What is the mood of the CSR community in light of the financial crisis?

We will obviously be affected by the crisis, but it will also be a good opportunity to see which companies were “walking the talk” and doing CSR strategically. They are the companies expecting benefits in innovation and bottom-line business.

But some companies were doing it on the PR or marketing basis without having it integrated, and it makes sense for them to cut back on those types of programs. You will see cutbacks in the companies that have not integrated it. That’s good for the consumers, and an opportunity for maturity in the sector and for going ahead strategically and innovation-wise.

As someone who works at a European business school, do you notice any differences in how Europeans and Americans approach CSR?

There are some differences. For example, in Europe we have much stronger government support for social issues. In the United States, philanthropy relates much more to individuals and companies. Having said that, that is only a very small part of CSR. The strategic part of CSR has been driven a lot here in the United States, but has been certainly driven as well by several European companies.

I tend to think it depends on the company. Multinationals have companies in the US and Europe. There are some companies that are quite ahead in this conversation: several American companies, but also several European companies that are approaching it much more strategically. I think the UK is a couple years ahead of the rest of Europe. I would even say that they are ahead of the US.

Is there a dedicated CSR program at IE Business School?

We have have an advanced management program for CSR. That’s for directors of CSR for different companies who want to go into more depth. But the real value is on the MBA. There, we do not have a specific program for CSR. We’ve made tremendous efforts to integrate it horizontally – strategy, marketing, or operations.

If you want to specialize in this area, we have a large set of electives, from social entrepreneurship to strategic CSR. The main objective is that we end up doing business quite differently, because the way we do business now is not sustainable.

The change needed will take decades, but in the meantime we can think of short-term solutions. Some short-term solutions are very important in raising awareness, but the most important question is how can we redesign the way of doing business. So it’s just engaging on these questions throughout the MBA and the other programs, for that matter.

We call it a platform: Social Impact Management. We didn’t want it to be a center where you go when you have some doubts. “How can we integrate CSR into this company?” “Oh, just go to the CSR center.” Then it’s nonsense. It’s like a department. No, we wanted the whole institution to think along these lines. We’ve created this platform that enables a conversation across different departments and stakeholders.

Max posts regularly on IE’s Corporate Responsibility Weblog.

Dan Vermeer

Will corporate sustainability survive the financial crisis?

There’s no question that there will be a whole lot of stress on the job market in general, and nobody is going to be exempt from that. There are a few things that give me comfort. One is that a good chunk of the environmental sustainability agenda has a cost-saving benefit immediately. I think efforts around reducing energy use, water use, waste are going to have very direct benefits on the bottom line in a more efficient kind of enterprise.

This is what some business schools are saying, but is this something companies actually believe?

I think so. I would differentiate the larger national and multinational firms where I would say that it’s pretty well understood that sustainability efforts have financial and strategic value. Most companies are pursuing them, and will continue to do so. I’m pretty confident about that.

I think it is less institutionalized in smaller firms that have less exposure, access to the tools, and expertise in this area. But, in general, it’s pretty well established.

There are a lot of things that go under the umbrella of sustainability, and I think you will see some aspects of that suffer. Things that are framed more in philanthropic terms, corporate social responsibility terms, or corporate affairs terms – those things are likely to suffer because they are seen as more ornamental or  the kinds of things you do in good times to buff up your image.

Will we see fewer image-driven corporate sustainability initiatives?

I think this downturn is going to get rid of the more superficial aspects of the sustainability agenda. There is one line of argument in doing this sort of thing, which is about reputation and image and ethics and being a “good corporate citizen.” To me, this approach is vulnerable to downcycles in the economy.

Which initiatives will survive?

The real aspects of sustainability are, in my opinion, grounded in the realities of access to natural resources. Can you afford to pay for them? Can you drive down the use of them through efficiency and innovation? How are you going to compete in a more constrained environment? Not just carbon-constrained, but water-constrained, soil-constrained, and all of the other natural resources  that we’ve come to depend on.

