Dr. Tima Bansal, NBS's Executive Director, shares her observations about business sustainability.
Growth is in the DNA of Business. Does this Mean Ultimate Collapse?
Business growth may be the problem, but the solution is not in attacking the growth paradigm.
Several years ago, I asked each participant in an executive program in which I was teaching: “What is your company’s growth target next year?” Almost every one of them reported a number close to 10 per cent. I was impressed by their ambition, yet terrified by the aggregated consequences.
Growth is at the heart of the business model. Shareholders expect ever-increasing share prices, which are best achieved by growing the business. Every business function — marketing, operations, finance, and even human resources — focuses on some aspect of growth and productivity. Increasing the top line
helps to improve the bottom line.
But, there is a simple problem with this type of thinking. If each business grows, then collectively, business will reach planetary limits. In 1972, Donella Meadows and her colleagues predicted these limits to growth in their book
with the same title. Through a computer simulation, they illustrated that exponential growth will lead to the collapse of a closed system with finite resources.
And, there are certainly indications that we are reaching the planet’s limits to growth. The stories in the popular press are coming with increasing frequency and urgency. Here are just a few headlines about systems collapse.
Now, some might see this as fearmongering to grab public attention or a collective panic that is seizing society. But, I believe otherwise.
I believe that we are facing the grim realities of the physical limits to growth because the planet cannot absorb all the stuff that we are dumping. The impact of all our waste is suffocating the land, water, air. If we have reached the planetary limits, then the future for business and society is pretty dire… unless we quickly find a new way of thinking about business.
How Do We Change Business if Growth is in its DNA?
So, what to do about it? The people who advocate for sustainability propose two solutions, both of which are problematic.
First, many people in the sustainability movement are advocating for degrowth
among businesses. They argue that business cannot continuously produce more stuff, so the solution is that businesses need to shrink, not grow.
Yet, asking companies to limit their growth, much less to degrow, works against the DNA of business. Businesses are programmed to grow. CEOs would lose their job if they advocated for degrowth. Few CEOs of shareholder-owned companies could aspire to degrowth.
A second approach advocated by the sustainability movement is to increase the ‘size of the pie’ rather than ‘split the pie.’ These optimists argue that business growth can be decoupled from business impact, so that businesses can continue to produce more stuff, while reducing their environmental and societal impact. Michael Porter and Mark Kramer call this ‘shared value’
in their often cited Harvard Business Review
Paul Polman, the former CEO of Unilever and hero of the sustainability movement, also argued that businesses could decouple growth from sustainability. Unilever’s 2010 Sustainable Living Plan
aimed to double revenues, while halving the environmental footprint
. Similarly, many companies focus on improving their carbon intensity (reducing carbon emitted for each unit of production).
However, this argument is also flawed. Even if each company reduces its footprint per output, the collective footprint would still increase if organizations seek to produce more output. A growth paradigm would ultimately lead to a larger footprint, even if firms seek shared value.
As long as businesses strive for bigger, faster, better, they will ultimately seek to produce more stuff, even if they do so more efficiently.
A Potential Solution: The Circular Economy
Changing a firm’s DNA is a fool’s ambition. Growth is embedded too deeply in corporate frameworks and executives’ mindsets. What we need to do is rethink how the broader system can accommodate business growth.
I think the answer lies in the circular economy
. The waste from a company’s operations serves as feedstock for another.
This approach isn’t simply reusing or recycling, it requires rethinking. It provides an opportunity for new products with new chemical formulations that can be repurposed. New supply chain relationships will form and new businesses will spring up.
The limits to growth are due to finite resource constraints. But, once waste is seen as a resource, then the resources will become unlimited.
There are numerous challenges in making this model work. For example, the very large amounts of energy required need to come almost exclusively from renewable resources. But this, again, represents a business opportunity.
There is much more to say about the circular economy, but I’ll leave this for another post. For the moment, I want to reinforce the main point: business growth may be the problem, but the solution is not in fixing the growth paradigm. The solution is to embrace the growth paradigm and rethink organizational processes.
