In a recent article ‘The Invisible Hand Won’t Solve the Climate Crisis. Capitalism Must Evolve‘, US professor Andrew J. Hoffman well articulates the perils of global unsustainability and the need to redefine the role of corporation and market. The Economist magazine also warns us against the dire consequence of not addressing the sustainability and climate change related issues in its August month’s cover story ‘In the line of fire – losing the war against climate change’. Both the articles represent a view that is increasingly gaining strength – a view that suggests that despite all the tall talks over sustainable development, we may be losing the war against climate change, as we fail to approach sustainability-related issues in the right manner. The reason is that all the standards – in global trade, in bilateral negotiations, industrial and investment policies and the framework for private and inter-governmental bodies – that we have been setting all the while, have been production oriented, and not consumer-centric.
Let me explain
Ever since the United Nations Development Programme (UNDP) set 17 sustainable development goals (SDGs) in 2015 at a meeting in Paris, all economic and developmental activities post-2015 are supposed to have the sustainability agenda, with an aim to protect all living creatures inclusive of flora and fauna, at its core. A mechanism to tackle climate change issues are also supposed to be in-built. However, in practice, there is an imbalance in the process of new standards (public policy measures) that are, in principle, guided by the SDGs. The non-mandatory standards set by the United Nations Forum for Sustainable Standards (UNFSS) and the international standards set by the International Standards Organisation (ISO) are both imperfect in this regard.
The UNFSS is a neutral, independent and credible forum that supports pro-poor, sustainable development objectives. The voluntary standards it set is expected to help the developing countries access the global markets, under the assumption that consumer choices in developed markets will tilt towards products and services that take care of the economic, social and environmental impacts of production and consumption. The big question that remains, though, is whether consumer choices are determined by such noble thoughts or simply the market power. The 12thGoal of the SDG – to chart a balance between consumption and production – is perhaps an attempt to bridge the gap.
Therefore, it can be argued that private standards created by the UNFSS have consumers’ choice at the centre and it has not addressed the objectives under the Goal 12 of the SDG. By doing so, the UNFSS has maintained the existing level of unsustainable consumption and in the process is helping a select group of countries to dictate the global production activities.
The case of ISO standards is even more interesting. The framing of these consensus-based market-relevant standards is completely driven by the private sector, especially after 1995, the year which saw 25 transnational corporations registering total sales that add up to more than the gross domestic product (GDP) or wealth of 154 countries across the world. The influence of the private sector is so evident that sustainable consumption is not an idea that finds prominence even in ISO’s SDG based standard called ISO 26000.
Many other activities aggravate the imbalance between consumption and production.
For instance, the standards notified by the World Trade Organisation (WTO) members are also framed after extensive consultations with the private sector. According to an internal analysis done by the Centre for WTO Studies of the Indian Institute of Foreign Trade (IIFT), WTO’s present classification suggests that technical barriers to trade (TBT) notifications by the developing countries are higher when compared to the developed and the least developed countries (LDCs). The situation is diametrically opposite when income or industry-based classifications, provided by the World Bank and United Nations Industrial Development Organisation (UNIDO) respectively, are considered. The higher income countries and countries with high GDP shares of the manufacturing sector are dominant users of TBT standards. Also, the developed countries TBT notifications have a higher weight for the private sector, which regulates production activities. The trade policymaking in the industrial countries thus has marked a shift in the direction that favours more and more public policy measures as a trade policy instrument. This has led to a proliferation of standards while the tariffs continued to lose its relevance as a barrier to international trade. The policy shift facilitated the creation of non-tariff measures in the areas of namely environment (sustainability and climate change), labour and others technical standards.
What needs to be done?
Of the 17 SDGs, Goal 12, which talks about “Responsible consumption and production”, attempts to address sustainability issues holistically by having both consumption and production related standards/controls. It states, “Achieving economic growth and sustainable development requires that we urgently reduce our ecological footprint by changing the way we produce and consume goods and resources”. In other words, for sustainable development, we need to keep a check on three fundamental pillars: social progress, economic development, environment, and climate. Therefore, it will become essential for economic and commercial activity and practices to be compliant with sustainability standards based on production and consumption. Since the word sustainability is expressed in three different ways: eco labels, messages and claims about a product or process, the standards are to be developed with the need to have sustainability incorporated in all such activities of procurement, production and trading.
Of the 500 plus private standards that we have today, almost all are production-regulating standards.
