ESG rises: The role of B-schools in the way ahead

Even until a few years ago, it seemed like a far-fetched, futuristic idea to speak about careers or mainstream investment options around ESG (Environmental, Social, Governance). But now, with every passing day, it is taking centre stage in the financial world. The root cause of this shift towards ESG in society is both practical and political. Therefore in the wake of this change, MBA aspirants can look at ESG-driven business education as a pathway to a lucrative career.

The Ecosystem behind ESG

Today, B-schools are regarded as not just education centres for business studies. Instead, they are considered instruments of change as bright business thinkers graduating from B-schools can make a lasting impact through the power of commerce. The modern day cohort includes students who, with their activist mindsets, want to bring about positive changes. Further, when they move into the industry, the B-school graduates, through their efforts, are not just serving their own politics but also catering to the consumer.

The reactive, conscientious consumer of the day that the B-school graduate will serve in the industry is increasingly seeking out goods and services with a positive environmental and social impact. Illustrating the collective shift in pro-ESG mindset, as of 2021, about 83 per cent of consumers, according to PWC, want companies to be ESG-oriented, while the same PWC report mentioned that 86 per cent of employees are more eager to be associated with ESG-compliant brands.

A bottom-up approach to looking at the ESG issue is this: to sustain their profits, ventures must be environmentally and socially aware. Pursuing the ESG trend, there has been a 20 per cent jump in companies reporting their ESG compliance report, as suggested by a study conducted by the Global Impact Investing Network (GIIN). Similarly, a recent GIIN study estimated the valuation of impact investment marker, the ESG-related investments, to be $ 1.164 trillion in 2022, whereas, in 2018, the market was worth $ 502 billion. It is amply clear that ESG has become a driving force in the market.

Therefore to understand the implications of ESG-centric thinking in business, future leaders must be groomed in a strong business environment where ESG is thoroughly understood. What better place than B-schools? Further, in the last few decades, the overall progress in sustainability research has pushed the business to move beyond just keeping the consumer happy and look at the long-term business potential in ESG.

Education, Sustainability and Green initiatives

With every new tenet of climate change unfurling, the commercial world looks towards taking into account the risk factors involved with ESG. Not only are financial institutions crunching environment-oriented risk calculations to mitigate long-term risks, but there has also been a conscious effort in the business circle to create green businesses. Additionally, the increase in impact investing has encouraged companies to move towards more sensitive business and operational models. Several MBA aspirants come from strong STEM backgrounds.

Strong STEM skills make them a good fit for challenging roles such as risk management, portfolio management, and investment banking. Using their solid analytical skills, such candidates can orient themselves in leadership positions where ESG-oriented risk factors are considered. In terms of Operations, the sustainable initiative that has gained the most traction is the investment in renewable energy and start-ups and R&D (Research and Development) projects around renewable energy technologies. Opportunities such as these seek STEM candidates with robust management education.

The Social Perspective

A study by McKinsey & Company suggested that not only do socially responsible practices such as DEI (Diversity. Equity, Inclusion) efforts improve the brand image and make people from diverse, especially marginalised backgrounds, feel comfortable seeking the company’s services but also improve the productivity of the company. This study is representative of what the overarching pro-inclusion social movement is about. At the workplace, DEI initiatives include steps to not only address the endemic discrimination in society but also fine tune the ambience to make employees feel at home, notwithstanding the milieu they come from. With inclusion being the spirit of the time and the long-pending moral obligation, B-schools' role, especially as they groom Human Resource aspirants, is to inculcate sensitivity to sustain healthy work practices.

The Governance Angle

In addition to the wave of social change and newly perceived benefits of ESG efforts, at the government level, there have been several initiatives to encourage ventures to invest in sensitive business practices. Recent practices such as carbon pricing, renewable energy incentives, emphasis on sustainability reporting and DEI, as well as policies for sustainable procurement, signal the impact of the ESG revolution made by the government. Aggressive eco friendly government policies aside, lately, tax holidays have been declared for large-scale investments in the domain.

Thus, B-schools with the right focus, priorities and commitment to make a positive difference will play a vital role in building sensitivity towards the ESG ecosystem.