I think there is another way of framing the sustainability agenda, which is fundamentally about cost savings, reducing your risk operationally, and finding new opportunities to create value. I think sustainability is fundamentally about how you want to place yourself in the market. Look at the auto industry and the choices they have made over the last several years that have now put them in a really suboptimal position in the marketplace, because they didn’t invest in the R&D and provide the products that are now much in demand. There are a good number of companies that understand that sustainability is the basis of competition.

Why else do you think corporate sustainability here to stay?

You have a lot of people moving into the current workforce that really value this stuff, and see it as critical that if they’re going to work for a company, that the company is operating sustainably and not damaging the environment. Sustainability is often an important element in the ability to attract and retain talent that companies are very sensitive to, because in the broader view, there is going to be a real war for talent, and this is one of the things that distinguishes companies from each other.

What are the skills that companies are demanding from graduates in this field?

Having recently come from the private sector, I can speak to my own decisions. I think they are looking for people who truly understand the fundamentals of running a business, so they can do the analysis to show the return on investment in these sorts of efforts. They understand the market strategy of a company. They understand that if you are a publicly held company, that you are spending the shareholders’ money, and that you have an obligation to use that to produce a return. The plus side is that more and more of these sustainability efforts really are in the interests of business and shareholders.

That’s one piece of it. I personally look for people with a mix of experience across sectors. They hadn’t spent their whole life in the public sector, but had worked in government and policy issues, and or had worked in the civil society sector, working in NGOs around some of these issues. I really look for people with a hybrid set of skills and experiences and networks that they could effectively work in partnership across sectors to address some of these bigger challenges. Having worked on water issues, I can tell you that this is something that companies cannot solve alone.

(Photo courtesy: Dan Vermeer)

Nicola Acutt

San Francisco is considered one of the “greenest” cities in the world. So perhaps it’s no surprise that Bay Area business schools are among the leaders in teaching sustainability and CSR. One school – Presidio School of Management – specializes in it. We spoke to the school’s associate dean Nicola Acutt about the Presidio MBA program, and whether corporate sustainability will be the first victim of the financial crisis.

Will an economic downturn marginalize corporate social responsibility and sustainability?

I think it’s something that’s obviously on the forefront of a lot of people’s minds. I would say that now more than ever, there is a need for business leaders who have this kind of training and understanding. In an economic downturn, sustainability becomes even more critical. In strong economies, it provides opportunities. In weak economies, it provides opportunities, and can be central to survival and turnaround strategy.

In a downturn, one of the most important things is to tighten your belt and look at where you can be more efficient. That’s really at the core of an integrated bottom line: understanding how a sustainability-oriented strategy can reduce risk, cost, enhance reputation, ensure customer loyalty. Those are all key parts of the business case for sustainability and sustainable management.

But there must be some companies that still think of CSR and sustainability as ornamental; a nice extra, but expendable.

I think we’re going to see a shakeout of the companies that rushed to the green scene for the purely marketing and PR benefits. Those are the kinds of companies that are going to drop their commitment, because it’s not integrated into their operations, systems, IT, or core business strategy.

We’ve seen a remarkable change in how companies see CSR and sustainability recently. Years ago we were having to make the business case for an MBA in sustainable management. Now, the business case is being made for us. Some of the most compelling reports are coming out of the finance sector, about the bottom line business case for responsible management and stewardship. These economic times are really going to validate the depths of that commitment, and you’ll see the companies that have connected this to their core business strategy are going to be successful.
What are the skills that students get from your MBA program?

Four key skills. The first is understanding the principle of whole systems: ecology and economics and how they impact business. This is at the core of addressing some of the most pressing business issues, like energy, climate change, water shortages, etc. So, the capacity to think in whole systems – to connect the dots – that’s number one.

