Does CSR improve performance?

Business Impact: Does CSR improve performance?

Does CSR improve performance?

Business Impact: Does CSR improve performance?
The impact of pursuing CSR investments on financial performance varies across studies, so where does the truth lie? And how do they affect the tenure of those at the helm? Jérôme Barthélemy, executive vice president and professor at ESSEC Business School, investigates

The relationship between corporate social responsibility (CSR) and performance is a frequent topic of research. The problem is that the results vary across studies. Some conclude that the relationship is positive, while others find that it is neutral or even negative. How can this surprising state of affairs be explained?

A review of dozens of studies published in the top academic journals showed that the relationship between CSR and financial performance is slightly positive. Furthermore, the intensity of the relationship depends on which journals publish the studies.

The (positive) relationship between CSR and profitability is twice as strong in articles published in journals specialising in ethics as in economics, finance and accounting journals. The results of the studies that are published in management journals lie between these two extremes, although they are nearer to the ethics journal publications. This may seem odd. Since all the researchers are examining the same problem, study results shouldn’t differ between publication outlets. The meta-analysis revealed that these differences are mainly attributable to ideology.

Differences in ideology

Ever since Milton Friedman, economists have tended to be sceptical about CSR, believing that it always has a negative effect on profitability. The upshot is that economic, finance and accounting journals tend to publish studies showing a negative or (at best) weakly positive relationship between CSR and financial performance.

Ethics specialists take a diametrically opposed approach. They see no incompatibility between CSR and profitability, and even hypothesise a virtuous circle: greater corporate investment in CSR leads to better financial results, facilitating more investment in CSR. Ethics journals thus give priority to studies finding a strongly positive relationship between CSR and corporate financial performance.

Management researchers are less categorical. Unlike the economists, they don’t systematically reject the idea that socially responsible behaviour can enhance profitability. Nor do they have the pro-CSR convictions of ethics researchers. As a result, the studies published in management journals have the most nuance.

What can we learn from this meta-analysis? The first takeaway is a warning: beware studies exploring topics with ideological connotations. CSR is undeniably one such topic. Some people think CSR should be a requirement for all firms. Others see it as a heresy that does nothing but distract firms from their true purpose, which is to create value for shareholders.

Although studies published in academic journals are more objective than reports published by think tanks, they can still contain biases. Academic journals play a ‘gatekeeper’ role for the screening and dissemination of knowledge. A study that finds a strongly positive relationship between CSR and financial performance corroborates the ideas held by ethics journals editors and reviewers. So it has a much better chance of publication in a pro-CSR journal than in an economics, finance and accounting (or management) journal.

The second takeaway is more encouraging. Annoying though it may be for the ethicists, nobody has yet managed to prove that CSR is good for financial performance. But neither has anybody proved the opposite. So why wouldn’t firms adopt (more) socially responsible behaviours? It would enhance their image without being bad for profits (or shareholders). And it’s a fairly inexpensive way for business leaders to do good.

How investments in CSR affect a CEO’s tenure

While there is no evidence that CSR strategies get in the way of business, research shows that they have a subtle effect on the tenure of CEOs at the head of a firm.  

Indeed, results show that a business leader’s view of the importance of CSR has no direct effect on their tenure. CEOs who make significant investments in CSR have neither more nor less chance of being shown the door than CEOs who make no investment at all in CSR. However, CSR investments accentuate the impact of financial performance on the way shareholders treat CEOs.

When a firm’s financial performance is good, financial markets respond very positively to investments in CSR. They take them as a sign that the CEO can both create value for shareholders and act responsibly. A CEO with good financial results who also considers CSR to be very important runs half as much risk (-53%) of losing their job than a CEO with good financial results who doesn’t consider CSR to be very important.

The opposite applies when a firm’s financial performance is poor. In that situation, financial markets tend to think that the CEO’s focus on CSR has been detrimental to creation of value for shareholders. A CEO with poor financial results who treats CSR as very important runs almost twice the risk (+84%) of getting marching orders than a CEO with good financial results who pays little attention to CSR.

So, is investing in CSR advisable for a CEO keen to stay at the helm? It all depends on the firm’s financial performance. If it’s good, a CSR-focused CEO will hold on to the job longer than counterparts with less of an interest in CSR. If it’s poor, the same CEO will be dismissed faster. Financial performance thus remains a priority for the markets. They have no objections to CSR… as long as the financial results are there.

