Business School

Business School Evolves to Meet the Climate Crisis

October 7, 2020  • Ideas Worth Teaching

From the “climate strikes” of recent years to imagery of orange skies from wildfires in the Western United States, momentum for action on climate change has been building as perhaps never before. But what does taking action mean, in practice? For businesses, it can require looking at their enterprise through an entirely new lens, through which everything from floorplans to marketing looks very different.

In this new lens, John Byrd, Senior Instructor at the University of Colorado Denver Business School, also sees tremendous opportunities for meaningful work. In 2019, Byrd was honored with an Aspen Institute Ideas Worth Teaching Award for his course, “Business and Global Climate Change.” The course challenges students to see themselves as a newly-hired sustainability professional at a business whose leader is unsure of sustainability even as she sees her bottom line suffering due to climate change. We spoke with John about the changing market for sustainability talent in business, whether today’s big climate moves by companies go far enough, and much more. 

Climate change was not a common topic for an MBA course when you first offered your course, Business and Global Climate Change, in the fall of 2010. How has the business education landscape changed since then and what have been the drivers?

Many more schools now offer sustainable business classes, and some offer several covering the main business disciplines of management, strategy, marketing, etc. Generalizing from our experience, this growth was spurred by faculty and student interest and a desire by schools to be relevant as businesses became more committed to sustainability broadly conceived – environment, community, employees, suppliers and other stakeholders. AACSB, the business school accrediting group, has also pushed schools to show social impact. So there have been a convergence of forces.

In addition to the climate class I have a more general MBA class, Business for a Better World. I update it every year and the things businesses are doing in the sustainability arena are amazing. This week I am putting together some information about a project that HP implemented in Haiti. Waste plastic that would have ended up in the ocean is collected, cleaned and recycled into new ink cartridges. Besides the environmental benefits, there is job creation and income generation. The project probably touches on several other UN SDGs. And, it is done at no additional cost to HP. This project, which I probably haven’t captured completely, shows the diverse set of skills managers need these days – project management, accounting, finance, international development, managing community partnerships. Business education needs to evolve to produce people with those talents.

The Business Roundtable just released a list of climate-related principles that support putting a price on carbon. Does this mark a significant shift in mainstream business attitudes? What will be required of business leaders to truly adopt carbon pricing?

A variety of business leaders have been calling for a carbon tax for a while. Many of these, from my perspective, were weighted down trying to be revenue neutral or politically attractive. The BRT carbon price recommendation is different. I have a short essay on Medium explaining that a carbon tax, in and of itself, will not be very effective. The problem is that carbon reduction benefits only occur if there are affordable low-emitting substitutes available. Along with a carbon price, or maybe before implementing a carbon tax, there has to be a dedicated effort to develop those substitutes. And, for areas like transportation you need a supporting ecosystem like fast charging stations or if Nikola gets fuel cell trucks on the road, a way to replace or recharge those fuel cells. The BRT model recognizes that there needs to be R&D to make a carbon tax effective, which is great.

Research that I have done with colleagues Beth Cooperman and Kent Hickman looked at companies using an internal price on carbon. We find that this quasi-tax is associated with emission reduction in some industry sectors, but it requires companies that are making capital investments and have high-emissions, so the tax burden is high. And, of course, there have to low-carbon alternatives available.

Right now there are lots of conversations about climate risk. One type of risk is transition risk, which includes the potential for regulatory shifts, consumer tastes changing, and reputational risk. As companies plan for this transition to a low/no-carbon economy they will use carbon pricing to test strategies and scenarios to identify where to make transition investments. The time is coming when carbon pricing will be a standard tool in risk management.

One of the central assignments of your course puts students in the shoes of a newly-hired sustainability officer at a fictional ski resort. The case explores the often complex position many students will find themselves in – understanding technical evaluation and prediction models and also navigating organizational culture and politics – while trying to create meaningful change. What essential skills are necessary for sustainability officers in today’s business environment?

A colleague, Ken Bettenhausen, and I developed a MOOC called Become a Sustainable Business Change Agent, using that case. Ken is an expert on organization change, so the case includes some of his insights about change. As you mentioned, to effect change requires making the economic and technical case for the change. It also requires identifying who the decision-maker is and how the change will benefit her/him. Once you have an advocate things can move forward. Ken pointed out that to gain an advocate’s trust it is valuable to starting out with small sure-fire changes, which builds credibility and helps managers support future, more ambitious proposals. Like the HP recycling project in Haiti, it takes a lot of skills to get sustainability done.

As alumni from your course go into leadership positions across industries and sectors, what is the one lesson that you hope will stick with them throughout their careers?

Sustainability is a fairly new field and some of the conventional wisdom needs to be examined. I really hope that I am giving students the tools and the motivation to look critically at sustainable business practices. This is crucial if we are going to figure out what needs to be improved or changed or ignored. Let me give you a couple of examples. I gave you one about a carbon tax requiring not just a policy, but substitutes and the eco-system to support those substitutes. Another is the idea of, Doing well while doing good. If we limit our sustainability efforts to those that are profitable, we’re doomed. Unsustainable activities often arise because companies externalized some costs – pollution, low pay, squeezing suppliers. Internalizing those costs cannot always (or maybe not even very often) be done profitably. We need to recognize those life-cycle, all-in costs, and help our customers understand them. Companies may also need to talk about a different type of level playing field, so all companies are recognizing their social and environmental impacts as well as standard costs.

A second example is recycling. Right now my students are absolutely anti-landfill. But David Allaway at the Oregon Department of Environmental Quality shows that the impact of sending some packaging to a landfill is much lower than trying to recycle it. This is important because if we want to get to a circular economy we need to identify the materials, or combinations of materials, that cannot be recycled and move away from them.

The work that people have done on planetary boundaries and thresholds and context is great. Kate Raworth’s Doughnut Economics model is a wonderful example of how sustainability needs to work to be within ecological limits and above minimum social needs. But the more I think about sustainability I realize that our targets are often the bare minimum – just within the carrying capacity or just at the living wage. After using “sustainable” about dozen times in these answers, I am saying I am looking beyond sustainability and survival to something richer, something that is regenerative and supports prosperity. I hope my students will take my initial clumsy attempts at describing beyond sustainability and improve it and apply it in their careers.

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