The Power of the Collective
When economist Milton Friedman published “The Social Responsibility of Business Is to Increase Its Profits” in The New York Times in 1970, he promoted a core doctrine that was both simple and highly influential. Businesses, in Friedman’s view, have one supreme set of stakeholders: their shareholders. Today, some economists and business leaders still espouse Friedman’s key views on the utility of business.
But while profitability is still imperative for business, many people have challenged Friedman’s doctrine due to the emergence of systemic societal and environmental issues that could have catastrophic outcomes—such as accelerated climate change, pollution, and inequality. In 2019, the Business Roundtable, whose members are the CEOs of some of the world’s most influential companies, released a statement affirming that the purpose of the corporation is to serve all stakeholders, not just capital providers.
At the same time, some of the world’s largest investment companies have declared that they would direct their investments to enterprises that addressed societal and environmental challenges. And after the pandemic turned our world upside down, businesses greatly accelerated the speed at which they prioritized environmental, social, and governance (ESG) activities.
But most global ESG initiatives cannot be achieved by one company or one set of constituents—they require multistakeholder involvement. Because business schools naturally link science and practice, they are extremely well-suited to providing space for such multistakeholder conversations to take place.
Changing One Industry at a Time
One way that Fordham University’s Gabelli School of Business in New York City is making this space is through its Responsible Business Coalition (RBC). Formed in 2020, the RBC is a network of executives, educators, researchers, and nonprofit leaders who are collectively redesigning business as a compassionate and regenerative force for prosperity. RBC members share a vision and commitment to improve the ESG impact of industries worldwide and help achieve the United Nations’ Sustainable Development Goals (SDGs).
The RBC provides a space where leaders can meet with their peers to express different perspectives, highlight challenges, and share lessons learned. These interactions result in commitments that they forge together during curated action sessions. Core to the RBC’s work is helping industry leaders recognize their own blind spots, value other perspectives, identify opportunities to solve social and environmental problems through their business models, and ultimately change their behaviors for the better.
We plan to build coalitions around different areas of business. The first focus area, Future Fashion, builds on work with CEOs to foster a more sustainable, responsible fashion industry. The RBC works with 46 CEOs who represent 275 brands, including some of the largest fashion companies in the world. They convene two to three times during the year to catalyze action in their industry.
For example, in March 2021, Fashion Makes Change (FMC), an industrywide initiative born out of the CEO discussions, was launched. Several fashion brands give customers the option to round up the amount of their purchases at the point of sale. These small amounts, along with matching brand donations, support programs that empower workers throughout the supply chain.
The initiative was inspired a few years ago by one CEO in particular, who expressed interest in finding ways to engage customers in ESG efforts while supporting more sustainable transformations across the business and industry. Further discussion revealed that several companies and NGOs affiliated with the RBC were investing in women’s education at a factory level. These programs, however, remained disjointed. Among other efforts, the FMC will support the [email protected] Collaborative, as well as provide a way for fashion brands and retailers to coordinate their educational programs.
Because business schools naturally link science and practice, they are extremely well-suited to providing space for the multistakeholder conversations required to achieve ESG initiatives.
The FMC now involves more than 50 fashion brands worldwide, including many companies outside the RBC. Backed by a grant from Rockefeller Foundation, FMC has two primary priorities. First, participating organizations have committed to creating more opportunities for women’s education. Second, these companies are exploring innovative financial solutions to expand the use of solar energy in their factories.
One goal of RBC members and their other colleagues in the FMC is to educate 80 percent of women in the supply chain by 2025. By that same year, the CEOs also have committed to adopting a strategy of 100-percent responsible recruitment, a term that refers to the proactive protection of workers’ rights, elimination of worker exploitation, and assurance of fair and transparent recruitment policies.
In addition, RBC partners have set the following ambitious goals:
- Reduce the use of hazardous chemicals to zero by 2025.
- Sustainably source 100 percent of key materials by 2025.
- Use 50 percent renewable energy in company-owned facilities by 2025.
- Use 100 percent renewable energy in these facilities by 2030.
- Eliminate single-use plastics by 2030.
- Reduce greenhouse gas emissions in the supply chain by 30 percent to 45 percent in 2030 and by 100 percent in 2050.
To bring this vision to life, the RBC relies on a leadership team made up of people from throughout the Gabelli School. These include our Gabelli Fellows, experts who have been identified as social innovators and changemakers with experience connecting with industry; administrators who help lead and execute the RBC’s larger goals; and faculty from all disciplines who link curricular and co-curricular initiatives to RBC initiatives. In addition, the leadership team facilitates collaborations between faculty and industry; and matches students with hands-on learning, internship, and job opportunities at RBC partner firms.
