This article is part of the ISC’s Transform21 series, which will explore the state of knowledge and action, five years on from the Paris Agreement and in a pivotal year for action on sustainable development.
Many business schools are currently engaging in efforts to integrate sustainability by “greening” existing disciplines, such as finance, marketing, strategy, operations, accounting, HR and management. While this process is in itself quite a challenge, it is marked out by limitations. Indeed, disciplinary boundaries are based on silo-thinking which is by nature ill-adapted to systemic issues such as climate or biodiversity challenges. At the extreme end, if business schools simply end up putting a “green” or “sustainable” label in front of each discipline, they risk missing deep understanding of the scale and scope of the phenomena, and ending up promoting marginal adaptation instead of meaningful change, thus inhibiting radical, critical and fundamental questioning of key disciplinary hypotheses in management about corporate governance and “sustainable” value creation.
As a result, beyond integrating sustainability within each existing business discipline, a second approach is required, focused on introducing new topics, skills and knowledge. This approach is needed to develop a deeper understanding of the mechanisms of sustainability ‘grand challenges’ (such as climate change, biodiversity collapse, ecosystem dynamics, social inequalities, etc.) and the development of specific competencies related to the assessment of sustainability impacts (Life Cycle Analysis, scenario analysis, etc.). Such knowledge is key to understanding the true scale and scope of sustainability challenges for our societies, to apprehend the systemic and non-linear character of climate or biodiversity dynamics, and to assess the relevance of sustainable solutions designed and promoted by businesses. However, as mentioned above, this approach is still largely lacking. According to a wide scale study conducted in France by the Shift Project in 2018, the vast majority of higher education institutions (76%) – including those offering engineering or business degrees – did not propose any single course on climate and energy issues (Shift Project, 2019). Subsequently, Jean Jouzel – former Vice-Chair of the Scientific Working Group of the Intergovernmental Panel on Climate Change (IPCC) – submitted a report to the French Ministry of Higher Education in 2020, to formulate various recommendations towards a new “common knowledge-base”, for all students of higher education, on the theme of ecological transition. There are clear expectations from students as well, such as the Student Manifesto for an Ecological Awakening, which gathered more than 30 000 students’ signatures demanding a reframing of corporations and higher-education curricula to integrate the themes of ecological transition and climate issues.
Over the last few years, programmes have started to change. At ESCP Business School, like in other schools taking a sustainability turn, we have widely used workshops such as the “The Climate Fresk” to improve student understanding of climate change with all new cohorts of students. We also have introduced seminars or compulsory courses across our main programmes (from master’s in management to executive MBA programmes). Through these initiatives, we want to make sure all students acquire basic ecological literacy and are able to understand the impact of planetary boundaries for business. However, we felt the need to dig deeper into the complex topic of energy transition, which lies at the core of ecological transition for our economies and societies, with massive ecological, civilizational, and business impacts.
Why does energy stand at the core of sustainability transition?
From a social and economic perspective, energy has played a decisive role in human development, wellbeing, productivity and growth. From an ecological perspective, our collective destiny is shaped by our ability to limit climate change in order to maintain ecosystemic services and an inhabitable earth. To keep within the limits of a carbon budget complying with the Paris climate agreement, a country such as France set the objective in 2009 (through the “Grenelle of the environment”) to divide its CO2 emissions per capita by a ratio of six in the coming 30 years, moving from 12 tonnes of CO2 a year to 2 tonnes of CO2 in 2050 (before reaching carbon neutrality by 2070).
From the perspective of a business leader, what are the risks and vulnerabilities faced by a specific business in the light of such energy challenges? What types of investments and changes are needed to adapt corporations to this new reality? Who bears the costs, and how do we manage the risks and process of change? How do we design a low-carbon trajectory at the micro level compliant with macro trajectories? How should business contribute to sectoral, national and international regulations to design a relevant regulatory framework in the light of these challenges? Such challenges involve key organizational transformations at the social, regulatory, sectoral, business and individual levels. For this reason, organizational and business skills are highly needed in such a transition.
In order to equip a new generation of students with the skills to meet this challenge, we set out to design a 30 hours management course that would develop an understanding of systemic complexity. During the first part of the class, we focused on defining energy and understanding its multidimensional facets and the paradoxical tensions involved. For example, after exploring the exponential growth of energy use over time, its correlation with GDP growth and its central role in economic and social development (Smil, 2017), we explored the need to radically decrease our dependence on fossil fuels, which still accounts for more than 80% of the energy mix at the global level. We explored the physical reasons and geopolitical consequences of such a reliance on fossil fuels, before exploring the challenge of climate change.