The second is being able to apply the principles in a way that helps guide business strategy: understanding these frameworks and how they can actually help business strategy move forward.

The third is making the case. It is one thing to understand these principles, but it’s another to be able to articulate the business case for sustainability.

The fourth is understanding how to apply emerging management tools that you wouldn’t necessarily get in a traditional MBA. You’ll get your core business skills and frameworks, but you will also learn emerging tools and beneficial frameworks like the integrated bottom line, stakeholder analysis, lifecycle analysis, full-cost accounting, G3 (Global Reporting Initiative) accounting – the sorts of things that you wouldn’t necessarily have access to otherwise.

How do you see Presidio as developing in this growing field?

Our teaching model is what really differentiates us from MBA programs that integrate environmental and social issues into their curriculum. How I differentiate Presidio is by using a 1.0-2.0-3.0 model.  Some of the more established, traditional schools are at the 1.0 level, which means including some electives in sustainable management or enterprise, so that MBA students can take a class in these areas. 2.0 is integrating sustainability into every class in the MBA curriculum. Presidio does that. We integrate sustainability and social responsibility into all of our classes from accounting to strategy to finance – the whole gamut.

The next level up is 3.0, which is what I describe as an integrated curriculum.  This means what you’re learning in finance and accounting is connecting to your operations class, which is connected to your marketing class, which is connected to your strategy class. This concept of vertical and horizontal integration across the experience, so that when you leave the MBA, you have the capacity to think in whole systems; to connect the dots across disciplines and functions in business.

Our goal is to create a different business education model with integration at the core, and that’s what we’re working on.

Photo courtesy: Presidio School of Management

Raymond Horton (Photo: Columbia Business School)

His students may not be anything like Gordon Gekko, the ruthless antagonist of the film Wall Street. But Raymond Horton, the director of the Social Enterprise Program at Columbia Business School, says CSR- and sustainability-focused MBA grads will still be in demand in a tough economy.

How will the current financial turmoil affect the corporate social responsibility branch? I imagine that companies that have to make job cuts might look here first.

To the extent that CSR units are located in the public relations parts of businesses, you might be right. But I think there has been a sea change here. Most people from Columbia Business School who want to be social enterprisers and practice corporate social responsibility are going into operating divisions, and incorporating CSR into the basic routines and policies of the organizations. So they’re not going to get displaced. It’s just another way of saying that CSR has become a profit center in a lot of businesses.

Is now the the right time to get an MBA in this branch?

I don’t know what the experience is at other schools, but I know our applications are up over 25 percent this year. I think a lot of people figure this is a good time to get an MBA. For somebody who came out of college and went to work on Wall Street or management consulting for four or five years, if they figure they are going to get an advanced degree at some point – and maybe they’ve just gotten laid off, or they think they’re going to get laid off or not going to get a salary increase – it becomes a good time to go to school.

When did businesses really start becoming interested with sustainability and social engagement?

We’ve had an explosive growth in student interest at the Columbia Business School in the last seven or eight years, and people always ask me why. Part of the reason is that we’ve developed a good program, so we tend to draw students because of that. I also think this is a secular trend in business schools, generally.

A lot of it has to do with the environment. Business school students are completely aware of the fact that they can’t do “business as usual” throughout their careers. I think the corporate scandals had a little bit to do with it, but business school students are generally more attuned to the needs of their society and environment than they used to be. There aren’t many Gordon Gekkos walking the halls of Columbia Business School.

What do students focus on in the Columbia Social Enterprise program?

We have four major areas of student interest: non-profit, social entrepreneurs, CSR, and international development. Our strategy has been to develop three or four courses in each area. There’s a lot of overlap, and the areas are not clearly defined, so you take students that are interested in non-profit might be interested in some of the social entrepreneurship courses and vice versa. We actually have larger average enrollments courses in our social enterprise courses than the regular finance, marketing, and operations courses. We have to cap our enrollment in a lot of these courses.