Toward Sustainable Change

To teach students how to operate in today’s volatile world, business schools must integrate social innovation and sustainability into the core curriculum.
Toward Sustainable Change

Today’s business schools are under the microscope of public opinion. Many critics, including business schools’ own faculty, are calling for reform. A generation from now, will we be able to look back and say we were successful at making real changes? From my perspective, this is the acid test: In a world that is crying out for innovative and principled leaders, can they and will they come from business?

It is obvious to even the most casual observer that trust in business is plunging to new lows just when markets are being radically reshaped by a variety of forces: the economic crisis, global tensions, energy and healthcare costs, water scarcity, carbon pricing, the growing dominance of China, growth in poverty, green consumers, and NGO watchdogs empowered by the Internet. To deal with these realities, the best leaders will have a global mindset and great facility with nonmarket forces. They will be able to manage to multiple objectives. They will exercise judgment, manage risks, and take a long-term view. Are business schools up to the task of producing such leaders?

At the Aspen Institute Center for Business Education (Aspen CBE), we believe business schools only will be able to prepare students for the transformed market if they make three mission-critical investments in knowledge and practice. These investments will require them to:
•Teach a business model that promotes long-term sustainable growth rather than the shareholder-centric model that externalizes costs and discounts the future.
•Research and teach social innovation within business.
•Teach graduates the skills that will allow them to give voice to their values once they’re in the business environment.

Business schools can be a great source of innovative thinking about capitalism and the future. They can share best practices about how business can contribute to a global sustainable society, and they can act as proving grounds for managers who need to practice putting their values to work. Business education may have a long way to go, but there is good news as well. The data suggests that the pace of change is picking up and many schools now have a story to tell. Many more are on the path to innovation—which they are more likely to achieve as they make these three critical investments.

A New Model

The first investment will require the most fundamental change: teaching a business model that emphasizes sustainability and shared value over shareholder primacy. While sustainable development means different things to different people, the most frequently quoted definition is found in “Our Common Future,” a 1987 report generated by the United Nations’ Brundtland Commission. It defines sustainable development as development that meets the needs of the present without compromising the ability of future generations to meet their own needs.

This simple concept is hard to argue with, and yet it is very much in conflict with what business schools teach about financial models and how corporations operate when practicing quarter-to-quarter management. Rethinking the simplistic, short-term paradigm of shareholder value and profit maximization may be the single biggest challenge we face in both business and education, and it is worthy of our best academic talent. The greatest benefit to emerge from our current financial crisis may be the clamor for a better business model.

Business schools can be leaders in developing more sustainable business models. They can teach students that the freedom to operate requires considering the constituents all along the supply chain who are most affected by business decisions—employees, host communities, and their natural resources. They also can present case studies that show how society’s demand for social responsibility affects growth. For instance, students can learn how a global campaign by labor and environmental activists influenced WalMart’s decision to move aggressively on alternative energy and other green innovations.

WalMart is joined by many other Fortune 100, 500, and 1,000 companies in their pursuit of “greener” business pastures. If that’s the case, shouldn’t business managers follow a sustainability model that allows them to lead rather than react to their changing circumstances?

An Emphasis on Innovation

The second essential change business schools must undertake is to spotlight genuine business-powered social innovation that tackles everything from poverty to climate change. Businesspeople are glass-half-full types who see a crisis as an opportunity when the rest of us are stuck in the quicksand of bad news. Today, social innovators are concentrating their attention on developing clean fuels and creating markets at the base of the pyramid. Managers at all kinds of firms can learn to work from within to invest in socially beneficial business opportunities that also promote top-line and bottom-line growth.

Business schools do a credible job of introducing students to the concepts of social entrepreneurship, or how to create new enterprises defined by their social mission. But they’re not as good at teaching students social intrapreneurship—that is, showing them that companies can pursue multiple objectives, including both profit and social benefit. Often students with high ideals get the message that they need to join nonprofits or start their own companies if they want to tackle the big problems that plague us. Not only is that a limited view, it sidelines the most important engine we have for solving the world’s problems: profit-seeking, globe-spanning, talent-rich business.