Jérôme Barthélemy is executive vice president, dean for post-experience programmes, corporate programmes and relations, and professor of strategy and management at ESSEC Business School, Paris. He has been a visiting professor and visiting research scholar at New York University, Stanford University and Cambridge University, and is the author of Myths of Strategy (Kogan Page).

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Read more Business Impact articles related to CSR:

Business Impact: Does CSR improve performance?
corporate social responsibility

Does CSR improve performance?

The impact of pursuing CSR investments on financial performance varies across studies, so where does the truth lie? And how do they affect the tenure of those at the helm? Jérôme Barthélemy, executive vice president and professor at ESSEC Business School, investigates

Read More »

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Differentiation through impact part III

Business Impact: Differentiation through impact part III

Differentiation through impact part III

Business Impact: Differentiation through impact part III

How are business schools making a positive impact on the communities in which they operate?

The way business schools compete is changing. Those that can demonstrate their positive influence on society are increasingly able to stand out from the crowd, in the eyes of prospective students, employers, and other stakeholders.

Business Impact set out to learn more and share examples of how Business Schools across the global BGA network are striving to make a positive impact on their graduates, communities, and the natural environment.

This article considers how business schools are making a positive impact on the communities in which they operate. Interviewee respondents represent business schools in France, Japan, Egypt, Belgium, Switzerland, and Canada. 

How is your Business School making a positive impact on the community/communities in which it operates?

 

Yasmina Kashouh, DBA candidate at Ascencia Business School and Faculty Member at Collège de Paris International: Collège de Paris is a French network of 25 schools specialising primarily in business and management. The group now has almost 40,000 students enrolled in continuing education. The main goal is to make high-quality education available to as many people as possible throughout the world.

It has, for example, a partnership with the association, Universités & Réfugié.e.s (UniR) that works to improve access to higher education for refugees and asylum seekers in France. Today, the project is expanding, as it also includes support for the Validation of Experience (VAE) for migrants who already have professional experience abroad, as well as online or distance learning courses.

We have also developed a new concept of tokenisation built on blockchain technology related to payments. Today, payment is one of the most important aspects of distribution. It is very difficult to pay school fees in nations where the domestic currency is unstable or illiquid. To provide as many students as possible with access to education, we want to use blockchain technology, specifically cryptocurrency payments. We are in the process of developing a token for the distribution of education, called ‘Talent’. The idea is that this token could be used for international payments, tuition fees, investments for student projects, and so on. The aim of the initiative is to create a valuable coin for the education and integration of international students around the world and for the introduction of new payment methods.

 

Steven De Haes, Dean, Antwerp Management School: Our master’s students are engaged in community projects, as part of their education. They cooperate with local organisations to address issues such as social inequality, access to public services, poverty, climate change, sustainable use of materials, and so on. Often on a small but very practical scale, the aim of these projects is to make a real and concrete difference by using students’ managerial talents for the benefit of a local community or a specific target group.

 

Nicola Jackman, Head of Academics, Geneva Business School: As a Swiss Business School with a student body that represents more than 100 different nations, we ensure that all our programmes have three fundamental principles: sustainability, accountability, and responsibility (leadership) which are further supported by our mentorship approach. To further assist our students and their communities, we are launching an Entrepreneurial Foundation Hub through which students can seek financial support for their projects, as well as access to a knowledge pool, composed by practitioners from different areas and countries.

 

Kenji Yokoyama, Dean of External Relations, NUCB Business School: NUCB Business School is located in the midst of Nagoya’s Central Industrial Area. NUCB has been at the centre of human resource development for the industrial area [to the extent that] it is said that the industrial area has developed together with the development of NUCB.

 

Sherif Kamel, Dean, The American University in Cairo School of Business: The School seeks to generate a positive and measurable social impact. It understands and values the invaluable importance of the UN SDGs’ (sustainable development goals) integration into curriculum, research and community development activities and services.

For instance, the School in collaboration with the UN Principles for Responsible Management Education (PRME) has recently launched the PRME Africa chapter as part of the third AUC School of Business Forum.