I’d love to hear your thoughts and provocations. Only through informed dialogue will we find solutions to some of our greatest challenges. You can reach me at privately at firstname.lastname@example.org
or publicly through Twitter (@TimaBansal
Do MBA Programs Make Students Greedy?
How business schools misinterpreted economics
I have often puzzled about a disturbing research finding: students enter MBA programs more community oriented, and exit programs more self oriented. Do MBA programs make students greedy?
I have taught sustainability to MBAs for over 15 years and this research finding certainly resonates with my experience. In recent years, I have taught my first class in the first few weeks of the MBA program. I am swarmed after class by students wanting to know more about sustainability. I teach my last class about four months later, and there is a visible shift in the students’ focus to business profits. In fact, some students even argue that business doesn’t have a role in society. I wrote about this experience in a past article
Now this shift in thinking of my MBAs may just reflect their comfort with the program. After four months in the program, students are less worried about managing impressions and willing to speak their ‘true mind.’ Even if this was the case, it would support the research. Students who care less about society may feel more emboldened over time, and those who care more about society feel less empowered.
If you have an MBA, you might be skeptical of these findings. But, there is plenty of supporting evidence.
In this newsletter, we describe
one such study by Miller and Xu. The researchers find that CEOs with MBAs are likely to lead firms with a short-term focus, which is harmful to the organization and society. Miller and Xu analyzed the educational background of 5004 CEOs from 2003 to 2013 and found that MBA-trained CEOs are more likely to manage earnings
to make themselves appear successful.
So, do business programs make students greedy?
Yes, but not intentionally. I can say confidently that my colleagues and I do not set out to teach students to be greedy. However, I believe there is a built-in flaw in the curriculum. The heart of the issue lies in the way that business schools (and business practice more generally) have interpreted their parent discipline — economics.
Milton Friedman says in a 1970 New York Times Magazine article
that business should “make as much money as possible ….” Friedman makes a logically consistent argument in this article, based on clearly laid out assumptions. Specifically, Friedman argues that if businesses look after their self interests and government sets the rules that protect society, the economy will efficiently produce output that contributes to society’s well-being.
Let me emphasize a key point: economists seek to enhance societal well-being, not business profits.
The concern among economists for societal well-being is evident in many of the recent Nobel Prizes in economics. In 2018, William Nordhaus won the Nobel Prize for “integrating climate change into long-run macroeconomic analysis”; in 2018, Angus Deaton won for “his analysis of consumption, poverty, and welfare”; in 2014, Jean Tirole won for “his analysis of market power and regulation,” arguing that society suffers if companies are left unregulated; and, in 2009, Elinor Ostrom won for “her analysis of economic governance, especially the commons.”
But, business schools often focus on Friedman’s claims of self interest and profits, forgetting that government is needed to protect society.
As business becomes more powerful, they increasingly control government. Based on data from SEC filings, sixty major corporations paid no corporate taxes
. I expect one would not have to dig far to uncover the political donations made by these corporations. Further, politicians with business backgrounds tend to sympathize with business. So, who is protecting society’s interests?
There is another issue in the way that economics logic is translated to business logic. Gordon Gecko’s famous statement from the 1987 movie Wall Street
that “greed is good
” can still be heard in business school hallways — a statement derived from Friedman’s argument. But Gecko made an illogical leap, which most business students miss. Friedman did not argue that every single manager be greedy. Instead, he argued that managers, in general
, need to act as if they are greedy (more accurately, self-interested). Friedman was talking about economic systems, not individuals. Applying the properties of a system to an individual is the same as saying that if the average height for men is six feet, then every single man must be six feet tall. The properties of an economic system cannot be applied to the parts that comprise the system.
Yet, business schools teach the principles for managing the ‘parts’ (i.e. managers and businesses) of the economic ‘system.’ So, business school professors do not teach greed, but the curriculum inadvertently reflects Friedman’s emphasis to “make as much money as possible.” In strategy courses, we teach students to be competitive and grow their business at all costs. In marketing, we teach students to sell stuff, whether or not it is good for society or the environment. In finance, we teach that everything can be valued, even though many would argue that human life should not be. There are many such examples. The problem does not lie with professors or with students; the problem lies with the assumptions of the curriculum.