In a recent article for strategy + business, journalist Marjorie Kelly examines companies that have achieved what she calls “mission control,” an ability to balance profit with important societal benefits. For example, Interface, a $1 billion carpet company, has promised to eliminate negative environmental impact by 2020. Google strictly separates advertising from its search results as one manifestation of its unofficial corporate motto, “don’t be evil.” Tiffany scrubs its supply chain to protect areas of ecological or cultural value. Pik n Pay, a $6 billion South African company, trains entrepreneurs to become suppliers in an effort to overcome inequalities that are a legacy of apartheid. At the same time, it invests in the long-term prosperity of the South African market.

Rethinking the simplistic, short-term paradigm of shareholder value and profit maximization may be the single biggest challenge we face.

These companies have followed a more complex set of metrics and decision-making approaches than the companies we are reading about in today’s headlines. They have interesting stories to tell our students about leadership and values—stories that will help our students be less cynical about what is possible.

Business schools can use compelling examples of social innovation across the core curriculum, from marketing to general management to finance. Business faculty can use research and teaching to help build an understanding of the potential for better societal outcomes. In particular, they can expand knowledge about what a company needs for long-term value creation, focusing on communications systems, metrics, compensation, and incentives. All these pieces must be in place for business schools to successfully teach social innovation.

An Essential Skill

Finally, it’s critical that business schools offer students the chance to practice raising their voices when they see business behaviors that conflict with their values or the firm’s own stated principles. Such work can be done in an ethics classroom, but for maximum effect, it should be practiced in courses across the core.

What we learned from Enron and the current market crisis is that mistakes weren’t fueled by lack of knowledge, but by greed, short-term thinking, and pay packages aligned with immediate results. Plenty of individuals could have helped avert disaster if they’d had the courage—and competence—to speak up about the bad behavior they were witnessing.

The Giving Voice to Values curriculum was conceived and authored by Mary Gentile and launched by Aspen CBE and Yale University’s School of Management. GVV treats the practice of “giving voice” like any other business skill that must be mastered. The program, which was profiled in the July/August 2008 issue of BizEd, is being piloted in more than 60 business schools in classes ranging from corporate governance to ethics to leadership.

Students in the GVV program recall and analyze times in the past when they raised their voices. They script responses to uncomfortable situations they could encounter in their next jobs. They learn how to find peers, build coalitions for change, and craft the most effective arguments. The GVV program offers them essential skills in a world that requires sound judgment to deal with complicated tradeoffs. No amount of regulation will replace the need for internal advocates with the moral compasses and skill sets to speak up before it’s too late.

Change Is Coming

At the Aspen CBE, we’ve seen hopeful signs that schools are making steady progress on these three mission-critical investments in knowledge and understanding. In the data recently collected for the 2009 version of “Beyond Grey Pinstripes,” our biennial survey of accredited business schools around the globe, we’ve noted steady growth in dedicated courses on sustainability, social enterprise, and stakeholder engagement. We’ve also identified curriculum change efforts in both global brands and regional institutions. At our Web site for teaching faculty, www.CasePlace.org, we’ve seen a twofold increase in demand for content in the past year.

Yet institutional change is always uneven and often maddeningly slow—the more so because it’s not clear who has the power to demand it. Students? Faculty? Recruiters? Donors? The media?

It’s obvious that if students have any ability to influence the curriculum, values and sustainability will quickly become part of the core. Aspen’s most recent survey of student attitudes reveals a student population hungry for practical knowledge about creating sustainable value through business in ways that contribute to the environment and the community. In that survey, 33 percent of respondents said they believe that a primary responsibility of a company is “creating value for the communities in which it operates.” Twenty-six percent were interested in finding work that would allow them to make a contribution to society.

Other stakeholders don’t seem so eager for change. Some recruiters say they want students who are broad thinkers, but frequently that claim seems to be “spin” from the parent company, not the reality that governs the interview process. And with important exceptions, donors aren’t leading the parade, either. They will endow professorships and bestow naming gifts to their alma maters even if their schools are not in the forefront of sustainability.

