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Climate change: Why business schools are failing

Published 10 January 2023 in Sustainability • 5 min read

We are faced with an existential challenge that requires radical action. Tomorrow’s business leaders must learn to think critically about their role in society and how they will practice their craft in order to bring about change.

Business schools in the United States, Europe and elsewhere are putting climate change more centrally into their curriculum. This is good news. The market is the world’s most powerful organizing institution, and it must be brought to bear on this monumental challenge. Indeed, if there are no solutions coming from the market, there will likely be no solutions.

But there is also a problem. The guiding motivation behind this change is the scale of the market shift that climate change presents – as much as $26 trillion through 2030. In the face of such opportunity, the business curriculum is being geared towards the development of new products, services, and practices to realize profit opportunities. Yet that focus on the win-win ignores the eventual win-lose that must happen in some parts of the economy. Without the latter, the effort will not be enough.  

Climate change, in its truest sense, is a system breakdown. To fix a system breakdown, we need to fix the system that caused it: capitalism. If business schools are to fully engage the climate-change problem, they must train tomorrow’s business leaders to think critically about the role of business in society, their role as a manager in guiding those businesses, the overall system in which they will practice their craft, and the leverage points for changing it. We are, in the end, faced with an existential challenge that requires radical action.   

As a starting point, business schools must acknowledge the power that business leaders possess to shape and guide society and instill the sense of responsibility that comes with that power. Too much attention is placed on the tools of management – strategy, accounting, finance, and operations in “the core” – and not enough on educating students as to how, where and why they will deploy those tools. And adding new electives in the midst of an entire curriculum that is unchanged will have little effect when that core curriculum maintains a heavy emphasis on 50 year old notions of shareholder primacy and a variant of the “greed is good” mentality.  

“Climate change, in its truest sense, is a system breakdown. To fix a system breakdown, we need to fix the system that caused it: capitalism”
- Andrew J Hoffman

To fill the gap, we must “rejuvenate the intellectual and moral training of future business leaders, and encourage them to consider management as a calling in a similar spirit to how we train doctors and lawyers — a move away from the simple pursuit of a career for personal gain towards a higher professional and moral purpose in service to society.

To do this, we need to rebuild the business school on a system of aspirational principles. This is not a call for a “value statement” on which to “brand” a business school in a differentiated market. It is a call to make a clear declaration of aspirational principles that guide the business-school structure in how it: selects and socializes students; structures the curriculum, co-curriculum and pedagogy by which they are molded; invites recruiters for placing them in positions of leadership; chooses the role models to elevate as exemplars of the principles they seek to reproduce; accepts donations that often leave a physical and cultural imprint on their facilities; and guides the research and rewards of its faculty.  

To this end, the curriculum can no longer take the form and function of capitalism as unquestioned, but instead must guide students in a critical understanding of how multiple capitalism(s) are structured, the underlying models on which they are based, where they have failed, and what forms they might take in the future. This will lead to challenging analyses that move beyond simplistic notions of “expanding the pie” and the quest for Pareto optimality, which often support the inequities that are undermining society.  

Two critical components of this shift are re-examining the purpose of the corporation and the role of government in the market. On the first, most business schools continue to teach shareholder primacy as the purpose of the company. This misguided idea leads to a focus on one type of shareholder that is shortsighted and opportunistic, creating a host of market problems such as excessively short time horizons for investment planning and CEO compensation packages that border on the grotesque. To replace it, business schools should return to ideas like “the purpose of a company is to create a customer” and that companies should exist for the contribution that they make to society as a whole. Such ideas lead to a completely different approach to the role and education of the corporate leader.  

As for the role of government, far too many students think that government has no place in the market, that regulation is an unwarranted intrusion and that all lobbying is corruption. These views are simplistic and destructive, both for society and the companies in which these students will work. Government is the domain in which the rules of the market are set and enforced. If recent history has taught us anything, it is that companies and markets need strong and clear rules.  

The obstacles are large, but so too are the stakes 

A profound transformation of business education is an institutional challenge, one that requires a coordinated shift in the entire ecosystem: pedagogy, rankings, recruiters, admissions, donors, and faculty. The changes required are significant. But the potentially catastrophic consequences of doing nothing are more significant. As the cause of many of our challenges, most notably climate change, businesses must play a role in turning the market to solving them, becoming a net-positive influence on the environment and society. And business schools must play a role in training future business leaders to embrace that challenge. We can either be part of the solution or continue to be part of the problem. The choice is ours.


Andrew J Hoffman

Andrew J. Hoffman

Holcim (US) Professor of Sustainable Enterprise at the University of Michigan

Andrew (Andy) Hoffman is the Holcim (US) Professor of Sustainable Enterprise at the University of Michigan; a position that holds joint appointments in the Stephen M. Ross School of Business and the School for Environment and Sustainability.


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