 

This article is part of a series and has been adapted from an article which originally appeared in Business Impact’s print magazine (edition: May 2022-July 2022).

Read more Business Impact articles related to CSR:

Business Impact: Does CSR improve performance?
corporate social responsibility

Does CSR improve performance?

The impact of pursuing CSR investments on financial performance varies across studies, so where does the truth lie? And how do they affect the tenure of those at the helm? Jérôme Barthélemy, executive vice president and professor at ESSEC Business School, investigates

Read More »

Read previous editions of the Business Impact magazine:

Do you want your School to feature in the next Business Impact?

By joining the Business Graduates Association, we offer BGA Schools complimentary marketing and PR support.
As part of our institutional membership, member Business Schools have the opportunity to feature in Business Impact. 

You might be interested in:

Upcoming AMBA & BGA award-winning Business School events:

Become a BGA Member Today

Want to get in touch?

For questions about becoming a member, please contact:

Victor Hedenberg

Membership Director

What does your business stand for?

Business Impact: What does your business stand for?

Public opinion increasingly represents a clear and present threat to business and it will be difficult to remain relevant unless businesspeople can clearly state what they stand for, says Five Horizons author, Steve Sanders

All business leaders are relied on by stakeholders to make the best decisions with regards to the impact their company will have on them as individuals, their interests and their income. Companies that perform well for their stakeholders tend to secure even greater success for the business in the future. But how can leaders articulate this and execute it, especially when it comes to persuading shareholders and directors that some ideas are the right strategic choice?

The need to satisfy and act on an implicit duty of care to all should be the priority for businesses. They are accountable to customers and shareholders first, but also employees, suppliers, the environment, and communities, wherever they make an impact. This is in addition to remaining responsive to government and regulators at home and in all markets, and amid a changing profile of investors or lenders. 

A ‘Great Shift’ is around the corner

During the next 10 to 15 years, humanity will fundamentally change in terms of what, how and why we buy and consume, and why we decide to work for any given company. The governments and businesses our elders run are responsible for all global societies reaching a precipice of globally catastrophic proportions. As a result, the attitude barometer is moving very, very quickly. Public opinion, among those generations soon to be aged 20 to 50, increasingly represents a clear and present threat to business.

Market conditions are shifting, and the race is now on. Either your business or another will be the first company in your competitive environment attaching a brand to a set of principles or a purpose that is important to your target audience.

Businesses will act or be left behind

The threat of being outrun by competitors should be enough to motivate shareholders and directors to invest in ways to navigate that shifting new norm. This is likely to become one of the greatest causes of discontinuity in businesses that we’ve ever seen. This ‘Great Shift’ will be a pan-sector disruption event second to none. Even now, it is simmering away in the background of every industry and competitive landscape. Employees and customers are just waiting for viable alternatives to arise. As soon as alternatives appear that better serve a burgeoning and overwhelming desire for satisfaction, the dial on employment and buying choices will move without warning. 

Change presents an opportunity

Yet, by pinpointing more precisely who and how their impact can be changed for the better, change gives businesses a positive opportunity. This is a key enabler for future success in business. It will be difficult to remain relevant unless businesspeople can clearly state what they stand for. This could be in terms of values and principles-led strategy, or simply the impact that is being made in the interconnected value chains of their ecosystem – both positive influences and actions to resolve previous negative effects. 

Business leaders need to look ahead and think about the scenarios that could arise in the future and try to identify potential vulnerabilities or opportunities in their ecosystem’s interconnected value chains. Doing this will help organisations decide how and when to act in response to unforeseen events as they unfold, using scenario planning and monitoring changes as they occur. 

Ideas come from your people

You don’t need to look far to find the sources of ideas. Listening to your own people and asking your business ecosystem with genuine curiosity will help you uncover the ideas and changes that are desired most urgently by consumers and employees, and the principles that will result in their loyalty. Some key actions to take are:

  • Aligning your business with global issues that matter deeply to most people at a human level, regardless of the scale of impact. This is likely to resonate immediately and could be a vital differentiator for your business.
  • Embracing the nonconformists and contrarians out there because they are the ones who will take your business in unforeseen directions.

