Promoting Societal Impact Through an ESG Lab

• Situated within ASU’s W.P. Carey School of Business, the lab is a multidisciplinary effort that consolidates ESG efforts across the school.
• While the lab’s research is wide-ranging, its primary focus is on the governance of for-profit firms, and its goal is to provide accessible information for practitioners.
• The lab also aims to educate students, working professionals, and the general public about the importance of ESG.

 
Some of the most interesting conversations in business today focus on environmental, social, and governance (ESG) issues. ESG is such a new field that there is still much discussion about what topics it includes, what its best practices are, what questions we should be asking—and even what each of the letters represents.

We do know that companies are looking closely at all three components of ESG and measuring their commitment on each one. For instance, the letter “E” most often stands for environmental issues and might pertain to the way a company approaches climate change, energy use, and waste management.

While some observers contend that the “S” stands for sustainability, it’s more commonly associated with society or stakeholders. In this context, business leaders might consider the needs of employees, customers, suppliers, local communities, and governments. As they strive to improve on societal measures, they are motivated to upgrade worker conditions, strengthen their relationships with the community, and enhance their efforts toward diversity, equity, and inclusion.

The “G” traditionally stands for governance, though some firms might also organize their government-related activities under this initial. As they monitor governance issues, leaders pay attention to leadership behavior, executive pay, internal controls, and shareholder interactions.

Because ESG topics are so important and wide-ranging, and because the field is so new, both practitioners and academics are still determining how these issues are impacting business. That’s why the W.P. Carey School of Business at Arizona State University in Tempe launched its New Governance Lab last year.

ESG had become a key focus of the school’s new strategic plan that was crafted in 2022 shortly after Ohad Kadan became dean of the school. Supported by ASU president Michael Crow and provost Nancy Gonzalez, the lab was viewed as a way to consolidate all ESG efforts across the school. Its goal is to transform modern governance and create a better future for stakeholders by creating practical, accessible research.

Creation and Funding

The lab is a perfect fit for W.P. Carey because we have more than four dozen faculty across multiple disciplines who have expertise in ESG topics, and ESG benefits from a multidisciplinary approach. While the New Governance Lab is situated within the department of management and entrepreneurship, it draws from all eight of the business school’s departments. It also works with other entities at ASU: the Lodestar Center for Philanthropy and Nonprofit Innovation, the School of Sustainability, the Global Institute for Sustainability, and the Watts College of Public Service and Community Solutions.

Funding for the lab, which currently comes from the ASU Office of the President and the W.P. Carey School, covers five PhD students and a variety of research projects. Starting in the fall of 2023, additional funding will enable us to support another PhD student for five years.

The monetary investment allows us to recruit faculty to serve as fellows of the lab, so last fall we invited faculty to apply for the roles. Individuals were nominated by department chairs and school directors, based on their research and teaching in the ESG area. In the end, four tenured faculty and two clinical faculty were appointed, and they come from a variety of backgrounds—the W.P. Carey School of Accountancy, the Morrison School of Agribusiness, and the departments of marketing, supply chain management, and management and entrepreneurship.

When the lab launched, we issued a call for research proposals and selected seven projects for funding because of their potential impact on ESG knowledge and practice.

These fellows gathered in late fall of 2022 to create the lab’s strategic plan. The fellows also studied relevant research to map the competitive global positioning of think tanks at other universities and organizations.

The entire ASU community was informed about the lab and its goals during a town hall meeting at W.P. Carey. The lab also has been profiled in the business school’s magazine, which is shared across campus, and it will soon have its own website.