So, what can businesses and business schools do about it?
The obvious answer is to change the curriculum. But, this is difficult to do as the principles of the curriculum are so deeply embedded in business. Business schools both reflect and shape
business practice. To change curriculum requires changing practice.
An easier approach is recognize the biases of business and compensate by introducing diversity in thought. The more that businesses integrate different ways of thinking into their decision making, the more the links between business and society come into focus. If government is not setting the rules that protect societal well-being, then businesses can bring in people with different ways of thinking. Engineers are particularly adept at solving technical problems; ecologists can see systems; and anthropologists focus on culture and society. In other words, business schools can advocate for integration, not isolation; for heterogeneity, not homogeneity. In doing so, we can achieve the ambition of economists — to advance societal well-being — by building our own logic and not distorting theirs.
I predict that if Miller and Xu had studied corporations governed by diverse executive teams, they would have found very different outcomes than corporations governed strictly by MBAs.
Bringing Your Whole Self to Work
Over the impeccably prepared sushi lunch, I said to my Australian colleague: “You called it ‘shark tank’ and you say you care about making the world better?"
I spent much of my February in Australia, giving talks and speaking to local academics and managers about sustainability. One conversation over lunch with an academic colleague was particularly poignant. It went something like this:
Him: I am setting up accelerators around the world, focusing primarily on Asia. We provide expertise and access to our networks; the local organization manages the day-to-day operations.
Me: Do you or the host organization screen for the social impacts of the initiatives? For example, would the host support an initiative that develops a new gun or a nuclear weapon?
Him: No, we don’t screen the initiatives, but I’m sure that wouldn’t happen.
Me: How can you be sure?
Him: Well, I can’t be. But, even if they did, our net impact would be positive. We encourage entrepreneurs to create wealth through good ideas. For example, we introduced Shark Tank to India, in which entrepreneurs compete against other entrepreneurs for the best ideas.
Me: Seriously?? You called it ‘shark tank’ and you say you care about making the world better? Doesn’t ‘shark’ undermine the notion of a better world? So, you’re basically teaching entrepreneurs to make money at any cost.
Baffled by my reaction, this colleague started to describe the social good he was doing in his spare time by bringing medical devices to Indians. I suggested to him that he could combine his hobbies with his occupation. He could, for example, screen the initiatives that the accelerators accepted by their net social impact.
I admit that I am not sure I made headway. It was clear that this colleague saw social responsibility as something he practiced in his spare time. I am dismayed by the frequency of this type of conversation: good people who disconnect their personal beliefs and values in their day job.
Such disconnects have been well documented in research in psychology and the behavioral sciences. Milgram’s famous obedience experiments
in the 1960s documented people administering heavy shocks to other people because they were simply asked to do so. In the 1970s, Zimbardo documented
people acting sadistically when asked to play the role of prison guards with people who were playing the role of prisoners. Darley and Latné
called the failure of 38 witnesses to stop the prolonged murder of Kitty Genovese in 1964 the bystander effect. More recent work
by Sachdeva, Iliev and Medin, called moral licensing, found that people justified morally questionable actions at one point in time by performing good work at a different point in time.
I know these individual studies have come under fire, but there is wide and robust support for the general pattern of findings: good people behave badly in some social contexts.
I argue that there may be another explanation that is not based in psychology, but in economic ideology.
In 1970, Milton Friedman wrote about the ‘social responsibilities of business’
in the New York Times Magazine
. His argument was that managers need to work in the best interests of shareholders, and practice their social responsibilities at home. Corporate social responsibility, in Friedman’s words
, seeks “to make as much money as possible while conforming to the basic rules of the society.”
I wonder if this thinking has become so dogmatic that many managers assume that wearing two hats is simply ‘the right thing to do.' Managers justify doing bad things in their professional life, because responsibility is something suitable to one’s personal life. Business is about business, at any cost as long as it is legal. Thinking about social responsibility distracts managers from making money and achieving corporate goals.