The next five sessions focused on the notion of physical and transition risks for businesses. We introduced methodologies to measure the carbon footprint of businesses, with detailed examples for multiple sectors and activities, managerial tools for low-carbon strategies, scenario analysis, and so on. Students also explored major antagonisms between business and climate objectives, such as the difficulty of reducing GHG emissions for companies, situations where short-term business priorities conflict with long-term action on climate change and the contradiction between carbon reduction objectives and business strategies driven by growth of production volumes.
An additional and transversal objective was to help students project themselves into their future career and identify a fulfilling pathway, both professionally and personally. Overall, feedback from students was very positive. An anonymous survey found that 94% of respondents would recommend the course to another student (with a likelihood of between 8 and 10 on a 10-point scale). Students praised the importance of the topic and its multidisciplinary approach (covering the macro, physical and technical dimensions before digging into business implications), the diversity of the professors and professional guests, multiple workshops and interaction with the teaching team and the overall dynamics in the course. However, students also noted that they went through a strong emotional experience throughout the whole process of the class, as they progressively became aware of the daunting centrality and difficulty of such energy challenges for business, society and climate issues.
Outcomes: Observations about business and the energy transition
For the team of professors, this course brought to light some important transversal observations about energy transition, climate and business:
- Firstly, there is a stark disconnect between climate macro-objectives (for example international and national commitments) and actual sectoral and business transformations.
- Secondly, the systemic dimension is often neglected in sectoral and business plans to meet climate targets: transformations and scenarios are considered only within the silos of specific economic sectors, countries, independently of what others do. They are very rarely considered at a more systemic scale, taking into consideration global interdependencies amongst sectors and countries. For example, to decrease their carbon impact, many companies and sectors are betting on a massive availability of renewable energy, which may not be available for all.
- In addition, there is a lack of real-life, tangible descriptions of a society that would be compatible with a “carbon neutral society”. There is an urgent need to propose narratives, imaginaries and prospective work to envision what our society would look like (in terms of travel, food, housing) if we decreased our CO2 emissions by a ratio of 6 by 2050.
- It remains difficult to envision radical strategic shifts in light of the global warming challenge. For example, at the end of the course, students presented their corporate analysis to conduct a “strategic stress test” of a firm’s climate strategy. Professors were struck that, in spite of the course, and while being now fully aware of the scale and scope of the changes required to address climate change, students were still heavily influenced by existing corporate policies and practices, and were uncomfortable with the idea of stopping certain activities, even when they are obviously harmful to the climate. Instead of challenging ‘business as usual’, students tended to interiorize the “imperatives” of economic growth and financial profitability. When confronted with trade-offs between business and climate, they tended to prioritize profits and try to “do less harm” rather than addressing the issue at the right scale. Some of them also tended to conflate energy issues with broader corporate sustainability policies, and had a hard time challenging the climate strategy of companies that enjoy a “green” brand image and a good sustainability reputation
Beyond energy and climate, how should business schools approach the study of sustainability grand challenges?
Ultimately, developing ambitious courses on such grand challenges is both a responsibility and an opportunity for management education. Because of the multidisciplinary and systemic complexity of energy and climate change, business schools need to invest resources and time to encourage multidisciplinary research and education on sustainability grand challenges by building relevant institutional partnerships with schools in engineering, agronomy, social science and even other business schools, in order to develop such multidisciplinary contents.
It is also vital that educational institutions reinforce links with alumni, students, professors and administrators, and build a wider ecosystem of companies around the school in order to spread knowledge on a wider scale, and to gain insights on experimentations conducted in the business world. Finally, they must create inter-organizational collaborations and share active solutions and good practices. The intellectual and social challenges presented by climate change are perhaps the greatest justification yet for why we need open-minded, open-ended exploration and dialogue of the sort universities can provide. As a first start, and given the urgency of the climate crisis, universities and higher education institutions could start by sharing experiences, materials and solutions to address the challenge in their educational endeavour. Don’t hesitate to contact us if you wish to further the dialogue.
Aurélien Acquier is a professor of strategy sustainability in the department of management at ESCP Business School as well as the Associate Dean for Sustainability and Scientific Co-director of the ESCP Deloitte Circular Economy & Sustainable Business Models chair. His research deals with the integration of sustainability and social responsibility issues in complex organisational forms.
Pierre Peyretou is an affiliate professor at ESCP Business School, and helps companies build low-carbon activities. Previously, he developed ventures in several countries at multiple leadership roles, worked in venture capital and led the DataCity programme.