Articles About Environmental Sustainability

Where Green Corporate Ratings Fail

Published:	January 6, 2012
Feature:	Op-Ed
Forum:	open for comment; 7 Comments posted

Many companies receiving high marks in environmental sustainability are hurting the planet in other ways, write professor Michael Toffel and executive Auden Schendler. Here's where green rankings fall short.

Carbon Tariffs: Impacts on Technology Choice, Regional Competitiveness, and Global Emissions

Author:	David F. Drake
Published:	November 22, 2011
Paper Release Date:	October 2011
Feature:	Working Papers

Under current emissions regulation such as the European Union Emissions Trading Scheme (EU-ETS) and the Regional Greenhouse Gas Initiative (RGGI) in the Northeast US, imports entering the region fall outside the regulatory regime and incur no carbon costs. As a result, imports can compete within the carbon-regulated region with a new-found advantage, potentially altering the competitive balance between emissions-regulated and -unregulated firms. While implementing carbon tariffs—border adjustments— may appear to be a straightforward solution to this asymmetry, the potential for such a measure to be interpreted as a trade barrier, and thereby initiate a reciprocal tariff, has thus far stymied debate on the issue. This paper explores the impact of such border adjustments on firms' technology choice, regional competitiveness, and global emissions. The analysis shows that border adjustments (or lack thereof) play a vital role in determining firms' technology and production choices, both of which are fundamental operations management decisions that ultimately determine economic and environmental performance. Results have implications for each of the primary stakeholders: regulators making the policy decision regarding border adjustments; firms interested in understanding their competitiveness and location strategies under a border adjustment; and technology producers interested in assessing the potential impact of border adjustments on demand for cleaner technologies.

Engaging Supply Chains in Climate Change

Authors:	Chonnikarn Fern Jira and Michael W. Toffel
Published:	November 15, 2011
Paper Release Date:	October 2011
Feature:	Working Papers

Managing a company's risks and opportunities associated with climate change—including its physical and regulatory implications—requires focusing not only on internal operations, but also on supply chains, especially since greenhouse gas (GHG) emissions in supply chains typically exceed those from a company's own operations. But this requires obtaining climate change information from suppliers, which some are reluctant to share. In this paper, Chonnikarn (Fern) Jira and Michael W. Toffel examine proprietary data from the Carbon Disclosure Project's Supply Chain Project, a collaboration of multinational corporations asking their key suppliers to share information about their GHG emissions and their vulnerabilities and opportunities associated with climate change. Jira and Toffel find evidence that a supplier is more likely to share this information when it faces several buyers requesting the information, when its buyers appear committed to actually using this information, and when the supplier is in a relatively competitive industry and is thus particularly vulnerable to being replaced by its rivals. These findings can help managers better predict which suppliers will be more willing to share climate change information, and which might require more incentives or pressure to share this information.

The Impact of a Corporate Culture of Sustainability on Corporate Behavior and Performance

Authors:	Robert G. Eccles, Ioannis Ioannou, and and George Serafeim
Published:	November 14, 2011
Paper Release Date:	November 2011
Feature:	Working Papers

Robert G. Eccles, Ioannis Ioannou, and George Serafeim compared a matched sample of 180 companies, 90 of which they classify as High Sustainability firms and 90 as Low Sustainability firms, in order to examine issues of governance, culture, and performance. Findings for an 18-year period show that High Sustainability firms dramatically outperformed the Low Sustainability ones in terms of both stock market and accounting measures. However, the results suggest that this outperformance occurs only in the long term. Managers and investors who are hoping to gain a competitive advantage in the short term are unlikely to succeed by embedding sustainability in their organization's strategy. Overall, the authors argue that High Sustainability company policies reflect the underlying culture of the organization, where environmental and social performance, in addition to financial performance, are important, but these policies also forge a strong culture by making explicit the values and beliefs that underlie the mission of the organization.