Research So Far

One of the lab’s most important goals is to produce useful, practical research. When the lab launched, we issued a call for research proposals and selected seven projects for funding because of their potential impact on ESG knowledge and practice. Our current research projects, most of which we expect to result in journal submissions, include the following topics:

• An examination of how firms are hoping to alleviate poverty in China by aligning with the United Nations Sustainable Development Goals.
• A look at the role of hedge fund activists in driving business behavior and decisions.
• An examination of how women experience the corporate director role at the individual, board, and group levels. This topic has inspired two manuscripts that aim to contribute to board effectiveness by helping board members understand and leverage the strengths associated with diversity.
• An analysis of the quality and type of media coverage that male and female CEOs receive and how investors react to that coverage.
• A study that considers the degree to which the personality traits of CEOs lead to agency costs when conflicts arise between managers and stakeholders.
• An examination of how much influence lead directors have on CEO succession planning in the U.S.
• The development of a theoretical framework that looks at how various audiences respond to public corporate sociopolitical activism. This research was presented at the Strategic Management Society’s annual meeting last September. Two PhD student researchers are using work on this project as part of their dissertations.

A Focus on Practical Value

While ESG is clearly a broad subject, the lab is looking specifically at governance in for-profit organizations and the influence wielded by company owners, boards, top executive teams, analysts, and other media intermediaries who influence firm share price. In this space, some of our topics include compensation, board composition, evaluation, succession planning, and performance.

Our goal is to translate our research findings into practical, nuanced, and accessible ways for organizations to implement better ESG programs. To this end, the lab is creating and maintaining a database of governance research and best practices for private, for-profit firms.

Our goal is to translate our research findings into practical, nuanced, and accessible ways for organizations to implement better ESG programs.

We are also looking for ways to involve corporate partners in the lab. For instance, we are forming a Directors Council of public and private for-profit directors. Council members will guide research and devise ways to gather and disseminate knowledge on an ongoing basis. In the future, we hope to bolster our funding by receiving commitments from corporate members who want access to the lab’s unique knowledge and by providing consulting to firms.

To make sure we continue to create valuable knowledge for our corporate partners, we are implementing summer research funding opportunities for faculty and PhD students, which include incentives for faculty who do ESG research. We are placing special emphasis on supporting cross-disciplinary research and research co-authored by governance scholars and practitioners. These summer research fellowships will culminate in a schoolwide research symposium with practitioners and researchers.

ESG in the Classroom—and Beyond

But we want to do more than provide useful insights to current CEOs. We want to educate future business leaders so they will prioritize ESG and understand its best practices. To that end, we now require first-year business students to take a Business in Society class. It will provide students with a foundation to understand the key role that firms—and the people who run them—play in creating functional communities.

The New Governance Lab also will serve as a resource for faculty looking to integrate ESG and DEI concepts into their courses. Faculty affiliated with the lab will be encouraged to write up their research as case studies that can be used in undergraduate and graduate settings. In addition, through partnerships with W.P. Carey’s executive and continuing education offerings, the lab will provide dedicated ESG training to working professionals. Through these educational offerings, we believe the school can become a choice destination for recruiters looking to hire students who can create societal impact.

In addition, the lab is looking for ways to have impact outside the classroom. We want to help everyday people better understand corporate governance—and even play a role in systems that are more typically the realm of stockbrokers and hedge fund managers. The number of publicly traded companies in the U.S. peaked in the late 1980s. Today, a significant amount of invested capital comes from private equity and venture capital, funds usually unavailable to small retail investors and those from underrepresented segments of society.

At the lab, we believe that when citizens understand and participate in investment decisions, especially when they are presented with an informed and nuanced perspective, they will pay more attention to ESG issues. They might buy stocks that they consider more sustainable or vote for board members who favor positive societal impact, which means ESG will become even more powerful.

The Future of Governance

At the New Governance Lab at W.P. Carey, we are excited to complete practical research across disciplines, methodologies, and perspectives to create a fuller picture of what governance is—and even more importantly, what it could be in the future.

Business schools must be part of the process that reimagines managers as leaders who not only understand the value of ESG, but also know how to meet the people-profit-planet goals of sustainable businesses. As we train our graduates in these critical issues, we will continue to create positive societal impact even in the face of an uncertain future.