Translating ideas into actions

To form coherent arguments, business leaders should learn to use frameworks, methods, tools and techniques, professionally and wisely. Get some help and become better at using the insights gained. Getting this right will directly improve financial performance and will result in increased company-level valuation. This is at the heart of your ability to convince directors and shareholders of the reasons why your choices are the right strategic decision – for survival and for improved profit. 

By being inclusive of people in your team and across your ecosystem you may create a force of evangelists that will spread news of your business’s purpose-led differentiation. To make sure their choices are right, leaders should encourage respectful challenge among that cohort. It also ensures the business is reactive to changing dynamics that its people might discover before leaders can.

Your deadline to act is now

There are more than 200 million businesses in the world and collectively, we are able to have more impact than any other community can. However, this impact must be preceded by an opening up of people’s minds. There must be widespread acceptance that doing good and having a better impact throughout the value chain and supply chains is now a matter of business survival, not simply a nice-to-have icing on the cake. 

It’s likely that business leaders will doubt this because they haven’t witnessed it before. Nobody has. The truth is, that we are at a crucial moment in the history of our species, at which it appears we are failing to act judiciously, expeditiously or with respect for the significance of our historical duty. What is more pitiful is that an addiction to consumerism and an insatiable thirst for perpetually growing profit – our basest human urges – seem likely to precipitate our fall. 

Whether this ‘Great Shift’ is an opportunity or a threat for organisations will largely be determined by how they react, and the course of action they choose to take. Will they act now or opt to wait and see? I sincerely hope you make the right choices.

Steve Sanders is an entrepreneur, the author of Five Horizons and market strategist at Business Growth Mechanics. He is also a Fellow of the Institute of Directors and an MBA strategy guest speaker.

Making an impact: corporate social responsibility

A close-up photograph of a single water droplet about to hit a pool of water; pool of water is causing a circular ripple motion. Water, in this case, signifies sustainability. Business Impact article for Making an impact: corporate social responsibility.

How impact and CSR feed into the sustainability debate, and what Business Schools could and should be doing to exert a greater influence on business and society

A new way to do business with social impact is emerging – purposeful, ethical and sustainable. This approach, with a focus on business as a ‘force for good’, disrupts established thinking around traditional profit-based models, but is this model viable?

With the most forward-thinking organisations actively putting people, the environment, and positive impact first to achieve a fairer society and a more sustainable economy, there is evidence that pursuing a ‘force for good’ business model can be more successful than a profit-driven approach. 

There is also a growing consensus that business leaders have a responsibility not only to shareholders, but also to wider society – customers, employees, suppliers, communities, and the environment.

What does this mean for business education? A session of the AMBA & BGA Festival of Excellence gathered CSR experts for a debate on the subject of positive impact, innovation, sustainability, and responsible management. 

Topics under discussion included: the challenges surrounding the role of Business Schools; how sustainability and social impact could and should be integrated into every MBA programme; how MBA students can learn the key skills required to become forward-thinking leaders; and how the sector can challenge the business models that have resulted in the unintended consequences of today. The following paragraphs are just a selection of highlights from this panel debate.  

Measurable impact

Pavlina Proteou, Founder and CEO of BeyondCSR, started the conversation: ‘The challenge, in part, is that lots of corporations still view sustainability as a PR activity, rather than a core activity. It should be CEO level; it should be the umbrella strategy – the only strategy, actually,’ she said, before adding: ‘When you have CSR and you have that budget, you can use it to come out with a positive measurable impact, because impact has to be measured; it’s not just adopting initiatives and corporate philanthropies. CSR is there to progress and accelerate sustainability strategies, but it has to be part of the core business development, not a marketing division. 

‘This is how you make impact, and social impact is part of sustainability. We talk about sustainable development and social impact as if they are two different things but it’s one thing. If you have concrete sustainable strategies, then you can make measurable social impact and environmental impact. 

‘One of the problems is that corporations feel it’s like ticking a box. There are game-changing companies, but if the approach is only ticking a box, you’ll never have the desired outcome.’ 

Echoing calls for a reset

James Gomme, a Director at the World Business Council for Sustainable Development, added: ‘In the long term, businesses will only be successful if they are operating sustainably. All governments are moving in that direction and societal expectations are moving very strongly in that direction as well. 

‘There were calls at the World Economic Forum for a complete reset of our capitalist model, of the way financial markets work and the way financial markets value sustainable business behaviour. 

