CEO Magazine - Volume 46

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CEO MAGAZINE, VOL. 46

HOW CIRCULARITY HELPS COMPANIES NAVIGATE TRADE TARIFFS

THREE STEPS TOWARDS SUSTAINABLE IMPACT AT SCALE

THE BOARDROOM MINDSET BLOCKING CLIMATE ACTION

EDUCATING LEADERS FOR A (MORE) CIRCULAR FUTURE

PROFITPLANET

LeadTech Executive MBA

For professionals with a Bachelor's degree and at least 5 years of work experience.

Executive DBA

For experienced professionals with 10+ years of work experience, a Master’s and a defined area of practice.

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SUSTAINABLE TRANSFORMATION: THE TRINITY BUSINESS SCHOOL MBA

Laurent Muzellec and Carrie Regan

SUSTAINABLE LEADERSHIP FOR THE BUILT ENVIRONMENT

Kayla Friedman

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EDUCATING LEADERS FOR A (MORE) CIRCULAR FUTURE: HOW BUSINESS SCHOOLS ARE DRIVING ESG, SUSTAINABILITY, AND POSITIVE IMPACT

Alon Rozen

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HOW CIRCULARITY HELPS COMPANIES NAVIGATE TRADE TARIFFS

Jon Hughes, Olaf Schatterman, and Jason Smith

THE PRICE OF CORPORATE AMERICA’S CARBON EMISSIONS: $87 TRILLION

CARLA FRIED

40

DO IMPACT INVESTORS PRIORITIZE FINANCIAL RETURNS OVER SOCIAL IMPACT?

Shankar Parameshwaran

with our Master’s or Postgraduate Certificate in Sustainability Leadership for the Built Environment

The University of Cambridge Institute for Sustainability Leadership offers part-time courses in Sustainability Leadership for the Built Environment that develop the knowledge, understanding and leadership skills needed to drive meaningful change in professional practice

Learn global best practices through project-based learning. Embark on a highly interactive and collaborative learning experience. Delivering exceptional future-fit built environment projects requires skill and expert coordination of individuals toward shared vision and purpose. Our programmes are highly interactive and designed to foster reflection and debate.

Through the programmes, students learn about emerging global trends, opportunities, and challenges in the built environment sector and develop deeper understandings of sustainability and resilience in professional practice, including health and wellbeing, retrofit and reuse, energy and carbon, conservation and heritage, stakeholder engagement, and cultural, political and regulatory contexts.

Bursaries & Scholarships

• SLBE Access bursaries

• SLBE Changemaker Scholarship

• Pomeroy Academy Scholarship

• Worshipful Company of Chartered Surveyors Scholarship Applications open early September 2025 for 2026 entry visit www.cisl.cam.ac.uk/slbe for more information

TABLE OF CONTENTS

44

THREE STEPS TOWARDS SUSTAINABLE IMPACT AT SCALE

Amitava Chattopadhyay

THE POWER OF RINGFENCING FOR AN EFFICIENT GREEN TRANSITION

Salvatore Cantale and Frederikke Due Olsen

LIST OF CONTRIBUTORS

48

56

Financial

Anthony

Head

Steven

Features

RESPONSIBLE ROOTS

including employees, customers, communities, and the environment. Responsible leaders are those, who, therefore prioritise ethical behaviour, sustainability, and the well-being of all stakeholders. As the Director of Griffith University's MBA program, I recognise the critical importance of equipping future business leaders with the skills and mindset required for responsible leadership in today’s dynamic and complex environment.

“Responsible

leadership is far more than a mere buzzword; it is a vital element of achieving sustainable business success.”

critical skills in a world where businesses and institutions are being held to higher standards of accountability and purpose. It’s also essential as organisations, rather than governments, emerge as significant drivers of change.’

