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In late February, I boarded a train at Penn Station bound for Charlottesville, Virginia, on my way to the Darden ClimateCAP Summit at UVA’s Graduate School of Business. Supported by the Bernstein Center and a Leadership Development Grant, I was looking forward to an interactive weekend with other MBAs discussing the short- and long-term business impact of climate change. Carving through the industrial meadowlands of Northern New Jersey, along the artery of chemical and gas refineries, lumber yards, and smoke-plumed auto plants that connect New York and D.C., I began to realize why rural Virginia with its bucolic bounty of rolling hills and abundance of fresh air was a more appropriate location to discuss the virtues of preserving the natural world than further up the Northeastern corridor. That, and, Darden has a long history of climate advocacy, a strong curriculum of stakeholder management—the theory that businesses should be accountable to their communities as well as their investors; that communities are, in fact, equal investors in the life of the corporation—and a deep bench of faculty committed to understanding and influencing the values and practices that define corporate environmentalism and social responsibility today.
Darden professor Ed Freeman is one of those leading the way. He’s a philosopher by training, which inflects his approach to Business Ethics with a strong sense of personal morality: leadership is about making choices. In a sector driven by operating profit margins, the personal ethics of leaders at the top are often outweighed by their responsibility to drive financial growth for investors. Launching the summit with an observation—that he’d been talking about the value of stakeholders since the 1980s, but only now are people listening—Freeman framed the weekend with bitter irony: global leaders in the private sector (normally the first responders in times of crisis) are only just now reacting to climate change because finally they’ve awakened to the potential impact to their bottom line. Few, however, are proactively tackling the cause. Executives from UPS, JPMorgan, Google and Wal-Mart (to name a few) presented on their latest efforts to invest in a sustainable future: fuel-efficiency, carbon neutrality, alternative energy, etc. And while it was a refreshing chorus to hear (global corporate players unified by common purpose: to keep the planet alive), many of the measures felt defensive.
The Climate Wake-up Call heard around the world originated not in the consciences of corporate CEOs but with a recent letter by Larry Fink, the head of BlackRock. Given the size and scope of his multi-trillion-dollar portfolio, which invests in nearly half of the S&P 500, his voice is often the loudest in the room. And with it, he outlined a simple fact: “climate risk is investment risk.” The symptoms of climate change—rising sea levels, disruptive weather patterns, drought, famine—all have negative impacts on the economy. In order to credibly pursue long-term financial growth, companies will need to address the underlying causes. To ignore the stakeholders, it follows, is to ignore the shareholders, which is a classic no-no of economic theory. This message translates into a host of different measures that Black Rock is taking to optimize its investments not only for profit but for impact. For Black Rock clients, this means more public commitment to transparency, advocacy and concerted effort to change.
Over the course of the weekend, presenters outlined their plans: UPS would send drones to deliver packages in order to keep gas guzzlers off the road (“the greenest mile is the one you don’t drive”); Nike would require transparency from its many suppliers and manufacturers across regions and countries where there are fewer regulations; and Moody’s would weigh sustainability assets more heavily into its ratings of corporate security. Yet each presentation seemed to conclude with a similar sense of resignation: “No one business can do it alone;” “The current White House doesn’t believe in climate change, therefore it’s harder to mobilize;” “We compete with several developing countries (China) who have no climate mandate.” The difficulty of the challenge always seemed a good-enough excuse to fall short of its demands.
This motif was hard to hear coming from some of the most globalized, profitable and powerful corporations in the world who have scalable leverage over their supply chains and the ability to influence the entire economy with small changes in their own tactics. While they seemed to understand that businesses can create and destroy value for society, therefore they have implicit responsibility to the communities they impact, many still acknowledged that shorter-term profitability drove decision-making from the top. Heads of Sustainability were hired, departments were created to address the problems, and initiatives were funded, but quarterly earnings were still the final metric by which they understood their own success.
To quote Freeman, “The idea that business is about maximizing profits for shareholders is outdated and doesn’t work very well… The task of executives [should be] to create as much value as possible for stakeholders without resorting to tradeoffs. Great companies endure because they manage to get stakeholder interests aligned.” This framework is no longer radical—many executives agree on its core proposition: stakeholders and shareholders have the same long-term goals. But it requires a paradigm shift in thinking that the MBAs in attendance at ClimateCAP seemed to be intent on defining. From programs as far and wide as Stanford GSB, Bard Sustainability MBA, and London Business School among others, MBAs pressed executives to explain the rationale behind their decision-making, how they set their goals and measured their own impact, and what timelines they were working against. The curiosity, concern and awareness were born out of an interest in business in society, rather business as a separate from society. This gave me a lot of hope.
The annual ClimateCAP Summit is in its third year. It was begun by a group of business students in 2018 to address the business concerns associated with climate change. And while the original vision was not about policy, science or politics, it’s become increasingly clear that in order to address the systemic causes of climate change, private companies will have to have to embrace their role as leaders of policy and public opinion. It may be an uncomfortable fit for CEOs, but during a time when political institutions are weaker than ever before, society still needs leadership. Change will not come without it. This is my ultimate takeaway from ClimateCAP: that we MBAs embarking on careers in management across sectors will have an opportunity to shape the future. And in that, we’ll have a choice in what kind of leader we want to be: reactive and defensive, slowly ceding ground to climate’s inevitable change, or proactive, progressive and intent on building long-term, healthy and sustainable growth for the world.
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