There are no standards or capping the consumption of various goods, except for a few standards regulating the marine fish stocks for intermediate products and as labels, marks and certificates for consumer’s information. A study conducted by the Food and Agricultural Organisation (FAO) of the United Nations (UN) is a pointer to the inadequacy of the consumption-based standard as it tells us about the quantum of waste generated by the big multinational food retail stores. It says that the per capita waste by consumers in Europe and North America is between 95-115 kg compared to 6-11 kg of those in Sub-Saharan Africa, South and South-Eastern Asia.
There is a gamut of products/activities that are unsustainable and would need direct consumption-based standards similar to those production-based standards. Since creating consumption based standards would be infringing on personal choices and the present market structure, we have to make a beginning with most environmentally sensitive products. These would have to be identified by a joint effort of intra-governmental bodies, and the consumption capped at the global level. An earnest and sincere effort should be put in place to develop new standards based on regulation of consumption, particularly for the already identified environmentally sensitive products. Similarly, a science-based assessment should be made for new products, which are not identified under the market-led international system.
The private sector of developed countries drives the standards that drive investments activities of developing countries using the new frameworks proposed by inter-governmental bodies (like the IMF). There is a lesser role for the domestic agents of production in the overall development agenda. The development financing by various the international bodies (WB, OECD, IFS etc.) which targets the sustainable development agenda and climate action are not adequately addressed – it needs to be reviewed, and the process to be based on science and empirical evidence. Therefore, the new framework on developmental financing being rolled out by the World Bank, implemented from August 1 2018, lacks a balanced approach to sustainability standards.
India and the SDGs
India has been part of the process of both MDGs and SDGs and in the process conceded considerable policy spaces. It now faces a formidable challenge of re-orientation its policies to accommodate the present understanding which is skewed and based on production based standards pushed by the private players, market and supported by global investors. In this context of investment and manufacturing policies, it is important to recognise some of the formidable challenges arising from the systemic issues under the formal systems (like the WTO) and present imbalances regarding private sustainability standards.
India should take this as a clue for its re-industrialisation and built upon its low shares in global trade share as an opportunity, thus for pushing for more sustainability-led industrialisation models. Its large market will always support such initiatives. Supported by the genuinely sustainable technical standards for products based on the following parameters, it would encourage local production and consumption involving people at all the agents of the economy. In the process, it would help in building a stronger nation, which could withstand any crisis and sustain and improves the quality of life for everyone.
(The writer is a professor, Centre for WTO Studies, CRIT, IIFT, New Delhi)
The University of Michigan’s Erb Institute second edition of ICYMI!
ICYMI! is a business-focused publication sharing the work of the Erb Institute. In this publication, we share how our research, teaching and engagement provide ideas and frameworks that help businesses move forward in meeting their sustainability challenges.
Of special note, we are proud to share the successful launch of the Dow Academy, a partnership among Dow, the Erb Institute and the Ross Business School’s Executive Education Program. Unlike most exec-ed training, the program has implementation baked in.
We’re also sharing two new landscape assessment tools: Corporate Environmental Responsibility and Social Sustainability (pg. 35). The institute continues to provide step-by-step approaches that businesses can use to address sustainability at the company level.
Last, please do share your comments! We are interested in knowing what you like and what you might want to hear more about. Look for our next publication in early spring 2019.
The expectations of a Post-Doctoral Fellow in the Erb Institute include the following:
RESEARCH. Post-Doctoral Fellows are expected to contribute to the research agenda of the Institute.
- Produce Scholarly Research. The Post-Doctoral Fellow will submit for publication and present at external research conferences, research that both furthers the candidate’s scholarly interests, and opens new avenues for inquiry through collaboration with Erb Institute faculty, affiliates, and the broader University of Michigan community.
- Institute Report. Before the end of the two-year fellowship, the Post-Doctoral Fellow will be expected to write at least one Institute Report (1,500 words) that summarizes the work they have done while at the University of Michigan.
- Research Seminar. The Post-Doctoral Fellow will be expected to give at least one research seminar at the University of Michigan, preferably in the Erb Institute Colloquium series.
- Occasional Papers and Posts. The Erb Institute emphasizes research with an applied component. To this end, the Post-Doctoral Fellow is expected to produce an occasional plain-language output about their research or interests, which is aimed at a non-academic audience.
SERVICE. Post-Doctoral Fellows are expected to provide intellectual support to the research environment of the Institute.
- Erb Institute Colloquium Brownbag. Post-Doctoral Fellows have primary responsibility for organizing the Erb Institute Colloquium series. Each year, the Colloquium brings roughly 4 speakers (approximately 2 internal and 2 external). Post-Doctoral Fellows, in consultation with Erb Institute faculty, will select speakers, invite them to campus and organize the year’s schedule. Speakers should be a mix of faculty affiliates, external speakers and speakers that fit the contextual area for which the Post-Doctoral Fellow was selected. (The Institute will provide support for logistics; the Post-Doctoral Fellow will not be expected to arrange travel and lodging.)