Thankfully, not everyone embraces Friedman’s dogma. I taught in an executive program for Maple Leaf Foods
last week. A senior vice president said that she “brings her whole self to the office.” She does not wear two hats. Rather than adapting her personal beliefs to the company, she helped transform the company to her own beliefs. Maple Leaf Foods now aspires to be the most ‘sustainable protein company’ on earth.
She said that she is a better leader because she wears only one hat. Not all the conversations at the executive table were easy, as many of her peers always asked for ‘the bottom line.’ But, she chooses her timing wisely and argues persuasively. She convinced the entire executive team of the business opportunities by aligning personal values with professional values. I have now taught four cohorts of Maple Leaf Foods managers and am struck by the number of people who took the job or have continued to work there because they are excited about the company’s ambition.
Most sustainability professionals are able to make connections between their personal and professional lives. They blend their preoccupations with their occupation. I sincerely believe that to advance sustainability in business, we need people to bring their whole self to work.
In the next editorial from my desk, I will speak more to this disconnect, especially within business schools. In the interim, I welcome your thoughts about this separation of personal and professional values. Please feel free to email me directly (email@example.com
) or tweet more publicly (@TimaBansal).
Why Am I So Often Asked: What Is Business Sustainability?
I am often asked, “what do you mean by business sustainability?” I hear this question from almost everyone, including business leaders, students, and even my academic colleagues who study sustainability.
I find it puzzling that this concept continues to create confusion. Terms like ‘leadership’ or ‘innovation’ do not seem to create such angst, even though the term ‘sustainability’ is grounded in a commonly accepted definition and these other concepts are not. Sustainable development is development that “meets the needs of present generations without compromising the needs of future generations” (WCED, 1987
This definition emphasizes that business must consider the following in their operations: social equity, short and long term thinking, and trade-offs between using resources now or later. These implications are often overlooked, ignored, or misunderstood.
Why the term ‘sustainability’ is confusing…
I think part of the problem people have is that the word ‘sustainability’ is commonly used in other business contexts, including to describe sustainable competitive advantage and sustained growth. I gave a talk recently to an audience at an Australian business school. When I asked audience members to define sustainable development, six people responded, each with different definitions. Only one person spoke to the prosperity of future generations. Several people described business sustainability in terms of sustained organizational profits and success —which can actually be at odds with sustainable development.
The other part of the problem with the word ‘sustainability’ is that that the definition— “meet[ing] the needs of present generations without compromising the needs of future generations.” — seems unclear and its guidance to companies seems vague and unspecific. What does it mean for a company to assure the prosperity of future generations? Business sustainability seems more like inspiration than aspiration.
…but other concepts aren’t equivalent
People often find it easier to translate business sustainability to corporate social responsibility
(CSR), shared value
, the triple bottom line
, or just managing environmental impacts. For example, when Shell Oil describes what sustainability means to them, they confuse it with responsibility and the triple bottom line: “Sustainability at Shell means providing energy in a responsible manner, respecting people, their safety and the environment.”
These other concepts differ from sustainability in important ways.CSR
speaks to the corporation’s ethical responsibilities, whereas business sustainability speaks to sustaining systems over the long run. However, what is ethical for one person is not necessarily ethical for another. Some executives feel their firm is acting ethically by abiding with laws; others feel their firm must often go beyond the law’s requirements. For some managers, being responsible requires offering the minimum wage; to others, it means offering the higher living wage.
Furthermore, CSR does not speak to equity across generations
. When Nike announced its woven FlyKnit
, it claimed to be responsible for creating fewer wasteful offcuts. I agree
that the action is responsible, but I am not sure it is necessarily sustainable if Nike intends to sell more sneakers, which consumes more resources in the long run.
argues that companies can generate value for the firm and society simultaneously. Like CSR, it too ignores the importance of time. Creating shared value often takes a long time, but many businesses are unable to see very far into the future.