Taking responsibility also means being accountable for their actions. Responsible leaders do not shy away from admitting mistakes or addressing issues. Instead, they confront challenges head-on and work to rectify any wrongs. This accountability demonstrates their commitment to ethical behaviour and reinforces their credibility. By acting with honesty, upholding moral principles, and ensuring transparency and fairness, responsible leaders create a positive and ethical organisational culture. This approach not only enhances the reputation of the organisation but also contributes to its long-term success and sustainability.

Sustainability: Prioritising long-term benefits over short-term gains is a defining characteristic of responsible leadership. This approach involves making decisions that not only ensure immediate success but also promote environmental sustainability and social equity for future generations. Looking back, Gilbert Guaring (Griffith University MBA class of 2022) reflects, ‘Even with years of leadership experience under my belt, I realised much of my earlier training had never accounted for sustainability. I had been mentoring young, driven marketers using frameworks that were disconnected from the systems thinking and sustainable strategies we urgently need today. That’s been the biggest shift in my career since the MBA: ensuring every business, marketing, or communications strategy I touch now begins with sustainability at the core—not as an addon, but as a foundation.’

Responsible leaders understand that short-term gains can often come at the expense of long-term stability and wellbeing. Therefore, they focus on strategies that foster enduring growth and positive impact. This means investing in sustainable practices that minimise environmental harm and promote the conservation of natural resources. By doing so, they help to protect the planet for future generations and contribute to the fight against climate change. In addition to environmental considerations, responsible leaders also prioritise social equity. They strive to create inclusive and fair opportunities for all stakeholders, ensuring that their decisions benefit a diverse range of individuals and communities. This involves promoting diversity and inclusion within their organisations, supporting fair labour

practices, and engaging in community development initiatives. Since completing her MBA with distinction, Kerryn Dillon has taken on several board positions where she can contribute strategic oversight, ethical governance, and values-driven leadership to causes that align closely with her mission to serve and strengthen communities. She assists other organisations to be better equipped to navigate future challenges, which emulates the characteristics of a responsible leader.

Courage and ethical decision-making:

Responsible leaders possess the courage to uphold what is right, even when faced with challenges and opposition. They are guided by their core values and a commitment to the greater good, making ethical decisions that reflect these principles. In learning about responsible leadership, Kerryn says, ‘The greatest benefit is that it shifts leadership away from a narrow focus on short-term success or individual achievement in a contained environment toward a broader commitment to ethical, sustainable, and inclusive impact.’

This moral fortitude enables responsible leaders to navigate difficult situations with integrity and resilience. By standing firm in their convictions, responsible leaders inspire trust and respect among their stakeholders. They understand that true leadership involves not just achieving success but doing so in a manner that is just and honourable. This means prioritising transparency, fairness, and accountability in all their actions. Moreover, responsible leaders recognise the broader impact of their decisions on society and the environment. They strive to create positive change, ensuring that their actions contribute to the well-being of their employees, customers, communities, and the planet. This holistic approach to leadership fosters a culture of ethical behaviour and long-term sustainability, ultimately benefiting both the organisation and the wider community.

Stakeholder inclusion: Engaging with and listening to all stakeholders is essential for responsible leadership. By actively seeking input from a diverse range of groups, responsible leaders ensure that their decisions are well-informed and considerate of various perspectives. This inclusive approach not only helps in addressing the needs and concerns of different stakeholders but also fosters a sense of community and collaboration. By valuing the voices of employees, customers, communities, and other relevant parties, responsible leaders can make decisions that contribute to the overall well-being and sustainability of the broader

“At Griffith University, sustainability is not an isolated subject but a fundamental principle woven into the fabric of the MBA program.”
“The Griffith University MBA program underscores the importance of sustainability, ethical leadership,and real impact, offering a comprehensive framework for cultivating responsible leaders who can effect positive change within their organisations and beyond.”

community. This commitment to inclusivity and dialogue ultimately strengthens the trust and support between the corporation and its stakeholders, leading to more resilient and successful outcomes.

