Where’s the iron ring for business graduates?

Someone once asked me. So… what’s the difference between what you’re doing (Corporate Environmental Management) and real business? I was a little peeved at the question.My answer was quite simple. I’m specializing. Same as there are specializations in marketing or finances etc… this is environmental management. What more do you want me to say?

But in reality, if I reflect a little more on the issue, it’s true.

Sustainable development = “Built to last” business

Business and sustainable development go hand in hand. If you want to build a company that lasts (i.e… a sustainable company) then perhaps you should think about risk management and future resource issues.

But after four years of business education, I can honestly say that they never really touched on this concept aside from a few optional geography classes and the one mandatory ethics class.

Put it this way: when engineers and doctors graduate they are reminded of the social duty bestowed upon them as professionals. So where’s the iron ring for business leaders? They can often be rewarded much more for their efforts, yet we don’t put them up to the same standard? Hmm…interesting.

I’m not saying that all businesses should have treehugger written all over them. I’m saying that all businesses should completely understand their social and environmental impact. Eco-efficiency is possible. It takes a bit more effort and a more holistic way at looking at the balance sheet, but being responsible and being profitable is the only way forward if we ever want to start fixing up some of the issues we have today.

Sustainable development will only happen in a capitalistic fashion and business education has to step it up to make this a reality. Not just in specialized masters programmes, but in the core curriculum.

Make money and be responsible. Who argues?

p.s. Jay – still thinking/writing on some better arguments on efficiency and conservation for the short and long term. Haven’t forgotten;) But yep, it’s a tricky challenge.

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6 thoughts on “Where’s the iron ring for business graduates?

  1. Jay Godse says:

    On the iron ring. Doctors, engineers, and a number of other professions make decisions that have huge impacts on public safety. Money cannot motivate anybody to be more mindful of public safety, but a public commitment to a higher cause using memorials such as the iron ring (made/memorialized from a collapsed bridge in Québec) or the Hippocratic oath remind such professionals to keep public safety in mind. This is reasonable because a human life is priceless.

    Business folks, on the other hand, don’t need such a thing. If they derive business from public-safety related products or services, they simply hire the appropriate professional to handle their public safety stuff. They don’t need oaths of service etc, because every business decision has a cost and a benefit. For example, adding side air bags to cars is a great engineering feature because it keeps passengers safe from side impacts. However, it raises the price of the cars, which could cut market share. The business leader simply makes a business decision of cost versus benefit and goes with it. The car makers have succeeded well with this. Other business folks make poor decisions. For example Arthur Andersen’s accountants bowed to pressure from Enron to cook the books. There was a risk of being caught, but at the time the benefit of lucrative management consulting work seemed to outweigh the costs. They were wrong, and Arthur Andersen is no more. The consequences of Enron/Anderson’s decisions may have eaten up the life savings of some folks, but it didn’t kill them. Business decisions are purely cost/benefit, and a bright actuarist can even put a monetary cost and benefit to humans killed or maimed by their products or services. It’s cold, but it is done all the time.

    Holistic ways of looking at balance sheets may be the right thing to do, but the people who are actually looking at the balance sheets are investors. They don’t care about eco-anything or sustainability when it comes to their own money. If they did, they would only invest in “green” companies and funds. We may like to think that CEOs and Wall Street are evil moneygrubbers who don’t care about the environment, but if there was ever a movement of actual investors to make eco-responsible business decisions at the expense of the balance sheet, the CEOs and Wall Street would go for it. Sustainable development will happen when there is investor demand for it.

  2. Jane Porter says:

    Good points but I still disagree. Businesses have to be mindful to public safety too. Engineers may build something with complete regard to public safety, but if the business person in charge of those plans need to cut costs to go with their “cost-benefit analysis” they’ll do so. And when that happens, the engineers plans are jeopardized and it’s the business person who has put public safety in danger. It’s not as blatant as the professional dealing with public safety head-on but that doesn’t mean they can shy away from that responsibility.

    For that reason, i do think it’s important that business students graduate with that thought in their head – instead of this money money money (short-term gain) mindset.

    As for the point on the car-makers…their cost-benefit analyzes have most definitely gone wrong too. To use the most common example, look at the Ford Pinto case. Some bright actuarist put a monetary value to lives taken by the car exploding into flames. The bad publicity they got (even though some ppl say it wasn’t as bad as any other car at the time) has lasted for decades.

    A cost-benefit analysis has lots of benefits but many shortcomings. Some studies suggest that the inaccuracy of the C/B is quite substantial. (wikipedia gives the links) It all depends on the accuracy of the cost and the benefits…. And that’s my point – do your cost benefit analysis, but to be more accurate, take into account the impacts that aren’t monetary.

    Investors don’t care about eco-efficiency for the sake of the planet necessarily, but they do have to start looking at it because shareholders (and stakeholders) are beginning to ask for it more and more. (Hence the rise in Corporate Responsibility reporting) Those that are not jumping on this band wagon are being scrutinized a little more and more as each quarter passes. (I have to finish up this comment so i can write an essay responding to a report on this;)

    Sustainable development will happen when there is investor demand for it and that demand will come from their share/stakeholders. (i.e you, me, and the masses)

  3. Jay Godse says:

    Businesses don’t have to be mindful of public safety except to comply with existing legislation and to avoid torts. Torts are grey areas, and since there are no hard and fast rules, the cost-benefit analysis still applies.

    Case in point. Before Sarbanes-Oxley (SOX), corporate executives could order their “keepers of the public trust” (auditors, engineers, researchers)to do evil things such as cooking the books and altering research results for their benefit. Why not? There was personal incentive if they “succeeded”, and minimal liability if they were caught. After SOX, corporate executives are personally liable for misleading financial reports. Before SOX, many companies used to cook the books…beat the street by a penny in their quarterly reports, sandbag sales, issue boatloads of unplanned (via expensing) stock options, etc. Only hard legislation and personal liability of executives and directors has forced a uniform level of honesty in financial reports of public companies.

    SOX showed that personal financial incentive and personal liability are two great motivators for key decision-makers. If SOX-like regulations were implemented for eco-sustainability, you would see a lot more eco-friendly behaviour from corporations. Unfortunately, that is hard in any country with a pro-business government. The only reason that the Americans were able to push SOX, which puts a lot of constraints and restrictions on public companies, is because the Enron debacle threatened public confidence in the public equity markets, and any lingering erosion of that confidence would have been catastrophic for businesses overall. In any other environment, SOX would have had as much chance of passing as any other eco-friendly or left-leaning legislation.

    That means that the key to bringing forth a change of heart with respect to eco-friendly behaviour of public companies will rely on successfully positioning the eco-constraints on businesses (in a SOX-like manner) as being good for all businesses. That is a tall order.

  4. Brian says:

    I’d have to agree with Jay. There is no substantial reason for business grads to consider the effect of what they do. As business grads, you usually end up in a management position, overseeing the entire project. The people who have to actually execute the work are the scientists, engineers, etc. Needless to say, the onus of safety is upon them.

  5. […] There are also calls to make management a profession like law or medicine, with a code of conduct, a certification examination and continuing education.(see my post on where’s the iron ring for business graduates?) […]

  6. […] Where’s the iron ring for business schools? (Oct ’07) […]

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