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 | December 2019
JUUL and the Vaping Revolution
Michael W. Toffel, John Masko and Sarah Mehta
In late 2019, San Francisco-based electronic cigarette (e-cigarette) maker JUUL Labs (pronounced “jewel”) faced intense pressure. Sales of JUUL products exceeded $1 billion in 2018, dominating the e-cigarette category. While JUUL Labs’ stated goal was to help current smokers switch from traditional cigarettes to e-cigarettes, the company’s products had become popular with high school and even middle school students, among whom “vaping”—the use of e-cigarettes—was rapidly spreading. Some advocacy groups and policymakers speculated that JUUL Labs had purposefully marketed its products to minors, an allegation the company strongly denied. The debate over JUUL Labs’ marketing and products had made 2019 a difficult year for the company, with a number of states and municipalities imposing bans on the sale of flavored e-liquids, and in some cases, on all e-cigarette products. Given that the company was ostensibly founded to reduce the harm of smoking, what more could JUUL Labs do to prevent misuse of its products, restore its reputation, and grow its business more successfully?
Keywords: electronic cigarettes; E-Cigarettes; vaping; Nicotine Replacement; JUUL; Juuling; Advertising; Online Advertising; Customers; Innovation and Invention; Marketing; Ethics; Brands and Branding; Marketing Communications; Marketing Strategy; Product Marketing; Corporate Social Responsibility and Impact; Social Issues; Technology; Technology Industry;

Citation:
Toffel, Michael W., John Masko, and Sarah Mehta. "JUUL and the Vaping Revolution." Harvard Business School Case 620-069, December 2019. View Details
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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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Working Paper | 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." Working Paper, December 2019. View Details
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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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Case | HBS Case Collection | October 2019
Harlem Capital: Changing the Face of Entrepreneurship (A)
George Serafeim and David Freiberg
Jarrid Tingle and Henri Pierre-Jacques had spent the summer between their first and second years of their Harvard Business School MBA program fund raising for their start-up Venture Capital (VC) firm, Harlem Capital Partners. Harlem Capital was founded upon the principle that addressing the VC funding gap for minorities and women – who received only 3 percent of total VC funding – could produce superior returns. Tingle and Pierre-Jacques were passionate about the mission of Harlem Capital to change the face of entrepreneurship. However, despite generating significant media attention, Harlem Capital had only raised a few million dollars over the summer, not nearly enough for the fund to be financially viable as a career path for Tingle and Pierre-Jacques. Should Tingle and Pierre-Jacques commit to Harlem Capital despite the serious roadblocks on their path? Or should they capitalize on their pre-MBA Private Equity experience and attempt to be impactful through a more traditional career post-MBA graduation?
Keywords: impact investing; Gender bias; Gender Inequality; minority representation; entrepreneurial finance; investment management; Investing; inequality; Venture Capital; Entrepreneurship; Diversity; Gender; Equality and Inequality; Equity; Mission and Purpose; Investment Funds; Financial Services Industry;

Citation:
Serafeim, George, and David Freiberg. "Harlem Capital: Changing the Face of Entrepreneurship (A)." Harvard Business School Case 120-040, October 2019. View Details
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Case | HBS Case Collection | October 2019
Harlem Capital: Changing the Face of Entrepreneurship (B)
George Serafeim and David Freiberg
Case B describes Tingle and Pierre-Jacques’ decision to commit fully to Harlem Capital as their post-graduation job. The case explores the results of their fundraising efforts, new strategic partnerships and how they plan to “build the market” in order to achieve future, sustained success in building funds comprised of diverse entrepreneurs
Keywords: impact investing; Gender bias; Gender Inequality; minority representation; entrepreneurial finance; investment management; Investing; inequality; Venture Capital; Entrepreneurship; Diversity; Gender; Equality and Inequality; Equity; Mission and Purpose; Investment Funds; Financial Services Industry;

Citation:
Serafeim, George, and David Freiberg. "Harlem Capital: Changing the Face of Entrepreneurship (B)." Harvard Business School Case 120-041, October 2019. View Details
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Case | HBS Case Collection | October 2019
How to Encourage Others to Give and When to Pass the Torch? Insights from The Philanthropy Connection
Christine Exley and Kathleen McGinn
This case follows the co-founder and president, Marla Felcher, of The Philanthropy Connection (TPC). TPC is a nonprofit organization that centers around collective giving: members of TPC make an annual contribution that is then distributed to select nonprofit organizations via grants. As Felcher works to maximize how much money they can give out via grants, this case allows for a deep dive into the motives for giving and how the organizational structure and processes can tap into why people give. As the case begins with Felcher’s founding of TPC and concludes with Felcher desiring to step down from her role as president, this case also allows for a rich discussion around if and when a nonprofit founder should step aside to let the next round of leaders takeover.
Keywords: giving and philanthropy; Philanthropy and Charitable Giving; Motivation and Incentives; Nonprofit Organizations;

Citation:
Exley, Christine, and Kathleen McGinn. "How to Encourage Others to Give and When to Pass the Torch? Insights from The Philanthropy Connection." Harvard Business School Case 920-018, October 2019. View Details
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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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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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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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