Continuous learning and adaptability: The business environment is in a state of constant flux, requiring responsible leaders to remain informed and adaptable. To navigate this ever-changing landscape, they must continuously seek new knowledge and skills, ensuring they stay ahead of the curve. The Griffith MBA program contributes to continuous learning by fostering a mindset of adaptability, critical thinking, and lifelong skill development, and it ensures graduates emerge as well-rounded leaders. Gilbert echoes this in that he sees responsible leadership not as a destination but an ongoing journey—one that requires curiosity, continuous learning, humility, and the ability to lead with resilience and purpose. The Griffith MBA played a pivotal role in shaping his perspective, reinforcing the importance of values-based leadership. It also emphasised for him that business decisions are never made in isolation and must be grounded in sustainability, integrity, and a willingness to challenge the status quo. This experience encouraged him to consider the kind of future being shaped—not just for shareholders, but for teams, communities, future generations, and the planet. Striving for this kind of leadership remains a daily commitment for him.

Responsible leaders also focus on developing their emotional intelligence and leadership capabilities. They recognise the importance of effective communication, empathy, and collaboration in driving organisational success. By honing these skills, they can better support their teams and build strong, cohesive work environments. Kerryn found that the Griffith University MBA program profoundly changed how she approached her career. She said the MBA program made her understand that leadership goes beyond simply meeting goals – it's about the approach one takes and the influence one has on those around you. She became far more deliberate in cultivating trust, promoting inclusivity, and making choices that prioritise lasting impact over immediate success.

The Griffith University MBA program: A commitment to responsible leadership

As we navigate the complexities of the modern business world, the Griffith MBA program stands out for its emphasis on cultivating responsible leaders. By integrating sustainability and ethical leadership into its

curriculum, Griffith University equips future leaders with the tools to drive positive change and foster a more just and sustainable world. So, how is this done?

Sustainability at the core

At Griffith University, sustainability is not an isolated subject but a fundamental principle woven into the fabric of the MBA program. Courses such as “Accounting for Accountability” and “Strategy for Purpose” ensure that students understand the importance of sustainable practices in all business functions. Gilbert found that the MBA’s strong emphasis on responsible leadership, sustainable business practices, and a global outlook truly shaped his perspective—and one can see that ethos embedded across every course. As he notes, ‘I still remember my first day in “Sustainability and Systems Thinking”. It wasn’t just theory—it was a wake-up call. The course pushed us to explore key sustainability models, challenge conventional business logic, and think critically about long-term impact.’ The program’s holistic approach equips graduates with the tools to drive positive change and promote sustainability in their professional roles, as Claudia Haenel hightlights, ‘Central to the MBA is its unwavering focus on sustainability; the very reason I chose the world's number one Griffith MBA program. Without a planet, people and profit cannot thrive. Through understanding the United Nations Sustainable Development Goals, my service and values-based, authentic leadership approach have been fortified.’

Ethical leadership and social responsibility

The Griffith University MBA emphasises the development of ethical leaders who are committed to social responsibility. Students are encouraged to reflect on their values and how they can align their professional actions with these principles, as Claudia underlines, ‘The Griffith MBA has empowered me to lead with accountability, integrity, and ethical decision-making, values that align with my commitment to building a sustainable legacy for future generations.’ This focus on ethical leadership is reinforced through case studies, real-world projects, and interactions with industry leaders who exemplify responsible business practices.

Real Impact and applications

Our graduates are making significant contributions to their organisations and industries by applying the principles of responsible leadership. For example, Kerryn has found her MBA to be instrumental in

Like a Diamond, an MBA is Forever

Ensure it’s AMBA-accredited.

Be in brilliant company

MBA students on AMBA-accredited programmes are required to have at least 3 years prior management experience, making for quality networks and applied learning.

Crafted with

world-class expertise

The high standard of AMBA-accredited MBAs is certified by highly experienced Business School Deans and Directors - Experts assessing Experts.

Invest in education that stands the test of time

AMBA-accredited schools have educated MBAs to AMBA standards for a minimum of 3 years and usually over 10 years.

