I have always loved tools. One of the best gifts I ever received was a real hefty toolbox. I like the toolbox but even more I like that I needed to fill it with tools. Then I could lug it around and always have all the tools I need with me.
For those teaching sustainability in our business schools, there is a need for the right kind of tools. And for a toolbox. But even more important is a blueprint of what we are trying to build in the first place. In my view, if business schools are engaged at all in sustainability education, it is characterized by random acts of overload teaching, whim, passion and other sideshow activities. While the main event takes place under the big tent, sustainability seems content to be invited. But we aspire for than that don't we? And surely the challenges and innovation opportunities demand more from us. At Smeal College of Business we are launching a multi-year initiative aimed to providing a rigorous answer to that question. We currently call it the BEST Model for "business education for sustainability transformation."
During Spring 2016, a number of interviews and roundtable discussions were held with executives from wide variety of industry sectors, businesses and organizations. The key question we explored was in the context of the changing landscape of business from narrow financial measures of performance to include social and environmental metrics. As one executive from a large specialty metals business stated: “The day is coming when all businesses will need to demonstrate social value.”
As a leading business school, we wanted to know: “what are the most important capabilities business leaders need for businesses to demonstrate social value while continuing to succeed financially?”
This whitepaper summarizes these discussions and highlights the following key capability areas:
Macro-Mindset/Skillset: Making the Sustainability Case for Business
One of the people we spoke with is a vice chairman of a large consulting firm that works with the world’s largest companies. He told the story of a CEO of a document technology company coming to him and saying that their most strategic issue was climate change. He pushed back.
“Climate change?” he asked to make sure he heard her correctly.
“Yes, climate change,” she confirmed and went on to explain how a changing climate would disrupt their supply chain, increase costs, and impact the one thing you really need to use one of their main products: paper.
US Senator Gaylord Nelson famously stated that “the economy is a wholly owned subsidiary of the environment.” Again and again the leaders we spoke with were emphatic about this simple but powerful dawning awareness in their companies: financial performance is linked with social and environmental value creation. This insight corresponds to observations already made previously. For example, the World Business Council on Sustainable Development (WBCSD) Chief Operating Officer Odd S. Gullberg famously said:
Society depends on a functioning and viable business sector to create jobs and welfare, but business cannot succeed in societies that fail.
At the highest level, this requires first that modern business education equips students with a new mindset, a new mental map for business’ relationship to society and nature.
An oft repeated phrase in our in-depth interviews was that students need to learn to “make the business case for sustainability.” And we can also add that students need to make the sustainability case for business. Making the business case for sustainability answers the question: “why should business get involved with sustainability?”
Making the business case means that a student is able to conduct analysis and make recommendations that either reduce costs or increase revenues while improving environmental or social impacts. The business case for sustainability requires that you:
Understand the environmental and social issues of relevance to your business and industry. This likely involves working with external partners who may have a better understanding of the issues (non-profit, government, higher ed)
Measure how the processes and products of your enterprise contribute to or help resolve the environmental and social risks and opportunities (ESRO)
Understand your business model and what drives costs and revenues
Choose the most material ESRO that drive business value
On the other hand, making the sustainability case for business answers the question: “why should sustainability get involved with business?” There many reasons to believe that we cannot achieve sustainability without business.
It is our entire production and consumption system that drives resource use, waste generation, employment, worker safety, and the treatment of the natural world.
Business is the only wealth generating activity on earth. All other sectors are wealth-utilizing not wealth generating.
It is large. In 2011, 1,101 of the 1,752 largest global economic entities on earth were corporations. The revenues of these mega-corporations—including Royal Dutch Shell, Exxon Mobil, and Wal-Mart—were larger than the GDP of 110 national economies and more than half the world's countries.
We spend most of our time working in them.
In sum, the skill of making the business case for sustainability and the sustainability case for business, must be done strategically.
According to our interviews, strategic sustainability requires two key elements:
alignment and synergy with the business’ core mission, strategy, culture and long-term goals
quantitative understanding of the specific, material environmental and social risks and opportunities (ESRO)
This led us to articulate what we are calling the macro-mindset/skillset for business sustainability:
Business depends on natural and social capital.
The ability to identify and measure the strategically important environmental and social risks and opportunities (ESRO) present in their business.