‘I would encourage Business Schools to start to echo that and to incorporate sustainability-related topics into the class on financial accounting, the class on strategy, the class on HR-related discussions, and so on. 

‘It is a topic that touches everything you do as a business. Purpose should be something that runs through all of these different functions and those functions should be in support of that purpose.’

Being held to account

Celia Ouellette, Founder and CEO of the Responsible Business Initiative for Justice, noted that there is a clear link between diversity, CSR and social justice, against a backdrop defined by unrest. 

‘Diversity should be the bedrock of good teams,’ she asserted, before pointing to her experience of leading and running a non-profit organisation: ‘The strength of our team lies in the diversity of experience, culture, ethnicity of our organisation, as well as the diversity of its agenda. You need to continually look at each aspect of an MBA programme through these lenses. It will create more sustainable businesses in the long run. 

‘You can create businesses that are less risky and more future-proof. I think that “cancel culture” is just one symptom of what will come when businesses don’t align their purpose and values with the people that they are employing, or that they are selling to. 

‘One of the things that businesses will really need to face is how they’re being held to account, particularly post-Covid-19.’  

Chair: Andrew Main Wilson, CEO, AMBA & BGA

Panellists: James Gomme, Director, World Business Council for Sustainable Development; Celia Ouellette, Founder and CEO, Responsible Business Initiative for Justice; Pavlina Proteou, Founder and CEO, BeyondCSR

This article was originally published in Ambition (the magazine of BGA’s sister organisation, AMBA).

Why businesses must develop greater integrity

A white and brown dog propped up with his two front paws looking outside a window. Business Impact article on Why businesses must develop greater integrity.

There is a need for more integrity and a greater depth of character among leaders, says B-Corp Ambassador, Paul Hargreaves, pointing out that SMEs often get away with not doing the right thing because of their size

If you were described as an integrous person, you may wonder whether it was a compliment or not, but it simply means a person full of integrity. I heard the story of a man called James Doty, a neurosurgeon, entrepreneur and university professor, who early in his career was involved in developing the Cyberknife, an invention that netted him millions of dollars. At the turn of the millennium, he promised $30 million USD out of his $75 million USD net worth to charity – just before the dot-com crash of 2000 to 2001, which brought his wealth down to around the $30 million USD he had already pledged. Doty’s lawyers advised him that he could renege on his promise and get out of the pledge; surely people would understand the change of circumstances and he wouldn’t lose his standing in society. However, Doty was a man of his word and decided to do the right thing and go through with his promise, giving away the last of his fortune to charity.

In a much less costly example, at Cotswold Fayre, we announced in the spring of 2019 that we were going to become carbon neutral from August that year; this was based on some logistical change we had made to vastly reduce the carbon impact of our distribution network, meaning that the carbon offset figure for the carbon used in the distribution of our goods was attainable. The data came from our new logistics company, and either we misunderstood the data at the time or we were just given the wrong figures, but the amount we had to pay to sequester our carbon was considerably higher than what we had budgeted for within the business plan. However, there was never any doubt within our management team that we would go ahead and pay the higher amount, even though no one outside the company would know any different. Money doesn’t make decisions for us; doing what is right does.

These days, many companies want to link a social purpose to their products and make great claims about the percentage of their profits they are giving to social justice projects, such as charities working with street children in Brazil. They often push back when I challenge them and ask them how much they have contributed so far. Of course, many startup brands don’t make a profit for a few years, yet these brands’ products often carry such claims during this time. To my mind, this approach lacks integrity. Surely, it is far better for a young company to say that it will give 5p for each product sold, for example.

In many cases, SMEs can often get away with not doing the right thing because no one notices what small companies do. That is the great advantage of a certification process such as B Corp, where businesses must provide evidence of what they are doing and be analysed on how good they are for the world: both the people and the planet.

Doing the right thing when no one is watching

The Urban Dictionary definition of ‘integrity’ is based on a quote often attributed to [author of The Chronicles of Narnia] CS Lewis, but which might actually paraphrase a line by author, Charles W Marshall: ‘Integrity is doing the right thing when no one is watching.’ It is all too easy to trumpet a high moral standing on social media yet not follow through when the heat is turned up a little. I am concerned that occasionally even renowned ethical companies and their leaders sometimes present a better view to the outside world than what is really happening inside of their organisations. There is a need for more integrity and a greater depth of character among leaders.

