Embedding Sustainability Into Business Education

Sponsored Content

Growing public scrutiny on sustainability, inequality, and other social concerns has put the pressure on businesses to view the concept of environmental, social, and governance (ESG) issues as a basic risk management concept. This powerful shift to a more socially responsible model of capitalism that puts stakeholders ahead of shareholders has impacted not only global business, but also business education.

Billy Nauman, reporter and producer for Moral Money at the Financial Times, sat down with Sophie Rifkin from NYU Stern Center for Sustainable Business and Kurt Harrison from Russell Reynolds Associates to explore this trend. In their conversation, Rifkin and Harrison outlined the impacts of responsible business practices in the global economy and the practical steps business schools can take to meet the rise of ESG.

Job Market Expectations

ESG is steadily moving from the margins of business to the main stage. Before the pandemic, sustainability was often thought of as a bull market luxury that companies and investors would discontinue if the economy fell. However, unlike earlier recessions, the COVID-19 shock has in fact accelerated the sustainability momentum.

By embedding environmental and social sustainability into core business strategy, “businesses can reduce risk, they can create competitive advantage, they can develop innovative products and services, all while improving financial performance and delivering value for society,” said Rifkin of NYU Stern. Over the past year, her prediction has been borne out: During the pandemic, businesses that prioritized ESG principles outperformed those that did not.

For example, research from data provider Morningstar showed that, during the market sell-off sparked by the pandemic in the first quarter of 2020, sustainable funds outpaced traditional funds, notching up average excess returns of up to 1.83 percent. Even excluding the unusual market conditions unleashed by the pandemic, the majority of sustainable funds in the study still beat traditional funds over the long term.

Harrison of Russell Reynolds shared that he is seeing “a dramatic uptick in demand for senior-level executives, as well as rising and mid-level executives who can demonstrate some sort of proficiency or track record around incorporating sustainable business principles into either an operating strategy or an overall enterprise-wide corporate strategy.”

Rifkin and Harrison both emphasized that the key to success was to integrate ESG analysis across the entire business, not as a separate policy. Nauman of the FT echoed their view, saying, “I've talked to the head of ESG at a lot of these big companies. What they’ll tell me is, ‘If I do my job right, my job is not going to exist in 10 years because we shouldn’t be thinking about ESG analysis as a separate concern. ESG analysis is a part of good investment analysis, and we’re working to integrate ESG across the entire business.’”

In some cases, corporations are looking to academic institutions to help them achieve this integration. For example, AllianceBernstein has partnered with Columbia University’s Earth Institute so its investment staff can learn how climate risks should be factored into investment decisions. In turn, the company’s asset manager is also teaching Columbia scientists about finance and the importance of collaborating on projects that will use their research in ways that have a real-world impact.

Similarly, NYU Stern’s Center for Sustainable Business has pioneered the Return on Sustainability Investment (ROSI) methodology as a way to marry sustainability strategies and financial performance. The methodology is designed to help corporate leaders build better business cases for sustainability initiatives.

When speaking about the job market, “the great news is [sustainability] is still a relatively new field,” Harrison said. “The next generation of leaders in this space is being created right now as we speak in real time, and it’s being created in the business schools.”

How Schools Can Prepare Their Students

As companies shift toward integrating sustainability into their core business strategies, business schools need to shift ESG into their core curricula instead of relegating the subject to their elective courses. Rifkin said, “There's more to be done in terms of really achieving that integrated approach, but I think for us at Stern, we want all students to graduate understanding how sustainability can be a helpful framework regardless of whether they’re going into sustainability specifically.”

Rifkin suggested a few strategies for how schools can use experiential programs to thread sustainability throughout a student’s education. For example, in light of a tightened internship market last summer, NYU Stern partnered with small businesses in New York City to find creative ways for students to gain work experience. To support these partnerships, Stern fundraised to subsidize those students so small businesses were not expected to finance the internships on their own. Stern also created a summer program with hackathon-like experiences focused on solving pressing challenges related to the pandemic.

Rifkin also made other suggestions. For example, schools can host and fully fund students as they participate in ongoing sustainability research. Schools also can leverage experiential learning programs to assist companies that are seeking out students to work on projects.

How Schools Can Incentivize Their Faculty

One of the biggest challenges schools face when trying to integrate responsible business practices into their core curricula is finding ways to encourage faculty to add ESG principles to their classes. Overcoming this challenge starts with providing the right resources and incentives.

In the case of NYU, the Center for Sustainable Business acts as an internal consultant to students, faculty, and administrators, collaborating across departments in Stern’s undergraduate and graduate programs. On the teaching side, these groups write case studies and make them available to professors; co-author teaching notes that outline ways to integrate sustainability into core-curriculum syllabi; and help recruit guest speakers. Schools can also create a faculty advisor council with members drawn from each department to share insight and advice on how to integrate ESG into the curriculum and produce resources like case studies.

On the research side, Rifkin suggests implementing a grant program for tenure-track faculty or PhD students who are researching subjects related to sustainability. It’s a “carrot approach to incentivize people to want to work with us and to receive some support for that work,” she says. The school then markets and promotes people’s efforts, she adds, “to make sure that they're getting the attention for receiving that [grant].”

Further Reading

Readers who would like to learn more about ESG can sign up for a 30-day free trial to read more from Moral Money, the trusted destination for news and analysis about the fast-expanding world of socially responsible business, sustainable finance, impact investing, ESG trends, and the United Nations’ Sustainable Development Goals.

Moral Money is published by the Financial Times, a global business publication known for its objectivity, extensive coverage of international news, and emphasis on responsible capitalism. Business faculty can rely on the FT’s award-winning journalism to bring theory into practice in real time, equip their students with an understanding of the global economy, and prepare them for a competitive job market.