Be part of a priceless network

AMBA-accredited MBA programmes require a minimum of 500 ‘contact’ hours, ensuring face-to-face learning and strong relationship-building.

Access the highest quality experts in academia and industry.

Faculty at AMBA-accredited programmes are internationally diverse and at least 75% must have a relevant postgraduate qualification.

AMBA is the world’s only MBA-specific Accreditation Organisation, accrediting just 2% of the world’s Business Schools. www.mbaworld.com

2025 GLOBAL MBA RANKINGS

With ESG moving from a fringe concern to a mandated necessity, driven partly by global regulation, conscious consumerism, and competitive ambition, research (Bloomberg, 2024) suggests there is strong, long-term support for ESG practices amongst C-suite executives and investors. While this is reflected in the growing appetite for sustainability and CSR amongst prospective students (GMAC, 2024), some commentators have suggested business schools need to be doing more to develop sustainability literacy.

Looking beyond token modules and electives, this year’s Green MBA Rankings showcase business schools that are championing sustainable business practices and, in so doing, developing responsible leaders capable of driving meaningful change.

While this year's Green MBA Rankings are concentrated on the percentage of core courses focused on ethical, social, and environmental impact, consideration has also been given to experiential learning opportunities, university-wide sustainability initiatives/partnerships, faculty research, delivery methods, and accreditation.

*Data collection encompasses direct submissions, CEO Magazine’s Global MBA rankings, and publicly available data.

THE BOARDROOM MINDSET BLOCKING CLIMATE ACTION

As the world's sustainability concerns increasingly become corporate concerns, boards are often left wondering where their responsibility begins and how far it should extend. While we may not be personally responsible for the climate crisis, we are all part of the system that created it. Anyone advising boards and sitting on them has contributed to the machinery that got us here.

Regulations that hold companies accountable for climate change, like the EU Corporate Sustainability Reporting Directive and Corporate Sustainability Due Diligence Directive, trigger an ambivalent response. People wish to do better when they see their company’s impact. But they also react to regulation with anxiety and defensiveness, finding justifications to delay action.

Instead of operating at the “decision level” – focusing on actions and immediate consequences – board members need to shift to the “choice level” and reflect on who we want to be and the values that guide us. We need to allow ourselves to be more human in the boardroom, for human considerations and concerns to fuel our decisions.

This deeper commitment at the choice level is the only way to address the climate crisis. It means being comfortable with not having all the answers and still embarking on a path of change. It's about wanting to make a difference, even when the path forward is

unclear. For many in board roles, thinking of the future we leave for our children and their children is a strong reminder of our current responsibility, making the choice to initiate change inevitable.

Remaining solely at the decision level, where we minimise immediate risks and maximise short-term profits, will only prolong climate inaction.

Overcoming learning anxiety, learned helplessness and toxic schizophrenia

To get to the choice level, we need to confront a big obstacle in the boardroom: learning anxiety – the fear of learning something new. According to social psychologist Edgar Schein, we often worry that learning is too difficult, will make us look incompetent or force us to abandon old ways that have worked so far. This fear is holding us back from taking responsibility for the climate crisis. It threatens our self-esteem, and in extreme cases, our identity.

Another big barrier is “learned helplessness”. Erich Fromm, in his 1942 work, explored how newfound freedom can be overwhelming, leading individuals to seek refuge in submission. This fear of freedom, he later argued, manifests in the creation of "idols" – systems and structures that, while initially designed by us to serve human needs, ultimately come to dominate individuals as structures over and above us that cannot be changed.

I n the corporate context, the relentless pursuit to maximise shareholder value –fuelled by excessive executive compensation tied to short-term gains – has become an unquestioned dogma. This "idolatry" can lead to a form of learned helplessness, where people feel powerless to challenge the system that they themselves helped create.