Sustainability is also distinct from the triple bottom line
, which simply requires businesses to consider three ‘bottom lines’ – social, environmental, and financial performance. However, just considering the three bottom lines, does not offer guidance on how to manage those bottom lines or make difficult trade offs. How should Nike choose between selling more sneakers (more profits) or fewer sneakers (smaller environmental footprint). How should Shell Oil decide between providing more energy to people to help them live a better life (and generating profits) and drilling in the sensitive Arctic ecosystem?
Making “sustainability” meaningful for business
“Meeting the needs of present generations without compromising the needs of future generations.” While sustainability’s definition can seem ambiguous, I believe that it can offer corporate guidance and a vision of a prosperous future.
It is important to recognize that this definition applies to the entire economy, not to specific organizations. A single organization cannot secure the prosperity of future generations; every single firm consumes resources and generates waste. But collectively, organizations can ensure their wastes become the feedstock for other industrial processes – what is often called the circular economy. So, in terms of specific practices, this means that organizations should seek to source from renewable sources and find organizations that can productively use their wastes.
Organizations must consider how their operations fit within the larger industrial ecosystem. If executives see their organization as part of a larger system, then they can see that they must collaborate to create a sustainable system.
Moving from a short-term business logic to a long-term systems logic
I admit that business sustainability is not a simple, straight forward concept. It requires systems thinking, which will be the topic of future musings from my desk. I also acknowledge that it will be some time before we move from short-term business logic to a long-term systems logic. However, I am reassured that executives and academics alike are increasingly more open to this perspective.
I look forward to the day when I will no longer be asked: “So, what do you really mean by business sustainability?”
Continuing the conversation
I would appreciate hearing your reaction to the ongoing question of ‘what is business sustainability’. Please feel free to message me (@TimaBansal
) or the NBS community (@NBSnet
) privately or publicly.
Why Write a Column From My Desk?
This column is the first among the many that I hope to write ‘from my desk’. If you’re a regular reader and subscriber, you might be asking why I’ve decided to create this platform through which to discuss my views.
When I founded NBS, 13 years ago, the gap between management research and practice was large. I saw much opportunity to advance sustainability by bridging that gap. Executives could undertake more evidence-based practice and researchers could tackle more managerially-relevant issues. By sharing knowledge and collaborating, researchers and managers would see the world through different eyes, which would stimulate ideas for long-term prosperity for business and for society.
NBS has made significant progress in this bridging work. We have published 14 systematic reviews
of research on managerially relevant topics, translated numerous articles, hosted conversations, and held several events.
Most of the knowledge that we mobilized was drawn from academic journals, but the academic machine is slow. A research idea can take four to seven years to publish. At a time of such unprecedented change —planetary, technological, and social— published research can lose its relevancy.
NBS needs to move ideas between research and practice faster. Researchers and managers have many deep insights, but lack the forum to share those ideas quickly. As well, NBS needs to source ideas, not just from researchers, but also from managers with deep practical experience. We need to take a more active role in mobilizing ideas that are on the frontier of knowledge. There is a hunger for good ideas.
In writing from my desk, I hope to bring some of those good ideas to you. I will highlight published and in-process articles that I’ve read, the observations I’ve made, and the conversations I’ve had that have piqued my interest and provoked my thinking. I hope my musings will similarly provoke yours.
In January's newsletter, we have highlighted the most visited articles in 2018, which I encourage you to read. What surprised me most about this list is the ‘most visited’ article: the workshop that NBS hosts for research centres worldwide
. In 2018, NBS hosted its fourth biennial workshop, which builds capacity and promotes collaboration among research centres. I was surprised that the top article wasn’t about ideas, but about community. It reinforced for me that bringing people together is one of the most important things we do.
I hope you help me in my pursuit of mining emerging sustainability knowledge. Please do reach out to me directly to share frontier ideas that can advance both the research and practice of business sustainability.
Stay tuned for ideas ‘from my desk’ in future newsletters.
Share your ideas
I'd love to hear your frontier sustainable business ideas. Here's where you can find me.
LinkedIn: Tima Bansal
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