Investors’ role in company collaboration

Investors play an important role in facilitating corporate collaborations to improve sustainability says a leading Harvard academic in sustainability.

George Serafeim, the Jakurski Family Associate Professor of Business Administration at Harvard Business School suggests that in the absence of regulatory intervention that forces prices to reflect all externalities a possible solution is pre-competitive collaboration by corporations and industries. Because of their long time horizons and common stock holdings, large investors can play a key role in encouraging this collaboration, he says.

An example of this is an initiative of the denim industry in Amsterdam. It has set up the Alliance for Responsible Denim which has a goal of producing denim in a sustainable way by tackling the three main ecological issues: the use of water, energy and chemicals.

Another example is American Beverage’s partnership with the Alliance for a Healthier Generation which sought to limit beverage portion sizes in schools. It released a report claiming beverage calories shipped to schools had fallen 58 per cent after two years of implementation.

In his paper, Investors as stewards of the commons?, Serafeim says there are two characteristics of investors that are likely to engage with companies at an industry level on issues of environmental and social importance, namely a long horizon and significant common ownership of companies in the same industry or supply chain.

The full paper can be accessed here

George Serafeim, the Jakurski Family Associate Professor of Business Administration at Harvard Business School is one of the speakers at the Fiduciary Investors Symposium to be held at MIT, October 1-3.