THE SHIFT TO A SOCIALLY CONSCIOUS BUSINESS STRATEGY, AND THE BENEFITS

The shift to businesses incorporating ESG into their strategies has been the norm in Europe longer than in North America. We’ll discuss the shift towards stakeholder inclusion in strategy and the benefits to investors. 

The business school shift 

When you think of business school, you probably think of accounting classes, economics, or supply chain management, but not human rights. However, a growing number of business schools across the world are beginning to incorporate the social aspect of ESG into their curriculum with the introduction of courses centered around human rights and business — taking on subjects such as outsourcing, land rights and privacy. Academics are focusing on migrant workers’ conditions in parts of the United States and the Middle East. Rare metals resource extraction spurred on by electric battery demand, like cobalt mining in the Democratic Republic of Congo, is increasing concerns about the use of child labour, working conditions and environmental contamination. 

A pioneer of this new focus is Michael Posner, the Jerome Kohlberg, Professor of Ethics and Finance at New York University’s Stern School of Business, who started a human rights centre in 2013. Soon after he established the centre, the eight-storey Rana Plaza garment factory in Bangladesh collapsed, killing more than 1,000 people. According to Posner, this led to increased attention on “how companies should deal with factory safety in a very poor country with chronic, massive problems”. 

Other universities have followed, and in 2016, Alliance Manchester Business School in the UK created the Business and Human Rights Catalyst for research and policy development. The Geneva School of Economics and Management (GSEM) offers a Master of Science in Responsible Management where students explore core topics such as responsible management and sustainable accounting and reporting. Electives include a specialization in sustainable business and human rights. Dorothée Baumann-Pauly, who runs the GSEM program, said, “No longer is the question why do this, but instead how and how to implement.” 

Furthermore, these new courses are a response to changing student demands. A GSEM student was inspired by a reflection during lockdown on his values and aspirations and finding something that provides unique value rather than “capitalism 101”. 

Being socially conscious bottom line and societal benefits 

A 2020 research study from the World Economic Forum in collaboration with Accenture identified stakeholder inclusion (safeguarding trust and having a positive impact for all) as an important characteristic for business leaders to possess.  

The study also identified performance premiums associated with sustainability, trust and innovation. “Profits and responsible leadership are not mutually exclusive; in fact, there is a link between responsible leadership and higher financial performance.” A key finding of Accenture’s research of 2,500 companies is that “companies that achieve high levels of both innovation and stakeholder trust outperform their industry peers financially — with an average of 3.1% higher operating profits as well as greater returns for shareholders. In addition, companies that achieve industry-leading innovation, stakeholder trust and financial performance display all five elements of responsible leadership to a greater extent than do their peers.” 

According to the study, “only stakeholder-centric business models can unlock the full power of innovation to elevate organizational performance and drive societal progress.” 

The transition to more socially conscious business education is creating a stakeholder-inclusive approach as a new generation of people enter the workforce armed with ESG strategies. With research showing the financial and social benefits of corporate sustainability and trust, investors, especially institutional investors who manage trillions of dollars of capital around the world, will gravitate to investing in companies that have seen the “ESG light”, or will they push the companies they invest in to change.  

We encourage our clients to be ahead of the curve — contact irlabs to see how you can incorporate ESG goals into your corporate strategy. 

https://www.ft.com/content/2a2ef5b5-fc65-456c-9248-b689e17f9cf0