People detest hypocrisy more than absolutely anything in a leader, and it has been the downfall of many political figures – as seen by the huge furore caused when the UK prime minister’s closest advisor broke his own rules with regards to the Covid-19 lockdown restrictions on at least two occasions. Imagine a stick of Blackpool rock that you can cut through at any point to reveal the word ‘Blackpool’. Would people see integrity running through us and our businesses if they were to figuratively cut through us at any point?

The wonderful message from the James Doty story is that even though he ‘lost’ personally, he still went through with his promises. For some of us, winning is too important and can come at the cost of all else. I know the appeal of this, as, like many entrepreneurs, I am very competitive and hate losing, and I have had to temper that competitive streak to maintain my integrity. The former tennis player, Andy Roddick, provides a great example of this. He was once awarded a match when a second serve from his opponent was deemed to be out. However, Roddick saw the ball’s mark in the clay himself and made the umpire reverse his call. Roddick went on to lose the match, but he maintained his integrity.

The danger of overpromising and underdelivering

So, how, do we develop our integrity? Well, probably the most important factor is silence. If we speak too hastily and make promises, we are in danger of overpromising and under-delivering. It is best not to speak hastily and to even learn to say ‘no’ on some occasions, where we may risk losing our integrity and disappointing customers, suppliers or, worst of all, team members. One of the most common reasons people leave employers is when they have been promised promotions, money or bonuses that haven’t been forthcoming.

In these instances, circumstances may well have changed – as they did for James Doty, to the tune of being $45 million USD poorer; but he stuck with his promises all the same. Incidentally, Doty claimed to be happier than he had ever been after he had given that money away, saying: At that moment I realised that the only way that money can bring happiness is to give it away.Being integrous, or full of integrity, is not only the right thing to do, but we will almost certainly be more fulfilled and happier as a result.

Paul Hargreaves is a B-Corp Ambassador, and the Founder and CEO of food and beverage company, Cotswold Fayre. He is also the author of The Fourth Bottom Line: Flourishing in the new era of compassionate leadership (2021).

Preparing tomorrow’s leadership for climate change

Schools must help tomorrow’s leaders take decisions together, with those from several areas of expertise, while understanding how these decisions will affect different groups in different ways across the world, say the University of Gothenburg’s Thomas Sterner and Åsa Löfgren.

Global changes are so significant that geoscientists speak of Earth entering a new geological era, the ‘Anthropocene’, during which many crucial variables for the planet are controlled by man, and our activities and consumption patterns risk exceeding the planetary boundaries. This leads to a changed climate, acidification of the oceans, loss of biodiversity and many other global environmental problems. These problems are global, long term and uncertain. They are also interconnected and must be analysed together in order to find solutions that provide synergies and avoid those that solve one problem but worsen others.

For example, it is not sustainable to aggravate problems related to a loss of biodiversity, or vital water/nutrient cycles, when you are trying to solve the climate problem through a poorly conceived forest policy.

Biologists, physicists and other natural scientists document and analyse many of the changes mentioned above, and are usually the ones who write about planetary boundaries and the Anthropocene. Social scientists, meanwhile, are experts on how society and the economy work. Both of these areas of expertise are indispensable when analysing social causes and proposing solutions that are effective and politically feasible. Therefore, collaboration between economists, social scientists and natural scientists is urgently needed to discuss solutions.

An interdisciplinary approach

Business Schools have the important task of preparing students to become tomorrow’s leaders in business and other organisations. It is vital that these aspiring leaders are given tools to understand our current and future predicament since it will be decisive for future success and, indeed, survival. One of the prerequisites for a sound future education is an interdisciplinary approach to problems where this is necessary. When it comes to sustainability, we need expertise that understands both natural and social sciences. 

When training tomorrow’s leaders, standards must be high in all areas. We need interdisciplinary understanding of environmental challenges and opportunities, high ethical standards, and a capability to
work with leaders from other countries, cultures and disciplines. 