- Mentoring/Advising of Masters Students. It is highly recommended that the Post-Doctoral Fellows advise at least one SEAS masters project on a topic that aligns with their research interests.
- Mentoring and engagement with the Erb Institute PhD community. This includes participating in, and if necessary, organizing monthly brownbag lunches with doctoral students and faculty.
- Erb Academic Conferences. Where practical, Post-Doctoral Fellows may assist in the development, organization and summary of research conferences on campus.
CITIZENSHIP. Post-Doctoral Fellow are expected to participate in the community life of the Institute. This includes attendance at regular Institute events.
- Attend EAB meetings. Post-Doctoral Fellow are expected to attend the bi-annual Erb External Advisory Board meetings and participate in discussions relating to the focus and direction of the Institute.
- Attend Erb Academic Seminars and Conferences. Post-Doctoral Fellows are expected to attend the Colloquium as well as Conferences that are organized by the Institute.
- Attend Institute Community events. Post-Doctoral Fellow are expected to attend Institute community events (for example, beginning of the year, end of year, and holiday parties).
How did sustainability become a career for you?
When I was going into undergrad, I wanted to do something in the sciences and had always had a strong affinity for the environment. I can remember back to my elementary school days when we had a “cans for critters” campaign, where we collected soda cans, and all the money from the recycling went to the San Diego Zoo.
When I saw that the University of Michigan had such a strong program—at the undergraduate and graduate level—I jumped at the opportunity to dive into something I loved.
Prior to working at Kellogg, I was working at the USDA doing environmental law compliance, which was a great learning experience and a different approach to sustainability. However, an opportunity at Kellogg provided the right opening to get back to my business sustainability roots. It wasn’t too long after joining the company that I was able to support Kellogg as we established our second generation of sustainability commitments—our 2020 Sustainability Commitments. The work continues to evolve, which is a lot of fun but is also one of the main challenges of working in the corporate sustainability space: What is material to our business is always changing. Stakeholder interests are evolving as
How do you think about the scope of your work at Kellogg?
The team focuses on two primary areas within the sustainability spectrum: responsible sourcing (working with ingredient suppliers to ensure social and environmental goals are tracking with our sustainability commitments) and conservation of natural resources within our own operations (reductions in energy and water use, as well as reducing GHG emissions in manufacturing). In addition, we reach out externally to understand the scientific and stakeholder landscape by partnering with nonprofit organizations and industry groups. We are also seeing increasing interest from our own brand and sales teams to respond to the needs of people who love our foods and care about where our foods come from, how they are made and how they impact communities and the planet.
The theme of the Innovation Forum conference this year focuses on measuring sustainability. Why does this matter, and which metrics matter most when it comes to better understanding sustainability impacts, both social and environmental, at Kellogg?
There is a saying: “You can’t improve what you can’t measure.” Quantifying corporate responsibility is important for a few reasons:
- We have a lot of advocates who want to do the right thing, but being able to provide guidance on what is most material for the business—how we measure the impact of what we are doing—helps people understand their individual contribution to meeting our goals.
- External stakeholders, including investors, nonprofit organizations, advocates, retailers, customers and consumers, often ask, “How do we compare the work you are doing to other companies, and how do we know it’s driving the right outcomes?” Continual assessment is imperative to determine whether we are measuring the right things to drive the right outcomes.
In a corporate setting and for our NGO partners, we are all held accountable to our boards. In the end, is what we are doing consistent with our values, reducing risk and driving growth?
Where has Kellogg been successful in measuring sustainability?
Measuring our progress is critically important to understand where we are and where we need to go. Here are a couple of high-profile initiatives:
- Science-based targets: We were one of the first companies to set science-based targets for our direct and indirect supplier partners. We partnered with nonprofits to understand how to build those targets out and are now actively working on them. Engaging a global network of suppliers on tracking emissions data or water and energy use is a huge undertaking. We want to both encourage reporting and be a resource; we often act as coaches to suppliers and track progress at the regional level to report out globally.
- Farmer engagement: We have engaged growers of our key ingredients through our “Breakfast for Better Days™” global signature cause program. As part of our commitment on food security, we have committed to engage 500,000 farmers in programs that are starting climate-smart agriculture initiatives. Since 2014, we have engaged over 320,000 growers. This progress is a great example of what an engagement metric can look like, and it has driven positive outcomes in yield improvement and income.
What issues does Kellogg face across the value chain, from the farm level to the consumer, in addressing materiality? Where do you wish you had better information or control of measurability?