Finally, we often suffer from what I call toxic schizophrenia. Ethics, morals, how to be and do good, are reserved for the private sphere of families, friends and neighbours. Meanwhile, in the business world, we are supposed to follow what Max Weber called matter-of-fact laws of the marketplace, of competition and of what investors desire. Our humanity, our human experience and judgement, are often left outside the

JAAP WINTER

SUSTAINABLE TRANSFORMATION: THE TRINITY BUSINESS SCHOOL MBA

ALEXANDRA SKINNER TALKS TO LAURENT MUZELLEC

Getting to Know Trinity Business School

Q. I’d like to start by unpacking Trinity Business School’s mission of transforming business for good. What does this mean, and how does it inform your values and vision as a business school?

At Trinity Business School, our mission to "Transform Business for Good" reflects our commitment to addressing the pressing challenges of our time through three foundational principles:

1. Sustainability

We are dedicated to climate action, which permeates our teaching, research, and institutional operations. This commitment is embedded across our educational programmes, shaping graduates who lead with environmental responsibility. By continually reshaping and redesigning curricula while fostering innovative thinking, we prepare students and researchers to innovate in ways that safeguard biodiversity and actively contribute to solutions for the escalating climate emergency.

2. Ethics and Social Inclusion

Fostering social inclusion is integral to our mission, exemplified through programmes like the Trinity Access Programme, which broadens access to education for underrepresented social groups. Simultaneously, we prioritise business ethics, advocating for humane and ethical practices across all sectors.

3. Innovation and Transformation

Businesses and business schools must continuously adapt to changing market realities. For example, we are integrating AI into our programmes and pedagogical approach. We also encourage entrepreneurial behavior and propose modules on entrepreneurship, technology management or entrepreneurial finance. Innovation drives this transformation, as reflected in our research centres, such as the Trinity Centre for Social Innovation, the Centre for Digital Business and Analytics, and the Corporate Governance Lab. These centres not only tackle contemporary business challenges but contribute cutting-edge solutions that shape industries and inform public policy.

Q. How do you bring these principles to life?

Through our educational programmes and research initiatives. For example, in addition to the traditional marketing, finance and accounting or strategic management approach, our MBAs include core modules such as Leading with Business Analytics and AI or Leadership in a Climate Emergency. These are not "nice-to-have" peripheral modules; they are essential to our mission of preparing business executives to lead in transforming business for the better. Additionally, our research centres serve as incubators for thought leadership, fostering innovative business practices.

Q. While the Business School is housed in a state-of-the-art development, you are also located on the historic Trinity College Dublin campus and are currently celebrating your centenary as a business school. Can you talk about what this means in relation to legacy and the learning environment you’ve created?

Trinity Business School is uniquely positioned to deliver a world-class education that bridges tradition and innovation. Celebrating our centenary as a business school is a moment of pride and reflection, offering valuable meaning for our current and future students.

With its rich 430-year history, the Trinity College Dublin campus provides students with a learning environment steeped in academic excellence, global heritage, and cultural significance. For over 100 years, Trinity Business School has contributed to this legacy, evolving to meet the challenges of modern business while honouring the intellectual rigour and tradition that defines Trinity College Dublin. This blend offers students a unique foundation, combining deep-rooted values with contemporary relevance.

Regarding the learning environment, our leading-edge facilities, located in the heart of Dublin's vibrant city centre—the digital capital of Europe—symbolise our forward-looking approach to education. These facilities are thoughtfully designed to foster collaboration, creativity, and real-world learning, offering cutting-edge resources that prepare students to lead in a dynamic and rapidly evolving business landscape. The unique juxtaposition of historic surroundings with modern infrastructure inspires students to innovate while respecting and learning from the past, enabling them to both embrace heritage and progress in their educational journey.

Q. To what extent is the School’s centenary shaping future growth?

Our centenary reminds us of our commitment to shaping ethical, sustainable, and innovative leaders. For current and future students, this milestone underscores our ability to adapt and thrive, ensuring that their education is both relevant and impactful. Initiatives tied to the centenary, such as expanded programmes and partnerships, reaffirm our mission of "Transforming Business for Good" and provide students with opportunities to contribute to meaningful change.

