The future is green for business schools

For 30 years business education has focused disproportionately on economic models based on financial valuation, to the exclusion of other factors. Business schools remain invested in this principle, but the simple fact is that this is no longer delivering maximum value to businesses.

Instead progressive companies, including many of the world’s largest blue-chip organisations, are increasingly focused on business durability and sustainability.

Conventional valuation-oriented economics has had no measure of externalities – maximising shareholder value at the expense of natural assets, social concerns or intergenerational issues. We are at a point where it is clear that this is no longer sensible. Rather than making the value of a company a priority right now, we are seeing the rise of new ways of thinking that prioritise long-term thinking and are more sensitive to risk.

However, while businesses are already changing, business schools appear stuck in the past, closing themselves off from these new ideas.

The 2008 crash was a wake-up call, highlighting how the “valuation economy” did not really generate durable value. There has also been a cascade of environmental events – floods in Europe and Asia and drought in Russia and the US for example – since 2010 that has consolidated both the acceptance of climate change and the fact there are serious problems that need to be tackled urgently.

Increasingly, businesses are recognising this. Mindsets are shifting towards approaches that deliver more assured shareholder value, creating companies that are “valuable” in a number of senses in the long term, delivering more durable and stronger competitive positioning.

There are some clear early adopters of this new economic approach. Germany is a great example, pushing ahead with radical new energy policies, while companies such as Bayer, J Sainsbury and Skanska in Europe are urgently pursuing sustainability. New enterprises and SMEs are growing from the opportunities created by climate change.

At an individual level some of the brightest young people at the forefront of the new sustainability agenda want to work for companies that reflect their own values and beliefs. Young people are looking to safeguard both their economic and environmental futures.

The one part of the equation that has not accepted the need for radical change is education. Business schools’ content and curriculum are fundamentally rooted in the past. And currently, they seem too occupied with massive open online courses (Moocs) – an incremental technological innovation in the delivery model – to acknowledge this growing economic revolution.

Many schools seem to think that including some environmental and ethical electives on MBA programmes is sufficient – but these are merely token gestures. At an intellectual level business schools still focus on the theory of competition and competitive advantage. But is this really useful given the global climate challenge or is it counter-productive? “Co-opetition” has more resonance with the climate challenge, but there is reluctance on the part of business schools to update their ideological underpinning.

Business schools are in danger of thinking these issues are simply about “doing good”, when the reality is that they represent the more sophisticated business models of a new economic era. The green economy is no longer the “nice” thing to do; it is the most risk-reduced way of generating durable value, taking us forward to a sustainable ecological future.

The reluctance to embrace new models is also reinforced by factors such as the industry rankings. The methodologies used are still primarily based on absolute salary and salary increase – each of these account for 20 per cent of a school’s total score in the Financial Times’ own MBA rankings, for example. Methodologies need to be more progressive in valuing other factors such as innovation, job creation, new business creation and environmental impacts.

There is still a need for the core skills that business schools provide, but tackling new challenges needs new solutions. A fresh layer of knowledge and skills is required, adding new dimensions to business education to better reflect contemporary and future needs in business and the global economy.

This should not be the end for business schools – quite the opposite. This is a vast opportunity for business education. By reassessing their educational models the schools can be at the forefront of promoting and popularising this new thinking, reaping the rewards of helping to create a new economy based on long-term value.

Business education needs to be more integrated, more interdisciplinary and more oriented towards thinking about the bigger “system-level” picture. A second order level of thinking is required. Moving beyond the direct relationship between action and value, business schools must offer education that addresses the complex systemic challenges we are all facing.

We do not need to rip up the current industry and start again. The concept of “co-opetition” also needs to extend to how education is delivered. Business schools should embrace complementary courses and partners that add new dimensions to core business skills.

New organisational forms have evolved in Europe. My own organisation, Climate-KIC, is Europe’s largest public-private partnership with more than 230 partners drawn from prestigious universities, research institutions, blue-chips and SMEs. The EU created the KICs to address the innovation challenge of Europe and make existing models obsolete. These organisations are creating new knowledge and will be a stimulus for business schools to evolve and change.

The climate challenge presents a real opportunity for the business education industry to take the lead on the issue, reinforcing their position and relevance as thought leaders in the new economic landscape. We look forward to working closely with them to achieve these goals.

The author is director of education, Climate-KIC.