The mainstream media sometimes adds to the confusion, particularly with rankings mechanisms that send contradictory messages. In addition, when reporters from BusinessWeek or NPR call us to ask about curricular innovation in sustainability, they want to know what’s happening at Harvard, not the University of Denver or Washington State at Vancouver or other schools where innovation is happening in unexpected ways. Nor will many business school deans choose to benchmark against these schools.

Nonetheless, progressive deans and pioneering faculty continue to advocate for sustainability to be integrated into the business school curriculum, because they believe this is the most important challenge of our day. It is impossible to imagine a sustainable future if business sits on the sidelines, and business education is too important and too influential to ignore. In the contemporary mantra, where sustainability is concerned, business education is too big to fail.

What Can Be Done

At the Aspen Institute, one of our goals is to create healthy debate about what constitutes a “cutting-edge” school and what kind of change is necessary throughout the system. Take, for example, the views of Larry Zicklin, the former head of Neuberger Berman whose name is on Baruch College’s School of Business. Zicklin has strong opinions about the importance of “soft” skills like judgment and critical thinking, and he says we can’t surrender individual judgment simply because a situation is complex.

“Those of us in the education profession have a responsibility to ensure that graduates understand that there is a human factor in business, and judgment and experience should trump models,” he says. “The system never was and should never be about pure mechanics.”

It seems that judgment was in short supply during the recent economic disasters. When Enron collapsed, many people believed its problems could be blamed on “a few bad apples.” Today’s crisis has focused the lens on the entire system. At Aspen CBE, we certainly don’t think business schools are wholly at fault for the world’s current financial woes. However, we do believe they bear some responsibility for teaching the narrow focus on short-term financial metrics that flows from the dominant theory of shareholder value. That kind of thinking led to the exaggerated risk-taking we are paying for now.

But while this is a time of crisis, it is also a time of great opportunity for business schools, as individuals throughout the system ask questions about formulating a better model for long-term success. Business schools not only can influence the next generation of business managers, they enjoy remarkable access to the current generation, particularly through alumni seeking guidance and points of connection in a complex world.

So what’s next? We have two suggestions for leveraging this unique access to business decision makers. The first is to deliver graduates regular and real-time opportunities to refresh their professional education. As graduates confront complex tradeoffs in expanding global businesses, they will need lifelong learning to grapple with evolving issues. Tom Piper, author of Can Ethics be Taught?, once asked how much of the ethics curriculum belongs in the MBA program, and how much in a continuing education program ten years out. The question has even more resonance today—and the power of the Web offers business schools an easy way to connect with alumni.

Our second suggestion revolves around viewing business as a profession, one that includes the notions of service, common knowledge, and common values. Harvard professors Rakesh Khurana and Nitin Nohria have proposed a written code for business, much like the codes that exist for doctors and lawyers. With these scholars and others—including Ángel Cabrera, dean of the Thunderbird School of Global Management, which already has a code in place for its graduates—we have begun to explore the idea of a “Hippocratic oath” for business. We think the time is right for a moral touchstone, a credo that helps managers sustain their commitment to practicing business as if the wider world matters.

Much to Do

Despite encouraging signs of progress, there is plenty of work ahead for business schools. At Aspen, we will continue to shine a spotlight on pioneering faculty and institutions so we can help schools prepare students for a world in which the soft sciences matter. We will continue to encourage fundamental questions: What is the purpose of business? How does it define success and over what time frame? Who is most affected by a decision or an investment, and who needs to be consulted to make sure that decision will stand the test of time?

We have arrived at a remarkable moment, a time when opportunity is ripe and potential is boundless. If schools build the tenets of sustainability into their curricula, their efforts will bear fruit in future generations of business leaders who will be worthy of society’s high esteem.

Judith Samuelson is the executive director of the Business and Society Program at The Aspen Institute, home of the Center for Business Education, which is headquartered in New York City.