An interdependent world economy, linked by technology, commerce, and communication, requires corporate leaders to have a global outlook on business. For a small but growing segment of management institutions, that global outlook is being taught through programs that emphasize corporate social responsibility and sustainable enterprise—attitudes and techniques that force corporations to consider the consequences of their actions before they even begin.
“I work with the idea that corporations are responsible for the intended and unintended impacts of their activities in at least three areas: economics, society, and ecosystems,” says Gail Whiteman, assistant professor in business society management at the Rotterdam School of Management at Erasmus University in The Netherlands. “All three of those operate at both local and global levels and also interact with each other.”
Putting social responsibility at the center of strategic planning changes a corporation’s whole outlook, says Whiteman. “It reframes the issue of who is a stakeholder,” she says. “If you look at the corporation as the most important player, you’d say certain people or organizations are stakeholders of the company. If you look at the actual world— the earth and society—as the stakeholder, then you can see that corporations are one stakeholder out of many.”
Irresponsible corporate management contributes to the degradation of the global environment, as well as a disruption of rural societies, say experts. But that’s not the only problem. Capitalism, which fuels much of the world’s economy, fails to include about two-thirds of the world’s population. Disenfranchised and angry segments of emerging markets turn to antiglobalization demonstrations, which are most visible in acts of terrorism and incidents of urban rage. Business practices that include the poor and do not threaten alternate cultures stand a better chance of long-term success.
“Corporate social responsibility is a critical ingredient of a world that has globalized around economics, the environment, society, and culture,” says Nigel Roome, chair in sustainable enterprise and transformation at Erasmus. “What we are seeing is a raging debate between those who seek their identity through consumption and those who perceive identity through forms of fundamental religious belief. Violent incidents will emerge because people are violent when they don’t think they belong to a system. How do you respond to that? Do you say, ‘That’s a wake-up call to the fact that my system isn’t making everybody happy’?”
Taken altogether, doing business in a volatile world can be a daunting prospect for multinational corporations. They have to realize that social responsibility “affects everything they do today and will be one of the primary drivers of future strategy,” says Stuart Hart, professor of management and director of the Center for Sustainable Enterprise at the Kenan-Flagler Business School, University of North Carolina at Chapel Hill. “We take the view that issues around global environment and social concerns probably will become the most important driving forces for business in the coming decade or so.”
Fueling the Demand
While the movement toward social responsibility has gathered more momentum in recent years, to some extent, it was always present, says Whiteman. “Often, the idea of corporate responsibility grows out of philanthropy,” she says. “Corporate responsibility also is a response to pressure from consumers, nongovernmental organizations, and international agencies like the United Nations or the World Bank.”
In more recent years, corporations have reacted to environmental pressures. “Because of the nature of the business they’re in, a whole range of companies have to deal with sustainability issues,” says David Wheeler, Erivan K. Haub professor in business and sustainability at the Schulich School of Business, York University, Toronto. “In certain sectors of business— natural resources, chemicals, almost anything having a significant impact on the natural environment— most leading companies are interested in the issue.”
Another key factor may be that the demographic of the world market is changing. As the consumer base in existing markets becomes saturated, companies look for emerging markets. “Because it requires a different model to do business in these extremely poor environments, you find people thinking about more inclusive models of capitalism,” says James H. Johnson, director of the Urban Investment Strategies Center at the Kenan Institute, also at Kenan-Flagler. “Inequality is bad for business. Doing something to narrow the gap is a form of enlightened self-interest. It enhances market opportunities. It creates the next generation of consumers.”
All of this is leading to a slow revolution in business schools. “There is a sea change in the business school clientele. It has become more international, and more racially and ethnically diverse,” says Johnson. “More students are coming from communities and contexts that have enormous social and economic problems, and they have a desire to gain serious business skills and go back into those communities and make life better. They’re asking for a different kind of business education, and they’re demanding that we respond.”
It’s crucial that the next generation of CEOs be educated on these issues, says Roome. “The leadership skills needed in the next 30 years will be fundamentally different from those of the last 30. Leaders are people who perceive what others don’t see and start shaping responses in ways that organizations can cope with. I tell my students, if they want to be leaders rather than occupational analysts, they need to think about the context of business, the way it’s changing, and the implications that has for the nature of capital and capital use.”
