For many people, the word “sustainability” has evolved over the past two decades from the simple concept of energy efficiency and recycling to a widely held philosophy that promotes the careful and efficient stewardship of the world’s natural resources and human well-being.
But in the corporate world, too often sustainability can be viewed as a feel-good marketing idea that carries little weight with executives and investors because it appears to play no driving role in a company’s future success and growth.
Some professors at Harvard Business School (HBS) are trying to change that perception as they prepare to host the School’s first-ever academic conference on sustainability and corporations this weekend.
Robert Eccles, professor of management practice at HBS and one of the three conference organizers, said that although there has been plenty of talk in the business community about the merits of sustainability in recent years, there has been little meaningful action to develop strategies that will create long-term value for investors.
“It feels like no real progress has been made for a while,” said Eccles. “The sustainability people in companies are marginal, and the sustainability people in academic institutions are marginal relative to their colleagues. So we thought: Let’s have this conference.”
The purpose is to make the academic community better aware of key problems in the business world and to identify ways that businesses can align their interests with the larger societal interest around sustainability, said George Serafeim, assistant professor of business administration. Serafeim and Amy C. Edmondson, Novartis Professor of Leadership and Management, are the other two conference organizers.
“What we’re trying to create with this conference is a venue for academic researchers to showcase some fundamentally big ideas that could take research forward and could inform managerial practice about how business should change,” Serafeim said.
Sustainability at the corporate level is an understudied area, he added. Academic journals tend to publish articles that are narrower in focus and are on issues that are better understood, making it hard to advance the field of research significantly.
“They are less receptive to big ideas that are broad and messy. But these are areas that are of big interest to management practitioners because that’s where most of the opportunities exist for business: to provide solutions. When something is very well researched and when something is very well understood, there are few opportunities for innovation, there are few opportunities for growth, there are few opportunities to develop new solutions,” said Serafeim.
Invited researchers will present 15 papers on fundamental thematic issues such as identifying innovations that could improve financial as well as environmental, social, and governance performance; exploring the role investors and capital markets should play in spurring organizations to be more sustainable; and creating a new, more future-facing corporate governance model. Most presentations will take a multidisciplinary approach, using ideas from organizational behavior, strategic management, marketing, accounting, and finance.
“What we were looking for in the papers is: Is there something interesting, original, provocative that will tee up discussion?’” said Eccles.
“What I’m looking for [is]: What are those very specific, tangible things that you can point to and say, ‘OK, if you’re really serious, you should think about,’ or ‘You should be doing this,’ as opposed to, ‘Oh, yeah, we have a green program … .’ I’m so tired of hearing all that, I can’t tell you. Because the tough stuff is the trade-offs,” Eccles said.
Too often, corporate change takes place only because of a CEO’s vision or social pressure from outside activists, said Serafeim. As more companies engage with sustainability and develop practices and strategies internally, such as Nike and Adidas in the consumer goods sector, for example, the dismissive attitude will slowly fade away, he said.
“I think more and more people are starting to realize they are compatible. There are profits to be generated,” he said. “That said, this is not easy to do. It requires a massive, large-scale change process inside the organization. And many organizations, especially the large and bureaucratic ones, are pretty bad at the change process.”
Three critical hurdles have to be overcome before companies will truly embrace sustainability, he said. First is doing the difficult work of getting organizations to change. Second is developing the necessary metrics — similar to those that already exist for finance issues — to measure things like customer and employee outcomes. And last is to counter the typically short-term outlook of companies and investors.
“Unfortunately, we have created an institutional infrastructure like incentives and reporting periods and measurement methodologies that promote this short-term thinking,” said Serafeim. “Many of us are trying to change this, so both companies and investors become more long-term oriented. If you can improve [the] environmental/social/governance dimensions of your corporation, then there are certain costs, but also long-term benefits. If you have a short-term horizon, you will see most of the costs, but not the benefits.”
Eccles said it will take months, if not longer, to fully assess whether the conference helps to initiate the kind of corporate sea change that sustainability requires, but he is hopeful the event will be a consequential first step.
“If out of this conference there are some things that really resonate with people, or there are some research partnerships that get made that then lead to something that people carry forward, [things] that they can then take to the business community or the investment community, that would be good,” Eccles said.
“It’s a hard slog. Are we making progress? Yes. But having a conference at Harvard Business School is not going to be a silver bullet. … What you need are things that are very actionable.”