Coalitions as Vehicles for Business Schools
According to the 2021 Global Talent Trends Study, conducted by Mercer, a professional services company focusing on the future of work, more than 60 percent of human resource managers in the United States say that their companies have continued or accelerated their ESG and multistakeholder efforts. The majority of these firms (53 percent) are tying ESG goals to their purpose, and about a quarter (26 percent) are embedding ESG metrics into executive scorecards. The study also finds that organizations that integrate ESG metrics into the CEO’s agenda are more likely to report high revenue growth.
Such studies show that the call across the business community for “stakeholder capitalism”—for strategies that serve the needs of multiple stakeholders—is getting louder. This means that business schools must actively engage with much larger and more disparate groups of stakeholders, each with distinct goals and objectives.
In an article published in January by the World Economic Forum, David Sangokoya and Ty Greene argue that if businesses want to improve their ESG impact, they must form the “coalitions for the future.” They must adopt “integrated, intersectional approaches” that bring together diverse stakeholders to cultivate in-depth understanding of, and spur action on, issues such as sustainability and social justice.
In short, the authors call for industry to employ the power of the collective. Increasingly, industry is acknowledging that coalitions accelerate the potential for transformation. The role that business schools can play to form these coalitions, influence industry action, and create shared value for business and society is exciting and motivating.
Integrating ESG and Multistakeholder Engagement
Organizations will need leaders who have the knowledge, awareness, mindsets, and frameworks to design solutions for systemic challenges while simultaneously achieving financial success. Therefore, business schools must demonstrate to students that ESG permeates all aspects of business. Their graduates will need a range of skills, so that they can determine how climate change affects corporate strategy, identify metrics that should be disclosed in sustainability reports, select board members with expertise in sustainability, communicate sustainability transparency in the supply chain to consumers, and form investment portfolios based on ESG.
One valuable resource for students is the Sustainable Accounting Standards Board (SASB), a collaborator of the Gabelli School of Business. The SASB sets standards that guide companies across 77 industries in how to disclose information to their investors that is financially material to their sustainability efforts.
If businesses want to improve their ESG impact, they must adopt intersectional approaches that bring together diverse stakeholders to cultivate understanding of, and spur action on, issues such as sustainability and social justice.
At the Gabelli School, students also learn about the ESG framework in Ground Floor, a core course that students take the first semester of their freshman year. In the course, students explore the purpose of business and the role it plays in moving society forward. They form teams to work on business plans that address multiple SDGs, before taking part in the PVH–Ground Floor Challenge, a business plan competition we run in partnership with fashion and lifestyle company PVH (Phillips Van Heusen).
In their sophomore year, students can opt into social innovation cohorts, in which they take core business courses that teach subjects such as management, marketing, and accounting through an ESG lens. Building on this foundational knowledge, students next can opt to complete an accounting major with a sustainable reporting track, learn about impact investing, or manage an ESG investment fund.
We believe that ESG should be introduced as a foundational framework early in the business curriculum and then infused into all core courses. It is too important to be taught merely as an add-on to existing coursework or as a single elective. Within this framework, we must also introduce the importance of multistakeholder engagement—of eliminating functional silos and increasing interconnectivity among the individuals and entities within a given ecosystem.
Future Skills for a Sustainable World
Students who develop the skills to promote widespread engagement will be poised to succeed in the future workplace. In 2019, I conducted a study on the societal importance of multistakeholder engagement with colleagues at more than 60 business schools; our findings were highlighted in an article published in Humanistic Management Journal. We found that while companies cite technical knowledge and acumen as prerequisites for our graduates’ success, they are increasingly prioritizing skills such as seeing issues from others’ perspectives, managing business diplomacy, and navigating a constantly changing world.
To devise appropriate solutions and opportunities, our graduates will need to know how to integrate the perspectives of disparate groups, focus people’s attention on issues of importance, and invite action. The HR managers who responded to Mercer’s 2021 Global Talent Survey support the need for these critical skills, noting that the top skills that workers will need to be resilient in their future careers are collaboration skills (mentioned by 53 percent) and adaptability/growth mindset (50 percent).
As companies redefine their purpose to include serving all their stakeholders, business schools must redesign their curricula to do the same. The schools that integrate ESG and a multistakeholder engagement perspective into their programs will be well-positioned to rise to the challenge.
Aksoy is managing director of the Responsible Business Coalition at Fordham University’s Gabelli School of Business in New York City.