sector’s purview. After struggling to develop a viable business model, the company received support from impact investing firm MOV Investimentos. By 2019, Terra Nova finally broke even and was exploring opportunities for scaling. But its leaders had to decide the right expansion model for the social business.
Keywords: Mission and Purpose; Social Enterprise; Entrepreneurship; Negotiation; Power and Influence; Social Issues; Conflict and Resolution; Business and Government Relations; Infrastructure; Urban Development; Real Estate Industry; Brazil; Latin America;

Citation:
Battilana, Julie, Ruth Costas, Marissa Kimsey, and Priscilla Zogbi. "Terra Nova: A Social Business Trying to Unlock Land Rights for the Urban Poor in Brazil." Harvard Business School Case 420-092, January 2020. View Details
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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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