We are in an influencer role. There are some things that we are able to impact because we have a good relationship with our direct suppliers—and for us, a supplier is more like a flour mill rather than the farmer. How do we reach the farmers that are at least a couple steps removed from us within the supply chain? We need to build trust with them, in order to get accurate information that will allow us to identify trends and areas of opportunity. We want to address challenges deep in the supply chain, from a social and environmental perspective, so being effective when we are further removed from the source is the biggest challenge we face.
Thinking about the Innovation Forum, how does innovation help drive the conversation forward? What are some new opportunities to better "innovate for sustainability"?
One area of innovation that has been important for us is how we build programs. As we think about new ways of working, we have shifted from thinking about supply chain as linear, exploring where we can be more integrated to simplify the process.
Similarly, with measurement and evaluation, we continue to evolve how we work with our partners to ensure we are asking the right questions to enhance our programs. We also rely heavily on data. For example, with food security, we’ve started asking questions that result in more innovative and thoughtful program design. There is a real step-change that occurs when innovation can flow throughout the company—not just in our department, but cross-functionally with procurement, R&D, etc.
About the Author
Monika Johnson is a 2019 MS/MBA student at the Erb Institute focusing her degrees on the food and agriculture industry. She did her SEAS Master’s Project with Kellogg’s sustainable sugarcane sourcing initiatives.
Innovation Forum is partnering with the Erb Institute in Detroit Oct. 2-3rd, to talk about the latest approaches to materiality, and how to establish a robust business case in 2018. Want to be a part of the conversation? Register here!
As a preview to the conversation, Innovation Forum held a webinar (see link below) to talk about several of things that companies should be thinking about with respect to materiality. Erb Managing Director, Terry Nelidov explains how materiality should be used to prioritize issues that important both to a companies stakeholders, but also to the success of the business.
Terry also highlights the Erb Institute’s new, simple and easy-to-use sustainability toolboxes which can be used to help companies figure out what matters most. 21:12, 43:00 and 51:15
Innovation Forum Webinar - Materiality
There are many factors that have lead to the increased awareness of environmental, social and governance – or ESG – issues.
This has led to greater focus on the principle of materiality to distinguish the information that is most important for key stakeholders. But, for companies, defining when and why each matter becomes material is a real challenge.
In this webinar, our expert panel discuss: how to clear up any confusion over what is ‘material’; tips on how to design a materiality assessment that suits your business; and, then how to use information generated from these assessments to drive strategy more effectively.
Bill Hall, head of sustainability, Fiat Chrysler Automobiles
Amy Braun Senter, senior director, global sustainability, Kellogg Company
Terry Nelidov, managing director, The Erb Institute, University of Michigan
– Hosted by Ian Welsh
Reposted from the Stanford Social Innovation Review 9/4/2018
On July 13, 2005, WorldCom CEO Bernie Ebbers, who had been convicted of fraud and conspiracy four months earlier, was sentenced to a 25-year prison term. It was the largest accounting scandal in US history, until Bernie Madoff’s Ponzi scheme was uncovered in 2008. I remember Ebbers’ sentencing well, because I had just joined the faculty at the University of Michigan’s Ross School of Business and was struck by the fact that no one was talking about it. Ebbers was a man that would have been held up as a model of success for our students, building the second-largest long-distance phone company in the country. But now he was a disgrace.
It was not until the end of the day that the silence was finally broken. I walked onto an elevator and overheard a memorable conversation between two senior colleagues of mine: “What do you think of the Ebbers’ sentence?” one professor asked. “I think it’s ridiculous,” the colleague replied. “It’s not like he killed someone.”
This remarkable response signified to me the disconnect between the power that business executives possess and the accountability to which they are held. Maybe it wasn’t murder, but Ebbers had caused extraordinary harm to the company’s employees, customers, suppliers, buyers, and investors, as well as to the reputation of the business community in general. WorldCom’s stock lost 90 percent of its value in just days, dropping from 83 cents to 6 cents per share, and its Chapter 11 filing made it the largest bankruptcy in history. Despite my colleague’s response, legal experts deemed the sentence fair.
What does unethical and illegal behavior like that of Ebbers say for MBA education in the 21st century? How might we assure that future business leaders protect the public interest and not just their own profit?
One might argue that we should work harder to teach MBA students about the legal implications of corporate wrongdoing, but that only sets a worst-case baseline and does not inspire future business leaders to be their best; to achieve great things for their companies and for society while setting the standard for ethics and integrity. We could ask graduating MBAs to sign an oath—like a management Hippocratic Oath to do no harm—that commits them to “create value responsibly and ethically” for the greater good. But that would come late in the education process and with little preparation for what such an oath means. In truth, such an oath may mean little more than virtue signaling with no real accountability.