Q. In terms of the student experience, what does it mean to be part of TBS at this important juncture?

Being part of a centenary-celebrating institution means students join a community with an exceptional global reputation, a network of 120,000 alumni spanning every continent, and access to leading research and thought leadership. The historic Trinity campus enriches the student experience, providing unparalleled academic, cultural, and social opportunities. Our location also connects students directly with Dublin’s business ecosystem, fostering close ties to global industries and entrepreneurial networks.

“Applied learning enhances their problem-solving, leadership, and decision-making skills, creating graduates who are equipped to make impactful contributions post-MBA.”

students develop a deeper understanding of the complexity of societal challenges, including the power and limitations of sustainable business practices. This applied learning enhances their problem-solving, leadership, and decision-making skills, creating graduates who are equipped to make impactful contributions post-MBA.

For example, a team of students from Trinity’s FEMBA conducted research to deliver an evidence-based report on how to set up a circular economy hub in Inishowen (Co. Donegal), which is the northernmost tip of Ireland. The hub, which was subsequently implemented, leverages environmental concerns to address social and economic development in a remote rural area. The student report was key to the organisation, Spraoi agus Sport, successfully winning a funding grant to build the new hub.

Q. What role do the Trinity Corporate Governance Lab and Centre for Social Innovation play on and off campus, and how much do they overlap with and inform your MBA?

The Trinity Corporate Governance Lab and Centre for Social Innovation are critical hubs of research and practice that directly inform the MBA curriculum. They provide cutting-edge insights into governance, sustainability, and innovation, enriching classroom discussions and project work. Beyond the campus, these centres collaborate with businesses, policymakers, and nonprofits to tackle societal challenges—bridging theory and practice while reinforcing the School’s commitment to impactful business practices.

Q. What can students expect from their Trinity MBA experience?

Students joining our MBA programme can look forward to an immersive and transformational journey that blends rigorous academic knowledge, practical application, and global perspectives. Our MBA fosters both personal and professional growth through leadership development, hands-on projects, and exposure to diverse viewpoints. Trinity’s rich heritage, excellent facilities, and vibrant Dublin location further elevate the experience, offering students a unique environment to expand their horizons. As FEMBA student Carrie

“By grounding all our endeavours in sustainability and innovation, Trinity prepares future leaders to transform business and society for the better.”

notes, “The programme has challenged me academically while simultaneously challenging my notions of what I’m capable of. It’s helped me understand where I thrive professionally and all that I have to offer.”

Q. From an admissions standpoint, what advice would you give potential applicants?

Prospective applicants should demonstrate a clear vision for their career goals and how the Trinity MBA aligns with their ambitions. Emphasising leadership potential, professional achievements, and a commitment to innovative and responsible practices can strengthen applications. We seek driven, motivated individuals with a genuine passion for personal growth, a collaborative mindset to thrive in team-based environments, and the adaptability to excel in a rigorous and transformative learning environment.

Q. What does the future hold for Trinity Business School regarding your graduate and executive education offerings and offcampus efforts?

As we celebrate a century of business education, our focus remains firmly on the future. By continuing to integrate our heritage with innovation, Trinity Business School is committed to producing leaders who respect the past while driving transformation in the years to come. For our students, this means being part of an extraordinary institution that not only shapes their careers but empowers them to make meaningful contributions to society.

More broadly, we will continue to expand our global reach through innovative programmes, flexible learning pathways, and strengthened partnerships with industry leaders. With sustainability and innovation at the core, the School is poised to enhance its executive education offerings and extend its impact through off-campus initiatives.

BIOGRAPHIES

Dean of Trinity Business School, Professor Laurent Muzellec is a professor in marketing and digital business.

Carrie Regan is a media consultant and content strategist at Global Content Strategies.

“Ensuring that our built environment is fit for the future of humanity is a fundamental challenge facing us today.”

