Customers are increasingly turning their backs on businesses that do not align with their values. Banks that invest in fossil fuels, FMCG companies that produce single-use plastics, and energy providers that make misleading green claims are facing a backlash. Putting profit above all else is costing these companies, and today’s MBA graduates know that.
Social and environmental sustainability has moved from a ‘nice-to-have’ to a core business priority. That growing significance is reflected in the content of many MBA programs, creating a new breed of business executives who understand the value of doing the right thing and putting the planet and people on par with profit.
The growing demand for responsible and ethical candidates in the job market means MBA programs with a focus on sustainability are becoming increasingly competitive. They are giving graduates the skills and knowledge to drive sustainable practices across a broad range of industries and helping them develop a competitive edge as markets evolve.
The Rise of Environmental, Social, and Governance
The idea that organizations have some responsibility to society beyond generating a profit for their shareholders is nothing new. It has been around for centuries. However, in recent years, environmental, social, and governance (ESG), a collective term for the framework that measures a business’s impact on the wider world, has become a global phenomenon.
You might assume the growing focus on the wider impact of an organization’s operations has been driven by business leaders. However, in many cases, business leaders are simply reacting and changing to meet the demands and expectations of customers, shareholders, and employees, as you can see from the statistics:
- According to PWC, 76% of consumers would stop doing business with a company that ignores ESG principles.
- Figures from Ernst and Young found that 99% of investors review a company’s ESG disclosure when planning investments.
Given those figures, it’s no surprise that 88% of publicly listed companies have introduced ESG initiatives, and 94% of executives feel pressured to prioritize them.
Organizations are now being held accountable for their actions by key stakeholders. To succeed in this landscape, they need business leaders who understand ESG issues and can balance those interests with long-term profitability.
The Rise of Environmental, Social, and Governance
Organizations need a workforce that can navigate these new challenges, and business schools are evolving to fill that gap. Business schools are increasingly revamping their curriculums to cover the essential skills the next generation of executives will need. To do that, they are putting environmental sustainability and social issues at the core of what students learn rather than an add-on.
They are increasingly partnering with local businesses and organizations to deliver a more rounded education that includes skills such as upholding ethical principles, complying with regulations and social standards, governance, carbon accounting, and net-zero strategies.
As well as a comprehensive understanding of ESG and CSR issues, MBA programs are equipping graduates with the practical skills to tackle them. For example, finance courses are now being adapted to teach MBA students about carbon pricing, sustainability loans, green bonds, and other practical instruments they can use to enhance an organization’s ethical credentials.
By breaking down the barriers between disciplines and putting sustainability at the forefront of the program, MBA programs are helping to create forward-thinking executives who can drive meaningful change.
How Can Social Responsibility Benefit a Business?
Achieving the dual aims of sustainability and profitability is often seen as a balancing act, with each coming at the cost of the other until an organization can find a compromise that satisfies its stakeholders. However, that thinking is outdated, as studies have shown that ESG initiatives can bring significant benefits to a business’s reputation and financial performance.
Increased Employee Engagement
90% of employees who work for organizations with a purpose other than profit admit to being more inspired, loyal, and engaged. That engagement translates directly to the business’s bottom line, with engaged employees being 17% more productive, 21% more profitable, and 41% less absent.
Better Hiring and Retention
Being more environmentally and socially responsible can help you find and retain talented staff. Nearly 70% of employees say they wouldn’t work for a company without a strong purpose, while 60% would take a pay cut to work for an employer that takes ESG seriously.
A Boost to the Bottom Line
Rather than a cost, organizations are increasingly seeing an increase in revenue and profitability after adopting ESG initiatives. One study found companies with a social purpose generate 20% more revenue. Another found that ESG improves financial performance in 62.6% of cases and has a negative impact in less than 10%.
Enhanced Customer Loyalty
Excellent ESG also boosts a business’s reputation and creates customer loyalty. 70% of customers say they are more likely to buy a product from a company with values aligned with their own, while more than four-fifths are willing to pay more for sustainability.
How To Balance Business Success With Social Responsibility
The benefits of sustainability are clear, which is why MBA programs are increasingly being designed to give students an awareness of the key ESG issues and the practical skills to tackle them. But how can MBA graduates make a difference?
Leading With Purpose
In an era where climate change, social inequality, waste, resource scarcity, and ethical supply chains define the business landscape, MBA graduates are increasingly putting ESG initiatives at the forefront of their business objectives to drive positive change.
Leading with a purpose is not just an empty phrase. To be effective, it must be matched by a commitment to ethical leadership and an environmental or societal cause. When that cause contributes positively to the wellbeing of all stakeholders, it can also boost financial success.
Harnessing a New Skillset
MBA graduates are emerging from business schools with an entirely new set of skills. These days, they are not only adept at managing the traditional aspects of a business. They also have qualities such as ethical integrity, inclusiveness, and emotional intelligence that extend beyond conventional business acumen.
The business leaders of tomorrow must be attuned to the challenges they will face. To do that, they must be open-minded, adaptable, and capable of embracing diversity. By nurturing these leadership soft skills, MBA programs are creating graduates who can navigate complex societal and environmental issues, mitigate risk, and make the informed and responsible business decisions that drive success.
Embracing the Triple Bottom Line
Today’s MBA graduates are not solely focused on the single bottom line of profitability. Instead, their performance is increasingly being measured against the three Ps of people, the planet, and profitability.
Embracing the triple bottom line and focusing on performance indicators other than just profitability can help organizations produce diversified income streams, cultivate better working environments, reduce energy consumption and costs, and create an enhanced perception of their brand. These initiatives improve the social and environmental performance of an organization and boost its profitability.
A Better Way Forward
If you want to make the world a better place through your work, getting an MBA may not seem like the obvious choice. However, MBA programs are increasingly producing graduates who can contribute to sustainable business practices, navigate stakeholder expectations, and create a competitive advantage by doing the right thing.