Without question, what we need to do is amend the MBA curriculum to teach students that they will possess awesome power as business leaders, and with that power comes great responsibility and an obligation to create benefit for all of society. We should expect the same values from business managers as we do from doctors and lawyers. This means amending the MBA’s attention to the basics of business management with an expanded focus on management as a vocation—one that moves away from the simple pursuit of a career for private personal gain toward a calling to serve society.
We face great challenges as a society today, from environmental problems like climate change, ocean acidification, and habitat destruction, to social problems like income inequality, unemployment, lack of a living wage, and poor access to affordable health care and education. Solutions to these challenges can only come from the market, the most powerful institution on earth, and from business, which is the most powerful entity within it. Though government is an important arbiter of the market, it is business that transcends national boundaries, possessing resources that exceed those of many nations. Business is responsible for producing the buildings that we live and work in, the food we eat, the clothes we wear, the automobiles we drive, and the energy that propels them.
This does not mean that only business can generate solutions, but with its unmatched powers of ideation, production, and distribution, business is best positioned to bring the change we need at the scale we need it. Without business, the solutions will remain elusive. And without visionary and service-oriented leaders, business will never even try to find them.
…with its unmatched powers of ideation, production, and distribution, business is best positioned to bring the change we need at the scale we need it.
Without business, the solutions will remain elusive. And without visionary and service-oriented leaders, business will never even try to find them.
7 Ways to Build the “Whole Manager”
The core thrust of my proposal to amend the MBA curriculum is not an appeal to corporate social responsibility or corporate sustainability. For many, these labels have become stale and merely relegate the challenge to the sidelines of a niche discipline. Instead, the MBA must reflect the new context in which business is and will increasingly become engaged. MBA education should therefore focus on developing the whole manager, one who both exerts a powerful influence on society and also is a member of the society that is shaped by his or her decisions. Taking on this renewed sense of responsibility will yield individuals who see new kinds of opportunities in domains that other managers may not. What we need to do is provide MBA students with the intellectual building blocks with which to use the power of business to find creative solutions to our emergent problems. Below I offer seven such blocks as a foundation upon which others may be built.
Pre-program guided discernment
The process of exploring one’s vocation requires reflection and discernment. Yet, MBA education is a whirlwind experience in which MBA students have no time to reflect at all. Classes, clubs, social activities, and the hunt for that all-important first summer internship, dominate their attention from the moment they arrive on campus. I have seen many students with no clear sense of their calling upon graduation exhibiting a weird ambivalence towards the sector of their first job—focusing instead on salary and career track, no matter the field. Sadly, most pursue jobs in consulting and finance for the simple fact that they offer the highest salaries. But some guided discernment at the beginning of the MBA program—expert-directed reflection guided by professional career counselors—will help to create more focused, balanced, and mature students who will be thoughtful about why they are pursuing this education and how they might choose to direct it towards a career that is personally, professionally, and socially meaningful.
Teach responsible government lobbying
One of the most important domains in which business leaders can shape capitalism is through responsible government engagement. Yet, the public perception of lobbying is generally negative, and few business schools offer courses on collaborative and constructive lobbying; fewer still offer them in conjunction with schools of government, law, or public policy (which most also lack positive courses on constructive business-government collaboration). For this to change, we need to teach ideas about lobbying as a public service that upholds obligations toward the collective good and not just individual gamesmanship. Lobbying is basic to contemporary democratic politics as governments seek guidance on how to set the rules of the market and ushers reforms. That said, any such training should also include an education about the evolution of corporate influence in policymaking and the negative aspects of what that influence can create. For example, many forms of lobbying were banned through the 19th century, and it was not until the early 1970s that major corporations began to lobby aggressively on their own behalf. Tomorrow’s business leaders must be taught this history and the contemporary context for participating constructively in the policy-formation process.
Offer critical education in the nature, evolution, and future of capitalism
Most business education does not question the form and function of capitalism. But that is an enormous mistake. Our society may possess a bizarre knee-jerk phobia about any questioning of capitalism, but the truth is that it is worthy of examination, as it is neither static nor a monolith. On the one hand, capitalism is, in fact, quite malleable. It is designed by humans in the service of humans, and it can evolve to the meet the changing needs of humans. Through the 19th and 20th centuries, rules have been established to block monopoly power, collusion, and price-fixing—there is absolutely no reason to believe that capitalism will be dutifully adjusted to address the challenges we face in the 21st century. On the other hand, there are many possible forms of capitalism from which to draw. Japanese capitalism differs greatly from American capitalism, which differs from Scandinavian capitalism, on such issues as the role of government, collaboration among companies, or the responsibilities of companies. Future business leaders must be taught about the form and trajectory of capitalism(s), the underlying models on which they are based, and the ways in which they both serve and harm society if they are to assume any kind of role in shaping necessary improvements.