The School of Business, Economics and Law at the University of Gothenburg (the School) has taken on this challenge in several ways. Most importantly, it is a strategic mission of the School to integrate sustainability into all education: ‘To develop knowledge, educate and foster independent thinking for the advancement of organisations, policy and a sustainable world’.

Over the the past decade, the School has turned its mission into practice by integrating sustainability-related learning outcomes for all undergraduate programmes and strengthening the progression of sustainability concepts between courses. This allows programme coordinators and lecturers to develop curricula in the knowledge that these learning goals must be met.

Sustainability days

Another important activity is the School’s compulsory sustainability days. The concept was introduced in 2013 and was implemented fully in all undergraduate programmes in 2016. It consists of three full days of focus on sustainability from various perspectives. The overall aim is to complement the sustainability content of courses by raising awareness and providing knowledge around three themes: challenges, responsibility, and solutions. During this time, students from different programmes meet and learn to work with, and respect, those from a variety of backgrounds.

At an international level, and in collaboration with Gothenburg’s Chalmers University of Technology, there is the School’s Environment for Development unit. With support from the Swedish International Development Cooperation Agency, the Environment for Development has trained PhDs from emerging markets in environmental economics for decades and helped build centres in more than 12 countries in the
Global South. 

In the future, the unit’s plan is to co-teach master’s courses with students in several countries simultaneously. In a pilot course run at Chalmers this year, students in Asia, Africa and the US solved problems related to fairness in climate negotiations simultaneously. In a second step, students held discussions with real climate negotiators to develop their negotiating and leadership skills. A capability to work with leaders from other countries,
and understand the positions of other groups or countries, is key to addressing global environmental problems such as
climate change. 

More specifically, while it is important to find effective solutions, it is also important to educate students about the income distributional effects of policy measures and their perceived fairness. These effects are vital determinants of political feasibility and aspects that must be considered carefully when policy instruments are selected and designed. The task is complex since policies need not only be feasible in Europe or the US, but globally. 

There are ways that global environmental problems can be addressed. But the solution relies on there being leaders who are responsible, knowledgeable and understand the importance of, and are open to, collaboration with those who possess skills from other disciplines. Business Schools have a responsibility and an important role to play in the education of such leaders.

Thomas Sterner is Professor of Environmental Economics and Åsa Löfgren is an Associate Professor in the Department of Economics, part of the School of Business, Economics and Law at the University of Gothenburg.

Business Schools for business and society

Business Schools must understand how they can contribute to the wellbeing of society, adopting an active stance, writes Loïck Roche, Director and Dean at Grenoble École de Management

On 11 December 2017, the then French Minister of Environmental Transitions and Solidarity, Nicolas Hulot, announced in a speech, at the Medef Employer Federation in Paris: ‘We [the French Government] are going to help companies evolve in terms of their social objectives, which can no longer be limited to earning profits without regard for working women and men, and without consideration for environmental consequences.’ 

His proposed French Pacte Law (action plan for business growth and transformation) was put forward, with the goal of helping to ‘reintegrate morality in capitalism’. 

To ensure financial objectives better support the greater good, the law will re-write two 200-year-old articles in the French Civil Code (articles 1832 and 1833, see box overleaf). 

The articles redefine a company’s role as simply  creating profit for shareholders. The proposed modifications will integrate social and environmental considerations. At the time of AMBITION going to press, the law was to be voted on in autumn 2018 and its primary actions could come into effect as early as 2019.

But, taking this news out of the context of the French arena, and into the wider global economy, could this development suggest that the era of the Chicago School and one of its most noted economists Milton Friedman – who coined the phrase ‘money matters’ – is over? 

A reason for existence

The step change outlined above looks set to take business thought back to 19th and 20th century business magnate Henry Ford’s fundamental advice: ‘Business must be run at a profit, else it will die. But when anyone tries to run a business solely for profit, then also the business must die, for it no longer has a reason for existence.’

This gives us, as Business School leaders, the opportunity to position social responsibility as the foundation for business. 

The perspective that a company can no longer exist within a silo, but instead must be part of the whole, builds on the stakeholder theory developed by R Edward Freeman, an American philosopher and Professor at the University of Virginia’s Darden School of Business.

His theory suggests companies should not only consider their own interests but also the interests of all concerned parties (employees, customers, stakeholders, leaders, and so on). This helps to improve the wellbeing of society. Corporate social responsibility is an example that was born from the concrete application of this approach.

