To dislodge old-school economic thinking, businesses need to take a bigger role in business school education.
Pratima (Tima) Bansal is a Professor of Strategy at the Ivey Business School and the Founder of the Network for Business Sustainability.
Earlier this week, I taught a case study to my class of MBAs and asked how Nestlé could create shared value through its coffee supply chain. Nestlé wanted to build value not only for itself but also for the coffee-producing farmers in China.
To my surprise, one student piped up and said “Well, it’s not the purpose of business to worry about the farmers, it’s government’s role.” He continued: “Nestlé should try to extract as much value from the farmers as possible, as long as it is within the law. It means more profit for Nestlé.” He was arguing that Nestlé needs only to pay farmers the government-enforced minimum wage, even if the minimum wage is below the poverty line.
I asked the class if they agreed. Many students did not.
The other students argued that by offering farmers a fair price and training to improve yields, Nestlé will be able to strengthen its brand, better assure its coffee supply, and do the right thing. One student spoke passionately about the need for corporations to protect farmers, as many farmers have committed suicide in her region in India because they could just not make ends meet. Yet, in spite of these arguments, the first student remained steadfast in his beliefs.
I have spent the last few days trying to figure out why it is so difficult to dislodge such 1970s economic thinking — thinking based on outdated Friedmanite neo-liberal economics — from business school students’ mindsets. Friedman argued that the business of business is business, within the confines of the law.
But, Friedman assumed that governments are fair and are there to protect society’s interests. Without a fair government, corporations will exploit people such as the farmers in the Nestlé case study. As well, even though such thinking has successfully lifted many people out of poverty by improving productivity, the world’s economic productivity now exceeds the regenerative capacity of the Earth. We are now facing significant environmental erosion, witnessed through climate change, toxic soil, and polluted seas.
The evidence also clearly shows that businesses flourish by considering their own interests and societal interests simultaneously These businesses attract and retain the best employees, innovate more radically, withstand outside shocks, and are at least as profitable as firms that focus on short-term profits.
So, why does old-school economic ideology linger in the minds of at least some business students? I believe that at least part of the problem is that business practices have leapfrogged ahead of what is often being taught in business schools.
Business school curricula are slow to change. Professors often teach what they were taught. In strategy classes, many professors still teach Michael Porter’s five forces — where a business seeks power over all others in order to gain competitive advantage — rather than Michael Porter’s more contemporary model of shared value. In operations classes, many professors still teach about the importance of price, quality, and delivery in supply chains, but ignore the increasing value of resiliency and fairness. In finance and accounting, many professors still focus on the firm’s valuation by short-term markets, rather than on long-term value creation — because long-term value is difficult to measure, manage, and incentivize.
Signs of change
But, business schools don’t have to be a holdout in a changing world. At the Network for Business Sustainability (NBS), I am seeing an important trend that gives me hope .
In 2010, NBS tried to improve the capacity of business sustainability in business schools around the world and held our first ‘Sustainability Centres Workshop’ at the Ivey Business School. The directors of about 60 sustainability centres from business schools around the world filled the room. The message I heard from them was that it was difficult to motivate faculty colleagues and students to dislodge the current economic paradigm and adopt sustainability research and teaching.
In June 2018, we held our fourth biennial workshop. Eighty people from 63 centres attended the workshop, coming from as close as New York University to as far as China, India, and Brazil. The workshop was held at Cornell’s new Tech campus in New York City. The state-of-the-art building was wrapped by windows that overlooked a grassland on Roosevelt Island. It was an oasis amidst the massive silos of buildings that occupy Manhattan. The Cornell Tech campus was a metaphor for what I am seeing as a movement in business schools.
The sustainability centre leaders who attended this workshop were optimistic and excited about the future; they saw possibilities where only eight years ago they saw challenges. One participant described the energy her centre had brought: “For the last couple of years, I’ve been working in an environment characterized by departmental silos. That is partly why I am so excited about the role of our sustainability centre as a potential intermediary and a whiff of fresh air.”
Centre directors said their sustainability centre was shaping the agenda of the business school. For the first time, I heard that dedicated degree programs with contemporary sustainability thinking were outperforming mainstream MBA programs, e.g. at the University of Guelph. Post-experience programs, such as the MSc program at the University of Lausanne, were fully subscribed. One participant even said that sustainability offers a new paradigm that is more interconnected, interdisciplinary and future looking and should shaping higher education more generally, as MBA enrolments in the United States decline.
These sustainability centre leaders wanted to break down the barriers between businesses and business schools. They recognized that to shift the paradigm within business schools from a neo-liberal view of business, in which business thrives at society’s cost, business schools need to work more closely with business.
Businesses are at the front line of managing tensions around making money and doing good, and they are increasingly creating shared value. They are innovating new practices that will assure sustainability of the business and society, and thereby showing that 1970s Friedmanite economics are indeed out of date.
I want to leave you with just one thought: business schools need to engage with businesses to advance sustainability thinking. Reach out to a professor at your local business school — especially the sustainability centre — and offer to speak in classes, host student project teams, or collaborate on research. Business schools need to shape future managers who see that the future of business lies at its intersection with society.
Find Out More
Sustainability Centre Community information and directory
Sustainability Centres 2018 Workshop reflection and photos
About the Author
Pratima (Tima) Bansal is a Professor of Strategy at the Ivey Business School. She is also the Founder for the Network for Business Sustainability, a growing network of more than 7000 researchers and managers committed to advancing sustainability in business. She has received significant accolades for her scholarship in business sustainability: most recently, in 2017, she was presented with the Organizations and Natural Environment Distinguished Scholar Award by the Academy of Management; in 2012, she was awarded a Canada Research Chair to pursue her efforts to make business both profitable and sustainable; and, in 2008 a Faculty Pioneer for Academic Leadership.
Photograph of the Cornell Tech campus by Thomas Johnson