Offer more critical examination of the “purpose” of the corporation
The dominant idea of the purpose of the corporation as simply to “make money for its shareholders” is one that, like direct lobbying, emerged in the 1970s. It was advanced by Milton Friedman and the Chicago School of free market economists, and later by others like Michael Jensen, but is now being subjected to scrutiny, as the narrow pursuit of shareholder value leads to market problems such as excessively short time horizons for investment planning and measures of success. It also leads to a focus only on the type of shareholder who is, in the words of Lynn Stout, “shortsighted, opportunistic, willing to impose external costs, and indifferent to ethics and others’ welfare.” Even historic acolytes of shareholder value like former GE CEO Jack Welch are beginning to turn against it. Yet, just about any MBA student will unthinkingly parrot an acceptance of this belief. However, there are other models, like those offered by management education leader Peter Drucker, that present a more compelling and accurate depiction of corporate purpose: “The purpose of a company is to create a customer” and serve it well. Profits are only one metric of how well the company performs this purpose. Ultimately, Drucker notes that “the business enterprise … exists for the sake of the contribution which it makes to the welfare of society as a whole.” Echoing Drucker’s words, BlackRock CEO Larry Fink sent a letter to CEOs of public companies in 2018 telling them that they have a responsibility not only to deliver profits, but also to
make “a positive contribution to society.” He wrote that “without a sense of purpose, no company, either public or private, can achieve its full potential. It will ultimately lose the license to operate from key stakeholders.” This is a powerful statement from the world’s largest asset manager ($6.3 trillion AUM). It represents a kind of shift in the purpose of the corporation that will lead to a concurrent shift in the role of the corporate executive in leading it.
Add natural science to the MBA curriculum
The natural environment is undergoing unprecedented and rapid changes in response to human activity. More specifically, it is the market that is changing the global atmosphere, restricting the availability of clean water, warming and acidifying the world’s oceans, and causing species to go extinct. So great are these changes that scientists have proposed that we have entered a new geologic epoch, leaving the Holocene and entering the Anthropocene, to acknowledge the catastrophic effects of the world’s 7.5 billion people on the planet. Given that there will be nearly 10 billion people by 2050, the market’s impact will only grow. But business students are offered very little education on the mechanisms through which business activities affect the natural environment—resource extraction, supply chains, manufacturing, consumption, and disposal. MBA students must be provided with some degree of scientific literacy to responsibly manage their companies. One useful tool is what scientists have defined as the nine “planetary boundaries,” “thresholds below which humanity can safely operate and beyond which the stability of planetary-scale systems cannot be relied upon.” Gail Whiteman calls these the “key performance indicators” (KPIs) of the planet, and business leaders would do well to understand them and how we are changing them. In this way, we may begin to examine and alter notions of unbridled consumerism that are setting society on a collision course with the ecosystem. At the root of it, the belief that perpetual economic growth is either desirable or even possible comes into question, to be replaced by offering products and services with a mindset of sustainable consumption that provides for human needs in ways that are not tied solely to the accumulation of material goods. (The sharing economy is one such example.)
Add social and political science to the MBA curriculum
One disservice that we offer to MBA students is the implicit assumption that business is disconnected from any responsibility to its social environment. Yet, the actions of companies have a direct bearing on the stability of societies. Unemployment, income inequality, and lack of access to basic needs are extremely dangerous for the future of society and the future of capitalism. Nobel laureate economist Joseph Stiglitz has warned that the worsening of these problems is destroying both our economy and its moral foundations. Instead, he argues that the rules of America’s economy must be rewritten to benefit everyone, not just the wealthy. Such a concern takes on additional weight, as business takes a stronger role in civic foundations of our society, like health care and education. To enter such domains responsibly, business managers need to be taught the full social implications of their actions and the ways in which the simplistic motivations of scale efficiencies and lower costs can lead to social instability as wealth is accumulated into fewer hands: workers lose their jobs, their livelihoods, and their well-being; large retailers kill local business and export profits to a headquarters elsewhere; or financial traders move large investments from one country to another in search of more favorable payback but cause economies to collapse (such as the Asian Financial Crisis of 1997). Each of these actions has moral implications for both local and national economies, but the ramifications for such actions are missing in the standard MBA curriculum.
