Business schools’ transatlantic divide over ESG
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Climate science shows that Europe is warming faster than anywhere else. The continent is also widely seen as a global leader on sustainability — driven by stronger climate policies, progressive environmental standards and renewable energy initiatives.
Many European businesses have also made sustainability core to their strategies, governance and reporting. This focus is mirrored in business schools across the continent, where sustainability is increasingly woven into the curriculum to meet the growing demand for graduates who can balance business growth with environmental responsibility.
Contrast that with the US, where a backlash against environmental, social and governance (ESG) investing is gaining momentum. This is in turn affecting how sustainability is taught in US business schools, with some treading carefully to avoid being perceived as too “woke”.
European schools therefore appear to have a more favourable political climate in which to prepare the next generation of sustainable business leaders.
Anna Dibble is an American who chose to pursue an MSc in finance at Stockholm School of Economics in Sweden last year — drawn by the country’s leadership in sustainability. She also works almost full-time as head of ESG at Alight, a Swedish solar developer, alongside her degree. “The Nordics have always been on my radar as the ‘Silicon Valley of sustainability’,” she says.
Dibble takes courses that integrate ESG principles into finance. One of her projects involved a “double materiality” analysis of Nordea, examining how the Finnish bank’s environmental and social impact affects its financial health and vice versa.
“These experiences have enhanced my ability to drive ESG initiatives at Alight,” Dibble says, notably as she gears up for the EU’s Corporate Sustainability Reporting Directive (CSRD), which mandates companies to disclose their ESG impacts.
A hands-on, multidisciplinary approach to sustainability is a hallmark of Nordic business schools. In Finland, Aalto University School of Business, for example, combines business with technology and arts, enabling students to tackle global sustainability challenges from multiple angles.
It recently teamed up with Aalto’s schools of chemical engineering and arts and design to work on circular economy solutions for the clothing industry. “We embed sustainability in everything we do, so students take these issues into consideration regardless of their major,” says Timo Korkeamäki, the business school’s dean.
While the “E” in ESG — environmental impact — is often at the forefront of business education, the social aspect is gaining more attention. Sandra Ool, a 2022 graduate of the part-time masters in social innovation at Cambridge Judge Business School in the UK, focused her dissertation on social injustice.
Now a director at EY’s financial services consulting practice in Stockholm, Ool, from Estonia, shared her research on the working-class experience in “elite” institutions with her employer. She says this led EY to focus more on social mobility. “My studies gave me a historical understanding of social injustice,” Ool notes — insights that she has brought into her work.
However, some academics warn that there is no room for complacency at European business schools. Mette Morsing, director of the Smith School of Enterprise and the Environment at the University of Oxford, believes that many institutions still teach outdated economic models and management frameworks that do not align with today’s sustainability challenges.
“There is a need for thorough reform of the business school curriculum if it is to remain relevant,” she argues. Students are increasingly demanding more up-to-date knowledge, particularly on climate change and the concept of a “just transition” — a shift to a sustainable economy that is inclusive and fair to all.
Pressure for change is also coming from businesses in Europe. The Finnish fashion and lifestyle brand Marimekko is seeking graduates with strong sustainability skills to drive its efforts across the company, which has 470 staff and 170 shops worldwide, from design to logistics.
“Graduates with knowledge of the most up-to-date academic research in sustainability and fresh points of view can be a great advantage for a company,” says Tiina Alahuhta-Kasko, Marimekko’s chief executive. However, she suggests that business schools need to collaborate more closely with companies to address real-world sustainability challenges, beyond just academic theory.
Across the Atlantic, concerns look different. While ESG investing surged in popularity in 2020, it has since faced significant pushback in the US, particularly from conservative states accusing ESG of being “woke” and anti-business — a trend that has also influenced business education. “There is a great deal of right-leaning antagonism aimed at higher education for teaching ‘woke’ ideas,” says Andrew Hoffman, a professor of sustainable enterprise at the University of Michigan. Business schools, he notes, are wary of the political blowback that could result from pushing too hard on ESG issues.
European business schools have been able to more easily integrate sustainability into their curriculums. Tima Bansal, a professor of sustainability and strategy at Ivey Business School in Canada, notes that, while American schools have excelled at quantifying sustainability, European schools take a more holistic approach.
“American institutions often focus on the business case for ESG,” she says, while many European schools view it as a broader discipline that also spans business subjects.
This is reflected in the approach taken by IMD Business School in Switzerland. Students are taught to analyse core business challenges through a sustainability lens rather than treating sustainability as a separate subject.
“European business schools are uniquely positioned to lead in sustainability education,” argues Julia Binder, professor of sustainable innovation and business transformation at IMD, pointing to the role of high societal expectations and regulatory frameworks such as the CSRD.
For international students, such as Snigdh Singh, an Indian masters in management student at ESCP Business School’s Paris campus, these factors are a big draw.
“Studying sustainability in Europe offers exposure to advanced policies, innovative technologies and strong environmental frameworks,” he says, adding that Europe’s progressive governance and public awareness can also appeal to students interested in sustainability.
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