Business Schools Must Do More to Address the Climate Crisis – Harvard Business Review
Business schools have much to contribute to the fight against climate change. They are experts in organizational transformation, performance measurement, operations, marketing, leadership, and governance. A group of eight business schools has come together to find ways in which business schools can collaborate to forge a community of responsible and educated business leaders.
Along with government leaders and NGOs, business and academia were well represented at COP26. There were plenty of scientists and CEOs in evidence. Yet one group was notably absent in the conversations around climate action: business schools.
Although evidence of climate change has been emerging for more than four decades, business schools have been late in acknowledging and responding to this urgent and existential issue. For some, there are political concerns — many leading schools are based in the U.S., where climate change has been politicized, making it harder to tackle the issues head on. Management academics may also feel underqualified: climate change is outside the typical areas of academic expertise found in business schools. And there are deep competitive challenges demanding the attention of business professors and students, notably digital transformation and AI, which represent more comfortable territory for management scholars.
But these are not excuses. As organizations with missions to improve the practice of management, business schools must do much more to raise awareness of climate change in the business community and to show how business and management can address the challenges climate change presents. There is much we can contribute:
Climate change is triggering unprecedented change, requiring businesses not only to launch new products and services but also to evaluate and adopt new practices. How will companies be able to transform their business models, mental models, and cultures sufficiently and quickly? These topics sit at the core of most of our teaching and much of our research, as well as the work we do in executive education. And while we are not experts on climate science, many of us sit within universities where this expertise resides and have access to cutting edge, relevant knowledge, technology, and innovation. We have the potential to marry the expertise of our business faculties with the content expertise of scientists and engineers, and the practical expertise of the businesses with whom we interact daily.
Business needs to understand how its inputs and outputs, and the markets for its products and for funding, are affected by a changing climate. What set of metrics — both for external and internal reporting — will ensure that businesses, investors, consumers and others have solid and trustworthy information on which to base decisions? How will financial markets incorporate emissions and other climate factors into asset prices? How will we differentiate between meaningful firm action and green-washing or, less cynically, green-wishing? The announcement of the International Sustainability Standards Board at COP means that we need not only to advance our thinking on the materiality and reliability of climate accounting, but also to educate a generation of auditors who can attest to the reliability of the data we produce. How will we restructure capital offerings and risk management processes to reflect climate forces?
The climate footprint of many firms in many sectors lies beyond their boundaries and is distributed across their value chains. It’s difficult if not impossible to exert direct influence over distant suppliers, customers, or partners. Yet we have vast knowledge about how incentives, contracts, and collaboration within value chains works, as well as the technical aspects of operations management and optimization. How can firms work across their value chains to create collective, effective, and efficient reductions in climate impacts? In what ways might they re-engineer their process flows and supply chains to both de-carbonize and be better placed to adapt to extreme fluctuations in weather? How do companies realize the benefits of circular approaches to resource consumption and simultaneous climate mitigation?
Consumption patterns in recent decades in developed and developing economics contribute directly to the climate emergency. How can firms (and governments) develop marketing strategies to wean consumers and businesses from carbon-intensive lifestyles, by, for example, encouraging them to use no- or low-emissions mobility solutions? With their deep understanding of consumer behaviour and marketing strategies, business scholars can show businesses how to motivate consumers into adopting more planet-friendly desires and habits.
Leadership is core at all business schools, along with core ideas around organizational change, organizational design, sense-making and more. How will these models of leadership need to be adapted as we think about the challenges of long-horizon massive impacts of climate? Can we think differently about our models of organizational adaptation, many of which emerged under completely different conditions and are no longer fit for purpose? Systems change and collaboration will require systems leaders who work across boundaries.
Along with our colleagues in law schools, business academics actively study questions about governance and control. Over the past decades, we have focused on addressing how to create governance mechanisms and high-powered incentives to enhance shareholder value. How can we use our insights — for example changing executive compensation or board structures — to improve the governance around moving companies to accelerate decarbonization? Going beyond a single firm, how might we help design models and mechanisms for business collaboration that are effective and do not run afoul of anti-trust rules or lead to greater rent seeking behaviour? How do we measure the effectiveness of these collaborations? In terms of even larger incentives, how can tax systems be used to change corporate activity with respect to climate change?
The business school sector has much to build upon. Pioneering scholars have long focused on issues of the environment and sustainability. There has been a dramatic uptick in the last decade of attention to climate change by business scholars, encouraged by editorial statements and special issues in the leading journals in every one of our disciplines. In the classroom, these issues are increasingly being discussed in core and speciality courses, representing significant curricular shifts, and supported by our accrediting bodies. Rankings and rewards for business schools to tackle such issues are also on the move.
But we are duty-bound to do more. If business needs to take a lead on climate, then so must we — even if it is uncomfortable at times.
Coming from eight leading business schools in Europe, traditionally keen competitors, our Deans and we have united to accelerate action towards the goals of the Paris Agreement and the UN Framework Convention on Climate Change through the Business Schools for Climate Leadership initiative. We believe that a collaborative impact will exceed the sum of our individual contributions as schools towards forging a growing community of responsible and educated business leaders. Effecting systems change typically requires cross-sectoral collaboration; the urgency of the climate crisis demands that business schools experiment with new ways to quickly and effectively collaborate.