Post-program guided aspirations
Before signing any oath to “create value responsibly and ethically” for the greater good, future business leaders would be well served by a final self-examination of what kind of life they want to live in the name of continuing their chosen calling after leaving graduate school. What kinds of companies do they want to run? What will be their leadership and management style? What kind of legacy do they want to leave? How does that legacy include their impact on the world’s people and environment? Such self-examination should go beyond their professional selves. These students, for example, will likely earn significant salaries. To what end shall they devote them? Will they use their earnings to buy a home in a gated community, isolating themselves from society, or will they involve themselves in the world around them? Will they become philanthropists (to causes other than donations to their alma mater)? Will they sit on the boards of organizations in the nonprofit, health care, or other service-oriented fields? What are the expectations and obligations of such service? Will they run for elected office or play a role in local administration? These questions are rarely, if ever, touched upon as we train our future business leaders. But a continuation of the guided reflection throughout their MBA education may conclude with some final considerations for how they might like to guide their careers in ways that are more civic-minded.
Training Tomorrow’s Business Leaders
Many of the ideas presented here may seem heretical in today’s world of business education. Yet, present-day heresies often become the dogma of the future—and we can see some of these dogmas beginning to emerge in multiple domains. In the words of William Gibson, “the future is already here—it’s just not very evenly distributed.” Some will say that there is no room in the curriculum for such additions. Yet, leaving aside space that is taken up for clubs, social activities and group vacations, the emergence of new forms of education tools (such as those utilized on social media) and innovations in curriculum design (such as moving beyond standard semester-long courses) can open up possibilities for introducing new topics. In fact, many of today’s MBA students can already see the changes that their education does not address, and they are hungry
for the chance to become the business leaders that will usher them further into today’s world (see this powerful critique by MIT MBA student John Benjamin). They are very receptive to the idea of a calling or vocation motivating their professional and personal lives. It is the business school faculty and curriculum that are not keeping pace.
Twenty years ago, graduate students who wanted to change the world turned to schools of public policy and nonprofit management for their training. Today, many are turning to schools of business management. One survey shows that 88 percent of business school students think that learning about social and environmental issues in business is a priority. Another survey shows that 67 percent want to incorporate environmental sustainability considerations into whatever job they choose, and, when looking for full time employment, 83 percent state they are willing to take a salary cut for a job that makes a social or environmental difference in the world.
“We are entering a very interesting period of history where the responsible business world is running ahead of the politicians,” Unilever CEO Paul Polman says, and business needs to take on a broader role to “serve society” by placing “the greater good ahead of self-interest.” Now that he is stepping down as CEO, the question becomes, who will take his place? If business schools do not train the next generation of business leaders to continue this vision, the answer is uncertain. Maybe these leaders will emerge despite an incomplete graduate training program. But why leave that to chance? Business schools have an obligation not only to business but to society and their students to provide up-to-date training that includes a full recognition of responsibilities that business has towards solving the challenges of the 21st century.
Each year, the Academy of Management recognizes four outstanding individuals, who have made significant contributions to the field of management through their service, research, innovative teaching methods, breakthrough developments, and more over the course of their career. The 2018 Career Achievement Awards were presented at the 78th Annual Meeting of the Academy of Management.
One of four Distinguished Scholars, Erb Institute faculty member, Andrew Hoffman was awarded this honor in the Organizations and the Natural Environment Division.
Thank you Marc, we couldn’t have said it better!
We’d love to chat with you about the Erb Institute dual-degree!
Learn about Erb Institute admissions requirements and application deadlines and speak with our Student & Alumni staff.
Erb Institute representatives will be at the following fairs:
Since 2004, the Idealist Grad Fairs have been helping prepare the next generation of nonprofit leaders by connecting thousands of prospective students with hundreds of admissions representatives from public-interest graduate programs across the United States and around the world. Fields represented at the fairs include public administration, international affairs, education, public policy, public interest law, social work, nonprofit management, global and public health, theology, environmental science, socially responsible business, and more.
The fairs are free and open to anyone interested in learning about grad school. Watch this short video to see why you should attend an Idealist Grad Fair.
Partnerships and Purpose at Sustainable Brands
By Sara Soderstrom, Erb Faculty Member
I was excited to attend and present at Sustainable Brands 2018. My research focuses on how organizations are engaging with sustainability challenges, and my work’s motivation stems from my deep-seated hope that business will transform how we address the many societal challenges that we face today. I believe that business is uniquely situated to help solve challenges like climate change and poverty. It was inspiring to hear from hundreds of companies at Sustainable Brands that are working to redefine how they do business—to do well by doing good.
