Will The Financial Crisis Kill the Good Corporate Citizen?

CSR and sustainability-oriented business schools stay upbeat about the demand for their graduates.

It's inevitable. In an economic downturn, companies look for the essentials and cut back on the rest. Often, this means fewer business trips and a dwindling selection of tea in the break room. Companies also stop hiring, and in the worst cases, start scaling back projects and laying people off. 

In the current financial crisis, one place where executives are bound to take a closer look is their corporate social responsibility (CSR) projects.

Over the last several years, corporate scandals and public concern about environmental issues like climate change have prompted many of the world's largest companies to integrate "sustainability" and "social responsibility" into their business strategies. 

Being "green" has also become a powerful marketing tool. These days, it is not unusual to see oil giants advertising their investments in clean energy, or to hear banking CEOs speak about reaching out to poorer clients at the "bottom of the pyramid." 

But will CSR - widely considered ornamental, but not essential to business - survive these tough economic times? Is it the wrong time for business school students to focus on things like social enterprise and sustainability?

"I would say that now more than ever, there is a need for business leaders who have this kind of training and understanding," says Nicola Acutt, associate dean of Presidio School of Management, which offers an MBA in Sustainable Management in San Francisco.

"In an economic downturn, sustainability becomes even more critical," says Acutt. "One of the most important things is to tighten your belt, and look at where you can be more efficient."

Acutt is not alone in thinking that sustainability will remain an important niche for MBA students graduating from the increasing number of sustainability and CSR-focused programs. Many graduates who end up in the private sector use CSR and sustainability concepts to improve the operations and policies of their employers.

"They're not going to get displaced," says Raymond Horton, who directs the Social Enterprise Program at Columbia Business School. "It's just another way of saying that CSR has become a profit center in a lot of businesses."

Horton says the socially and environmentally focused courses are still extremely popular among students at Columbia Business School - outdrawing some finance and operations courses. And despite - or because of - the financial crisis, Horton says applications to Columbia Business School are up about 25 percent this year. 

"A lot of people think this is a good time to get an MBA," he says.

Still, CSR and other sustainability initiatives may have to prove their value in order to survive. According to Dan Vermeer, executive director of Duke University's Corporate Sustainability Initiative, this value will already be apparent for companies that have been serious about CSR and sustainability.

"There's no question that there will be a whole lot of stress on the job market in general, and nobody is going to be exempt from that," says Vermeer. "There are a few things that give me comfort. One is that a good chunk of the environmental sustainability agenda has a cost-saving benefit immediately." 

"I think efforts around reducing energy use, water use, and waste are going to have very direct benefits on the bottom line in a more efficient kind of enterprise," he says. 

But it is also true that not all companies have taken sustainability seriously. What about those companies who jumped on the bandwagon to improve their image - the so-called "greenwashers"?

"I think this downturn is going to get rid of the more superficial aspects of the sustainability agenda," says Vermeer. "There is one line of argument in doing this sort of thing, which is about reputation and image, ethics, and being a 'good corporate citizen.' To me, this approach is vulnerable to downcycles in the economy."

Max Oliva, associate director of Social Impact Management at IE Business School in Spain, agrees.

"We will obviously be affected by the crisis, but it will also be a good opportunity to see which companies were 'walking the talk,'" says Oliva. "Those are the companies expecting benefits in innovation and bottom-line business." 

"But some companies were doing it on the PR or marketing basis without having it integrated," says Oliva. "You will see cutbacks in the companies that have not integrated it. That's good for consumers and an opportunity for maturity in the sector."

It is not surprising that business schools remain sanguine about the job prospects for their graduates. But they also have a convincing point: for the many companies that have already cut costs through sustainability practices, it hardly makes sense to quit now.

Photo: sachab / Flickr

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