The Business School Approach
Even though the concept of social responsibility is not new, it has only recently become part of the business school curriculum. Schools that do offer such courses often bundle them with business ethics courses, and overview courses are still optional. “The idea of greening business schools and MBA programs is an important one, but we’re not there yet,” Whiteman says.
UNC-Chapel Hill is one of the acknowledged leaders in sustainable enterprise, and Hart joined the faculty there in 1998 in part because of all the activity at the school. “A lot of pieces hadn’t really been pulled together in a persuasive way,” Hart says. “By combining the environmental and social pieces under the umbrella of sustainable enterprise, we broke down a lot of barriers. Typically there are factions of MBA students, some interested in minority enterprise, some in social justice, some in poverty alleviation. Others are greenie types. We brought all these agendas together and created a synergistic way of looking at the field.” It’s a popular field of study. Recently, one of the required classes for the sustainable enterprise concentration brought in more than half of the school’s second-year students.
The schools that offer sustainable enterprise teach individual courses on the topic, have students research socially responsible companies, and set up practicums and internships that expose students to real-world companies. But sometimes the schools also take more unconventional approaches. For instance, Whiteman encourages students to develop their own set of beliefs through journaling and other methods of self-discovery. More practically, she brings in speakers who can discuss “the impact of transnational corporations on local indigenous people. For instance, you would rarely have native people come into a business class—but I say, why not? Let them tell their story about the impact of the students’ future actions.”
She also wants to take students outside, so that when they’re talking about environmental issues, they’re surrounded by nature. She tells a story about a manufacturing plant whose workers made sure to keep their cars away from vents that would spew out unpleasant particles. “But they never asked, ‘What are these particles doing to the environment?’ They just worried about their cars. The point is, if you could get managers to go outside, they would begin to interact physically with the results of their own decisions. It’s important that we shift students from seeing the natural environment as an abstract concept to seeing it as a place where they can make business decisions.”
A Growing Field
While only a few schools currently offer courses on social responsibility and sustainable enterprise, advocates predict their numbers will grow. “It’s really a diffusion process that is in the early adoption stage,” Johnson says. “But there’s no question in my mind—after 9/11, and given global disparities and the antiglobalization movement—that we’re going to see more and more attention devoted to this topic.”
“Sustainable enterprise is a lot like globalization was ten or 15 years ago,” says Hart. “In the early stages, business schools handled it by hiring a few faculty who were supposedly specialists, and they had one separate class on global enterprise. In time it became integrated. And I think that’s what will happen here. There’s really no other way.”
“In all candor, it’s a bit of a balancing act, because the MBA curriculum is already pretty jam-packed,” says William Rosen zweig, director of the Socially Responsible Business Leadership Initiative at the Haas School of Business at the University of California in Berkeley. “Our ultimate hope is that the program will start to infuse the thinking of the whole MBA education. It won’t be a separate thing. When you take organizational behavior, you’ll get a case that’s relevant to this topic.”
Several things must happen before corporate social responsibility becomes mainstream. First, there must be a market interest, says Timothy L. Fort, associate professor of business law and business ethics, University of Michigan Business School in Ann Arbor. “Traditionally in business schools, there haven’t been a lot of positions for junior-level faculty to be ethicists or corporate responsibility specialists. But about 20 years ago, a number of major donors said, ‘This is really important. I want to establish a chair and find somebody to teach these courses.’ There’s a momentum and an infrastructure out there now, so more junior-level people will be hired and more conferences will be held.”
This new faculty will need to have a range of skills. Corporate social responsibility “is not about a core functional area such as finance, accounting, and operations,” says Johnson. “It has to be embedded in sociology and culture. At our school, the faculty are interested in business, but they also have training in sociology, economic geography, and cultural anthropology. Business schools will need to hire people who have diverse skill sets in business school or who can build the necessary bridges from the business school to the social sciences. And they will need to create a curriculum that allows students to take courses within the business school and in other schools. We have a lot of students getting dual degrees in business and social work, or business and public health, or business and law.”
