A decade ago, a successful business was defined in terms of profitability and return on investment. MBA students were encouraged to think of profit and loss in hard-currency terms. Doing well meant making more money. Everything was clear.
Not any longer. Where senior business executives once thought of the world's resources as a bottomless well with infinite potential for exploitation, now, says Paul Kleindorfer, professor of sustainable development at INSEAD, "the reality is we must look at the world through the lens of scarcity."
That new reality is increasingly reflected in curricula at European business schools. Over the past decade, France's INSEAD, the Rotterdam School of Management (RSM), and the Copenhagen Business School, among others, have added required courses in sustainability. Across European MBA programs, there's a broad push to weave awareness of scarcity into basic coursework.
The motivation is clear, says INSEAD's Kleindorfer, a management economist who has worked in risk management for 40 years. "In the past, risk was defined in terms of employment or product-related hazards, such as health and safety," he says. Classic examples might include keeping workers safe in a chemical processing plant or making sure consumer products complied with safety standards.
Now, Kleindorfer says, the world has been transformed. "We have to consider bioterrorism and global warming as potential threats to the supply chain. Geopolitical forces are at work. The picture has changed."
Woven into All Subjects
When Kleindorfer puts risk maps in front of senior executives today, he says, "it's very scary." Limited supplies of raw materials—metals and petroleum, as well as food and water—are compounded by the need to constrain emission of greenhouse gases. Climate change and the welfare of factory workers 10,000 miles away are now part of the risk pool. "It's all tightly interconnected on this little blue marble floating in space," he says.
The biggest shift in executive thinking, according to both business professors and students, has to do with how business people now define the bottom line. Atreyi Dass, an MBA student at RSM, says that at her school, "sustainability is not taught as a separate topic. It's intertwined with all the subjects."
Dass is the leader of the RSM chapter of Net Impact, a global not-for-profit group that draws together business people on the subject of corporate social responsibility. The RSM chapter has helped sponsor social entrepreneurship projects in Kenya, Ghana, and Uganda. Dass, who comes from India, worked for SAP (SAP) doing corporate performance management—with an emphasis on sustainability—before attending RSM. She argues for a new "triple P" definition of the bottom line: Where once profit ruled, she says, "now we think of people and planet first, then profit."
Impetus from Students
The interest in sustainability isn't coming just from businesses or being imposed by professors. Students also are clamoring for it. "Eight years ago, only 20 percent of applicants had even heard the term 'social entrepreneurship,'" says Stephan Chambers, director of the executive MBA program at Saïd Business School at Oxford University. "Now they've not only heard of it, they're explicitly interested in sustainability and social return on investment—as much they are on shareholder return on investment."
To help MBA students really understand sustainability, Professor Dianne Bevelander, associate dean for MBA programs at RSM, uses the tried-and-true technique of game-playing. Her students are divided into teams and given the job of managing fishing companies. She provides basic facts about fish stocks, renewability, life cycle, and markets.
Regardless of what information is given to the teams—including everything they need to make a profit while sustaining the fish and the environment—students invariably begin the game aggressively, determined to out-do each other in earnings. "At first, all they focus on is the bottom line," says Bevelander. "Some of them do things like decide to have only one or two ships, to create a premium-brand identity."
Tellingly, when they first start playing, "the students keep forgetting about the fish," Bevelander says. Indeed, in many cases they get so caught up in competing with each other they don't even notice when the fish stocks are nearly depleted. "That always comes as a shock."
Missing the Point
It's just this sort of short-term thinking that MBA programs are setting out to change. Stephen Peake, fellow in management science at Cambridge University's Judge Business School, says he used to think the secret of teaching business students about climate change and resource scarcity was to "show the science, put up the charts and graphs, give them an ice core to hold, and their hearts would follow."
It turned out that half the students were uninterested in the science and missed his broader point about sustainability. Peake sees the same problem in some companies that go through the motions of sustainability without undertaking rigorous analysis of their true social and environmental impact.
Peake chides companies that congratulate themselves on their eco-friendliness because they are carbon neutral or force their suppliers to comply with a checklist of criteria. For some, it takes a major crisis to alter their world view. But with more students now coming out of European B-schools versed in sustainability, perhaps fewer crises will be needed in the future to help companies get on the bandwagon.