To implement these changes, and to ensure companies accept that they must go beyond their mission (to manufacture products or deliver services) and participate in a larger responsibility, Business Schools have a primary role to play as they train future managers and leaders and offer continuing education for working professionals who are ready to question their practices.

Beyond the ‘usual goals’ of the Business School

The first step in taking on this new role, is to go beyond a Business School’s usual goals (for example ‘training the leaders of tomorrow’ or ‘ranking in the top 10, 20 or 30’) in order to ask: ‘why train the leaders of tomorrow?’, ‘what do the leaders of tomorrow need to be able to do?’, and ‘why attempt to be in the top 10, 20 or 30 Business Schools?’

The second step is a result of this exploration: in addition to working through these questions with students, professionals and employers, Business Schools have to consider the bigger picture. 

Much like what is expected of companies, Business Schools have to understand how they can contribute to the wellbeing of society. As a result, Schools are preparing and implementing a process of change to become ‘schools for business for society’. 

It is a positive sign to see that what was once the perspective of a few has become a generally shared vision. While not all Business Schools are currently working in this way, they are all headed in the same direction and that’s a great result.

It might not seem like much, but there is an important difference between saying ‘we want to train the leaders of tomorrow,’ and ‘we want to train the leaders of tomorrow to do something special’. 

It’s vital to understand that this concept of doing ‘first, for society’ is, in fact, quite complicated to implement because it’s a reversal of traditional values. For Business Schools,  it means that if we only carry out our mission to offer training and support research we will miss our fundamental objective. And, if we miss this fundamental objective, we will still be doing something positive – but the current stakes are so much higher.

In addition to working with students and companies, Business Schools have to offer a vision and solutions for major global challenges (issues surrounding end of life, climate change, energy transition, immigration crises, terrorism, epidemics, corruption, child exploitation, human rights, women’s rights, cybersecurity and artificial intelligence).

The challenge for Business Schools

The mission is for Business Schools, and higher education in general, to continue working in their particular fields of expertise, while contributing to solving the world’s larger challenges. They have to go beyond their comfort zone; in other words, move beyond their limited focus on business, in order to understand and explore the complexities of the world. 

It’s a change that will enable them to provide support in overcoming the major hurdles faced by society.

When Business Schools take the step to work on major societal problems, they open the door to risks and are forced to take sides. By this, I mean that Business Schools do not currently think (and this is a simple fact, not provocation). Their researchers and professors think, but the Schools themselves do not. They ‘describe’ and often they do so after the fact. This was illustrated by the 2008 financial crisis – no Business School anywhere in the world predicted or anticipated this crisis. In other words: Schools do not think, they do not take sides, they do not act.

For example, what does Harvard Business School think about problems impacting on society? Does Harvard voice an opinion, not on immigration, but on what we should do in concrete terms about immigration and immigrants? Going further, if a School’s opinion supports immigrants, does the School work actively to welcome them?

Another example that might offer better perspective is the case of US President Donald Trump. The researchers and professors at Harvard voiced many negative opinions before and after the election of Trump. But in concrete terms, what has Harvard done about it? Nothing. 

If the School had an editorial policy, if it truly wanted to change the world, then Harvard wouldn’t simply denounce policy or take sides. The School would act in concrete terms. How? For example, by setting up locations in the US where people voted overwhelmingly for Trump. 

That would be going beyond its comfort zone in Cambridge, Massachussets, and entering the playground where things are taking place. To understand societal changes, events and facts, it’s important for Business Schools to be ‘external’ and to maintain a certain impartiality. But if you want to change things – and to have an impact – you have to be where the action is. While Business Schools have been limited to describing and explaining, they now also have to (and I do mean ‘also’, not  ‘instead’), state their aims, choose sides, communicate and convince. 

They have to act, which is at the heart of being engaged and inciting change within the world. In this way, Schools can help federate the business world and public institutions in order to work together on important human values and the goal of companies: to perform and create profit for all concerned parties, thereby improving our shared social fabric and contributing to the common good.

Loïck Roche is Director and Dean at Grenoble École de Management (Grenoble Business School). Coming from a corporate background, he worked for 10 years in France and internationally as a consultant in the field of human resources.

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