Market Interest in Nonfinancial Information

Authors:	Robert G. Eccles, Michael P. Krzus, and George Serafeim
Published:	October 21, 2011
Paper Release Date:	September 2011
Feature:	Working Papers

During the past two decades, there have been many ideas for improving business reporting of nonfinancial information such as on a company's environmental, social, and governance (ESG) performance. Using data from Bloomberg, authors Robert G. Eccles, Michael P. Krzus, and George Serafeim provide insights into market interest in nonfinancial information at a level of granularity not available until now. They identify exactly what information is of greatest interest, contrasting both the global and U.S. market across the full spectrum of ESG information and for each component of ESG, as well as Carbon Disclosure Project metrics. They also show variation in interest across asset classes and firm types, and present preliminary explanations for these differences.

Designing Cities for a Sustainable Future

Published:	October 19, 2011
Feature:	Research & Ideas
Forum:	open for comment; 7 Comments posted

The city of the past is likely not the city of the future—climate change is bringing an end to the traditional model. Harvard Business School faculty are thinking along with government leaders and business practitioners about how to create sustainable places to live and work. From HBS Alumni Bulletin.

Historical Trajectories and Corporate Competences in Wind Energy

Authors:	Geoffrey Jones and Loubna Bouamane
Published:	October 18, 2011
Paper Release Date:	May 2011
Feature:	Working Papers

Analyzing developments in the wind turbine business over more than a century, Geoffrey Jones and Loubna Bouamane argue that public policy has been a key variable in the spread of wind energy since the 1980s, but that public policy was more of a problem than a facilitator in the earlier history of the industry. Geography has mattered to some extent, also: Both in the United States and Denmark, the existence of rural areas not supplied by electricity provided the initial stimulus to entrepreneurs and innovators. Building firm-level capabilities has been essential in an industry which has been both technically difficult and vulnerable to policy shifts.

What Environmental Ratings Miss

Authors:	Auden Schendler and Michael Toffel
Published:	October 7, 2011
Paper Release Date:	September 2011
Feature:	Working Papers

Environmental ratings of companies are based on "green" management efforts and the environmental performance of their operations. In this paper, Michael Toffel and Auden Schendler argue that these ratings neglect companies' actions that seek to influence environmental policy, which can have a much broader impact than their internal efforts. As a result, sustainability ratings risk seriously misleading consumers and investors, and can even enable "greenwashing" by allowing corporations to game the system, gaining high rankings for greening their operations despite advocating for less stringent environmental policy. Toffel and Schendler argue that environmental ratings should factor in political contributions, CEO advocacy work, and engagement with non-governmental organizations, among other actions. This would erode the environmental ratings of companies advocating weaker environmental policy, and bolster the ratings of those advocating more stringent environmental policy.

Transforming Manufacturing Waste into Profit

Published:	October 3, 2011
Feature:	Research & Ideas
Forum:	open for comment; 15 Comments posted

Every manufacturing process leaves waste, but Assistant Professor Deishin Lee believes much of this left-behind material can be put to productive—and profitable—use.

The Globalization of Corporate Environmental Disclosure: Accountability or Greenwashing?

Authors:	Christopher Marquis and Michael W. Toffel
Published:	August 19, 2011
Paper Release Date:	May 2011
Feature:	Working Papers

Between 2005 and 2008, the world saw a dramatic increase in corporate environmental reporting. Yet this transition toward greater transparency and accountability has occurred unevenly across countries and industries. Findings by professors Christopher Marquis and Michael W. Toffel provide the first systematic evidence of how the global environmental movement affects corporations' environmental management practices. Firms' use of symbolic compliance strategies, for instance, is affected by specific corporate characteristics and by institutional context. This study contributes to a larger body of research on the effects of global social movements and environmental reporting.

Corporate Social Responsibility and Access to Finance

Authors:	Beiting Cheng, Ioannis Ioannou, and George Serafeim
Published:	July 22, 2011
Paper Release Date:	June 2011
Feature:	Working Papers

Corporate social responsibility may benefit society, but does it benefit the corporation? Indeed it does, according to a new study that shows how CSR can make it easier for firms to secure financing for new projects. Research was conducted by George Serafeim and Beiting Cheng of Harvard Business School and Ioannis Ioannou of the London Business School.