As a University of Michigan faculty member, it was also exciting to have an opportunity to share my research with an audience of practitioners. My academic career often feels split—research and conferences with other academics, and teaching with practitioners. Yet for our research to have impact beyond the ivory tower—as Professor Andy Hoffman at Erb challenges us to do!—we must engage with practice around data collection, analysis and sharing of findings. Sustainable Brands was a great chance for me to do that.
I shared research I had done a few years ago with Kate Heinze, associate professor of Sport Management, University of Michigan. We did a case study on the Detroit Lions and how they developed a new, more strategic approach to engagement with the local community. Kate and I had been working on a different research project in Detroit, focusing on FoodLab Detroit and the emergence of a sustainable food economy in the city. As we spoke with different food entrepreneurs, we kept hearing about the Detroit Lions as an example of a fantastic partner to these early-stage business people. We started to explore what the Lions were doing and how they were having such a positive impact.
New Partnership Models
The Lions had recently transitioned from a traditional model based on charitable giving to a more focused development model with the goal to “support transformational efforts that improve the wellbeing of metro Detroit’s underserved communities” (Lions’ Living for the City, 2013). In our assessment, we found the Lions’ narrower and deeper approach (focused on community health and local development) to be more strategic, and necessitating a stronger commitment to the city. This novel model of sustainable partnerships for impact contrasts with a more standard approach to community engagement—philanthropic donations of funding.
An initial step in the Detroit Lions’ new approach was to complete a concerted, bottom-up process of identifying the city’s needs. The Lions community relations team met with many leaders throughout Detroit—to learn from them and better understand all the activities and expertise that already existed in the city. The team then identified how their own strengths mapped to a long list of community needs, narrowing their areas of focus to those topics that were the best fit between city need and team resources and goals. Thus, the Lions were deliberate in the areas they selected and focused on these two primary areas to develop and strengthen linkages with community stakeholders. Our research identified this as a critical element of their success—recognizing what skills they had and how they could apply them to the city’s needs.
Communication and Outreach
Once community partners were identified, the next step was communication and outreach. The Lions mindfully considered both what their role should be and how their involvement should be perceived. It was clear to both Kate and me that the Lions’ path towards mindful engagement was critical in their successful outreach. Several key themes were identified that characterize these partnerships:
Respect and humility: listen to different perspectives, defer to the expertise of various partners, and respect the knowledge and experience of long-standing community organizations
Enabler role: engage in a helping, rather than self-serving and imposing, manner
Authenticity: a more genuine commitment to helping Detroit’s revitalization; not simply about money or visibility
Mutual benefits: partnerships that benefit themselves and their partners in terms of more specific organizational goals
Brokerage: connect different organizations committed to aiding Detroit
As I shared these findings with the audience at Sustainable Brands, it was affirming to hear how much these ideas resonated. Leaders across different companies met with me after to discuss how they are developing partnerships for their own projects and to ask about various considerations with respect to building sustainable partnerships for impact. The talk also generated a thought-provoking discussion about “what is impact?” that touched on how to measure the impact of community partnerships, the importance of recognizing causality, and the critical step of defining—and aligning—objectives for each partner in a project.
I look forward to continued conversations about impact through partnerships. Through my research, teaching and engagement with practitioners, I hope to connect with many in the Erb community.
Note: research findings adapted from Heinze, K. L., Soderstrom, S., & Zdroik, J. (2014). Toward strategic and authentic corporate social responsibility in professional sport: A case study of the Detroit Lions. Journal of Sport Management, 28(6), 672-686.
Former Erb Institute PostDoc, Panikos Georgallis received one of five Veni grants that were awarded to researchers from the fields of economics and business, out of 59 total grants to researchers from the social sciences and humanities. Veni grants are targeted at “outstanding researchers who have recently obtained their PhD and allows them to conduct independent research and develop their ideas for a period of three years.”
The Veni grant will provide the sum total of €250,000 towards Georgallis’ work in understanding moral markets. Georgallis added,
“I am honored to receive the Veni grant by the Netherlands Organisation for Scientific Research. The grant will enable a better understanding of the evolution of moral markets, and help nurture these sectors which have a dual impact on economic and social change. I look forward to getting started!”
Applications are assessed in a nationwide competition based on the quality of the researcher, the quality, innovative character and academic impact of the research proposal, and the potential for knowledge utilization (see here).”
Let it shine: The emergence and evolution of moral markets
Moral markets, sectors that emerge to foster social change, are critical for society. But what are the circumstances that spur and sustain these markets? Using data from the European solar sector, Georgallis will develop a novel framework of the emergence and evolution of moral markets.
A list of the 154 Veni laureates, working titles and a brief summaries of the research projects can be found here.