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© Eliot Wyatt

It is widely recognised that no single institution can solve the sustainability challenges that business and society face — it will take collective action. The business education sector acknowledges this, too.

Like companies, business schools are moving away from a traditional focus on shareholder primacy and are emphasising the interests of a wider range of stakeholders in their teaching and research. But they are not doing it alone; they are taking a collective approach — and breaking academic boundaries.

An example of this shift is the Stanford Doerr School of Sustainability. Financed with a $1.1bn donation from venture capitalist John Doerr and his wife Ann, the school opened last September. It provides curricula to students across the university’s California campus, whatever their academic discipline.

The Doerr school is a departure from traditional university education and siloed fields of study, and places a greater focus on planet as well as profit, at Stanford.

“Business schools need to take a leadership role in helping the new generation of business leaders transform the way we engage in capitalism,” says William Barnett, professor of business leadership, strategy and organisations at Stanford’s Graduate School of Business (GSB) who helped establish the Doerr school.

“If you think about the history of our industrial world, we have been focused on moving towards systems of mass consumption and production,” says Barnett. “It has produced tremendous wealth but, as we push the limits of what our climate, oceans and biodiversity can handle, it’s important that our business leaders know as much about sustainability as they do accounting, strategy, finance and organisational behaviour.”

Those environmental risks, as well as the fallout from the global financial crisis and the Covid-19 pandemic, mean that business schools are having to revamp what they teach. These events called capitalism into question and prompted a reflection on the purpose of companies. Students and employers alike are pushing schools to move beyond profit maximisation and instead place issues such as climate change, values and purpose at the forefront of teaching, research and operations.

Institutions are responding by increasing the availability of relevant elective courses, lacing sustainability into the core curriculum, establishing standalone masters and executive education programmes, and opening new centres of research.

During the 2021-22 academic year, IE University in Madrid provided 12,712 hours of sustainability-related content, accounting for nearly a quarter of all subjects taught across all its schools and programmes. “We wouldn’t be offering the best possible training to our students if we didn’t make sure that sustainability was woven into their programmes, especially in core elements,” says Conchita Galdón, sustainable impact teaching and research lead at IE’s Sustainability Office.

“The main goal is to leverage the responsible view in every engagement of our faculty with our students. In other words, we don’t expect operations [management] teachers to stop teaching operations [in order] to teach sustainability. What we hope is that they will always make the explicit connection between good operations management and responsible operations management.”

Pressure for change has come from employers, whose demand for staff with specialist expertise in sustainability is growing. Schools say sustainability is no longer a niche career in organisations; it is increasingly required for traditional roles in business and management. “We know that employers are demanding these skills and there’s a huge gap in the job market,” says Galdón.

Students have also been vocal proponents of reshaping curricula. “Schedules are just so full and there is not enough time to really have the discussions that go to the root causes of the problems facing society,” says Sophie Charrois, former president of oikos International, a global student-led organisation working towards transforming management and economics teaching.

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© Eliot Wyatt

Yet there is disagreement in the sector over what exactly “responsible” business means. “You can argue anything business schools teach is sustainable, as it is aimed at achieving economic growth,” says Urs Peyer, dean of degree programmes and an associate professor of finance at Insead business school in France. “But you can’t claim those are responsible practices when, for example, you address poverty reduction but at the same time you pollute the water.”

At Insead, the proportion of students taking at least one sustainability-linked elective has grown from 25 to 66 per cent in the past decade. The school defines as “responsible” the business decisions that take into account environmental and social factors. It is reviewing its curriculum to determine which lessons on sustainability should be taught on core courses.

Peyer says that students still need to learn skills for generating financial value, while tackling the negative externalities. He points to former Danone chief executive Emmanuel Faber, who advocated a new “humanist” capitalism but was ousted in 2021, after sales growth and share price performance lagged behind its rivals.

“We have to create value for stakeholders — and one important stakeholder group is the equity-holders,” says Peyer. “To take some of the value away from shareholders, you need a big consensus. We are trying to think about how to lessen those wider issues and still deliver a return.”

Business schools are a microcosm of the wider debate over pursuing profits alongside environmental, social and governance (ESG) goals, as well as whether that amounts to hypocritical “woke capitalism”.

“There is a growing interest in these topics,” says Alex Edmans, professor of finance at London Business School, but “some of this enthusiasm is misplaced”.

“There are some false promises of the ESG crowd: that everything you do will always help shareholder value and ESG always pays off,” he says. “Many people ignore the trade-offs. Sometimes social goals are at the expense of financial goals. Decarbonisation, for instance, is important — but there will be a cost.”

Many schools still only offer sustainability content through electives, rather than the core curriculum. A holistic approach is critical, says Katherine Baird, associate director of sustainability at UC Berkeley Haas School of Business in California.

About a third of the 70-odd faculty who teach the school’s core MBA courses have integrated environmental or social sustainability issues. “We don’t see sustainability as a siloed issue; we see it as integral to doing business in the 21st century,” says Baird. “We want to ensure that, as students learn about accounting, marketing, operations, finance and strategy, they understand how sustainability is fundamentally part of those business concepts.”

But some schools are falling behind, says Mette Morsing, head of Principles for Responsible Management Education, a UN-backed initiative to promote the teaching of sustainability in business schools and, in turn, advance progress towards the UN’s Sustainable Development Goals. While many faculty members may be enthusiastic about integrating sustainability in curricula, a high proportion of them lack the knowledge and skills to do so. “It’s not because they don’t want to; it’s because they have not been trained to,” says Morsing.

Efforts are under way to boost expertise, with alliances of academics rallying around the globe, including the Responsible Research in Business & Management network, founded by scholars at 23 university-based business schools, and the Oxford Sustainable Finance Group at the University of Oxford. The Impact & Sustainable Finance faculty consortium is a network of experts brought together by Northwestern University’s Kellogg School of Management. It has more than 370 members across 210 universities in 39 countries, who meet up to share their experiences.

“When we launched in 2017, many faculty were very new to teaching the subject,” says Megan Kashner, director of social impact at Kellogg. “Our approach is to provide that opportunity for faculty to share with one another and for all of us to move our teaching forward.” She cites the effort to standardise ESG reporting that has made its way into the curriculum. “Five years ago it was the Wild West,” with a plethora of metrics, she says.

Such alliances also hope to promote business school research on sustainability, thereby bolstering teaching content. Some professors have argued, however, that academic promotions are linked to work being published in journals that neglect such research, prompting a push to quantify the social impact of research.

That goes to the heart of a debate over whether business schools can effect change in business and wider society, rather than merely reflect it in their teaching and research. “That is our hope,” says Michele de Nevers, executive director of sustainability programmes at Berkeley Haas. “Currently, market incentives and regulations aim to solve the pollution problem. But there are broader questions that involve transforming capitalism, to reflect evolving ethics and values in the underpinnings of our economic system.

“This goes beyond climate solutions and addresses how society and capitalism are organised. Students are asking these questions and we think that business schools should help them to frame both the questions and the answers.”

See the winners of our second annual Responsible Business Education Awards on January 16

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