Twenty-first Century Skill: Trading Carbon Credits

Published:	June 8, 2011
Paper Release Date:	October 2010 (revised)
Feature:	Lessons from the Classroom
Forum:	open for comment; 7 Comments posted

As cap and trade becomes an increasingly popular mechanism for governments to cut corporate pollution, students at Harvard Business School use a simulation to learn how it works. An interview with professor Peter Coles.

Corporate Sustainability Reporting: It's Effective

Published:	May 23, 2011
Feature:	Research & Ideas
Forum:	open for comment; 11 Comments posted

In a growing trend, countries have begun requiring companies to report their environmental, social, and governance performance. George Serafeim of HBS and Ioannis Ioannou of London Business School set out to find whether this reporting actually induces companies to improve their nonfinancial performance and contribute toward a sustainable society.

The Consequences of Mandatory Corporate Sustainability Reporting

Authors:	Ioannis Ioannou and George Serafeim
Published:	May 17, 2011
Paper Release Date:	March 2011
Feature:	Working Papers

The number of firms reporting sustainability information has grown significantly in the past decade, both due to voluntary actions and to mandates from several national governments and stock exchange authorities. In this paper, London Business School's Ioannis Ioannou and Harvard Business School's George Serafeim investigate whether mandatory sustainability reporting has any effect on a company's tendency to engage in socially responsible management practices.

HBS Faculty Comment on Environmental Issues for Earth Day

Published:	April 26, 2011
Feature:	Op-Ed
Forum:	open for comment; 3 Comments posted

Harvard Business School faculty members offer their views on the many business facets of "going green."

Will the Japan Disaster Remake the Landscape for Green Energy in Asia?

Published:	April 8, 2011
Feature:	Research & Ideas

Entrepreneurs at the recent Asia Business Conference at Harvard Business School said the disaster in Japan could accelerate the move toward "green" energy sources in Asia, opening opportunities.

Water, Electricity, and Transportation: Preparing for the Population Boom

Published:	March 14, 2011
Feature:	Research & Ideas
Forum:	open for comment; 17 Comments posted

By 2050, the world's cities will have to support 3 billion more inhabitants, mostly in developing countries, with crucial investments needed in three areas: water, energy, and transportation. Several of the planet's top city planning and environmental business experts gathered at Harvard Business School earlier this month to discuss available options.

Sustainable Cities: Oxymoron or the Shape of the Future?

Authors:	Annissa Alusi, Robert G. Eccles, Amy C. Edmondson, and Tiona Zuzul
Published:	February 9, 2011
Paper Release Date:	December 2010 (Revised March 2011)
Feature:	Working Papers
Forum:	open for comment; 2 Comments posted

Among the issues looming large in the twenty-first century is a rapid rise in the number of people living in cities and a rapidly growing awareness of our threat to the Earth's environment. In response to both, a number of major corporations and various government bodies have teamed up to explore the idea of "ecocities" —urban communities ideally designed around the idea of environmental sustainability. This paper explores the idea by looking at several ecocities in progress in China, Abu Dhabi, South Korea, Finland, and Portugal. Research by professors Robert G. Eccles and Amy C. Edmondson, doctoral candidate Tiona Zuzul, and HBS research assistant Annissa Alusi.

Cognitive Barriers to Environmental Action: Problems and Solutions

Authors:	Lisa L.Shu and Max H. Bazerman
Published:	December 15, 2010
Paper Release Date:	November 2010
Feature:	Working Papers

Researchers have long studied the cognitive barriers that cloud our thinking and decision-making. In a recent book chapter, HBS doctoral student Lisa L. Shu and professor Max H. Bazerman look at three barriers that can prevent clear decision-making, specifically on environmental issues. They also propose ways in which these biases could be put to advantage in promoting sound environmental policy and practice.