The task of hiring specialized faculty might not be as formidable as it first sounds. “The production of faculty that’s interested in this is growing,” says Hart. “Here in the strategy area, I have three Ph.D. students with sustainable enterprise as their focus. The number of young faculty needs to increase by a factor of ten with this as an interest area.”
Schools that may initially resist adding social responsibility courses to their curricula will be motivated to do so in response to world events such as the Enron collapse and the increase in terrorism, says Fort. “I’m optimistic that in 20 years you’ll see increasing attention devoted to these issues in business school,” he says.
“One of the best things about business is that it’s filled with people who know how to do things. They’re not just thinkers and talkers.”—Gail Whiteman, Rotterdam School of Management, Erasmus University, The Netherlands.
The schools who already offer a concentration in social enterprise find, not surprisingly, that their student bodies are highly diverse. Many students are from developing countries; though they may have elite backgrounds, they are concerned about environmental pollution. “These people are also annoyed at the Western approach to business. They don’t think it’s necessarily the way to go,” says Whiteman.
Adds Johnson, “They’re typically people who have a very strong commitment to the community and think about making their nation more competitive. We have international students coming from emerging markets and, from this country, people of color from inner city or rural communities where inequalities and disparities are real.”
Students attracted to the sustainable enterprise program at UNC are high-quality applicants, Hart stresses. “They have higher GPAs and test scores. More important, they have more and better work experience. And even more important, they’re intellectually motivated and socially committed people with a personal sense of mission. Their primary motivation is not to raise their salaries by $50,000 and play a lot of golf.”
Fort says students come into Michigan’s classes with a variety of perspectives. Some want to learn to run nonprofits in a savvy way; others want to turn corporations into engines for social change. “The third group consists of people who are curious and a little skeptical,” he says. “The fourth group wants to come in and show us all that this is a bunch of nonsense. The fifth group has heard that it’s a fun course, and they want to see what the hullabaloo is all about. I will say that people go out of the class with a conviction that this new emphasis is important.”
While some students already have a defined world view, others are waiting to be inspired, says Rosenzweig. “It’s something of a catalytic process when they get exposed to people who are integrating their own values into their livelihood. They say, ‘I want to be working in a way that’s consistent and harmonious with my values.’”
Will the lessons they’ve learned stick with them once they’re back in the business world? Fort simply hopes to sow the seeds of further thought. “Some students will act on these ideas immediately,” he says. “Others will file them away; a few will ignore them completely. I’m not sure a course on these topics will prevent an Enron, but I think it will make people who take these classes a lot less likely to end up in these situations.”
A Promising Future
Those who specialize in corporate social responsibility are optimistic about its future, as they see both companies and business schools begin to embrace the concept. But for the concept to really catch on, Johnson says, “you’re going to need two or three big-time successes. The diffusion curve will begin to accelerate and people will realize, ‘These markets are huge, but we can’t do business as usual while we’re there.’”
Rosenzweig thinks we’re on the brink of nothing less than “a profound transformation of what the American way of life looks like. I think a lot of this transformation is going to come out of the creation of new companies. Large existing companies are going to be much harder to change.
“The hottest areas in this niche right now are sustainable energy and clean tech,” he adds. “There’s also a lot of interest in water supply, food security, and food supply. If you’re an organic food company, you’re going to make all your business practices harmonious with the sustainable world. The emergence of the markets will converge with the entrepreneurs who want to fill these niches, and then venture capitalists will come and say, ‘We choose to participate in this kind of venture. We want to start measuring not just the financial returns on our investment, but the social impact as well.’”
While there is much left to be done—and many social and environmental messes to clean up—Whiteman thinks business leaders are up to the task. “One of the best things about business is that it’s filled with people who know how to do things,” she says. “They’re not just thinkers and talkers. Perhaps the most innovative minds will be the ones who will be turned on to this the most.”
The question remains whether other academic and business leaders will take up the banner of corporate social responsibility. Given the inexorability of globalization, the fact that prominent corporations are already engaged in sustainable enterprise, and the very real environmental concerns facing countries all over the world, it seems inevitable that business schools will begin to pay more attention to this vital issue. How quickly and energetically they integrate the topic into their courses is yet to be seen—but the market may help determine the pace.