LEADERSHIP SUSTAINABLE

FOR THE

ENVIRONMENT

LEADERSHIP SUSTAINABLE

ENVIRONMENT THE BUILT

The built environment encompasses all of the physical places that are created from the finite natural resources that we as humans depend upon. There is a dependent relationship between the two that is intimately connected to our ability to live successfully on the planet.

In fundamental terms, there is no material that our built environment is constructed from that is not extracted or made from some aspect of our natural environment. With global population numbers expected to reach 10 billion by 2061 1 , that means there will be 2 billion more people who need homes, places to work, places to be educated, places to pray, places to heal, and the associated infrastructure that will allow those places to function and let people move between them. What does their future look like?

To help understand the scale of the challenge, I like to share this visualisation that I learned from one of our CISL Fellows, Will Day. He notes that Greater London has a population of just under 10 million people. It has a mixture of high-density and low-density areas. It has built areas and natural recreation areas, cultural areas, and arguably everything people need to thrive in a diverse community. Although many people prefer not to live in

“We use education to empower individuals and organisations from across the world to change their own actions, rethink their purpose and performance, and work to change the system itself.”

cities at all, Greater London probably offers a range of living environments that most people would find agreeable. For us to accommodate 2 billion people to the standard of living that is provided by a place like London, we would need to build 200 of them by 2061, or about one Greater London every nine and a half weeksgive or take.

This is not particularly good news for the planet, given that in 2019 it was calculated that the built environment was responsible for 39% of global energy related to carbon emissions28% from operational emissions and 11% from materials and construction 2 . Between 40-50% of resources extracted for global materials are used in construction markets, and as much as 32% of landfill waste comes from construction sites3 . We have not been very good stewards of the planet, and the strain we have put on it is evident through climate change and the degradation of the natural environment. We are using up resources faster than we are replenishing them, and we need to not only reverse this trend for ourselves, but for an additional 2 billion inhabitants in the future. It is an enormous challenge.

This challenge is compounded by the fractured nature of the built environment as an industry. As a sector of the economy, it employs a vast range of professionals and individuals, from finance, consultancy, construction, and the public sector, amongst many, many others. This was recently well illustrated by work from the New London Architecture, highlighting the lack of clear understanding of the scale and significance of the collective whole4 . Unfortunately, these professions have a long history of not working particularly well together, and certainly not thinking of themselves as all working in the same industry. Publications such as the 1994 Latham Report in the UK5 and work from RICS in 2008 on the Vicious Circle of Blame 6 have highlighted the adversarial nature of industry relationships, yet these challenges still persist.

It is easy to feel overwhelmed by these matters, but the scale of the challenges also holds the secret to the opportunities.

At the University of Cambridge Institute for Sustainability Leadership, we recognise that transforming places to meet the needs of people in the future, in terms of their physical environment, infrastructure, and socio-economic conditions, is a fundamental component for building a sustainable economy. We sit in a unique position within one of the world’s greatest educational institutions and use that position to build a network of global change-makers from across the private sector and government to create a sustainable and resilient future. We deliver

this through education, innovation, research and fostering collaborations between the private sector and policymakers.

Our headquarters, Entopia, is a unique hub fostering collaboration between academia, startups and corporates and is now becoming a ‘Living Lab’ with researchers, startups and corporate innovators using it to innovate, pilot and demonstrate new solutions for sustainability in the built environment.

We use education to empower individuals and organisations from across the world to change their actions, rethink their purpose and performance, and work to change the system itself. We do this through targeted, traditional executive education programmes for specific organisations and through accredited, non-accredited and online programmes. In my role as programme director in our postgraduate education team, I lead on our accredited built environment offerings, including the Postgraduate Programme for the Built Environment.

Unlike traditional professional pathways, our master’s and postgraduate certificate programmes assume that our students are already experts in their chosen fields. We offer ‘next-level’ education opportunities that are routinely excluded from siloed professional courses. One of the fundamental aspects of our programmes is that our students come from across the professional disciplines that make up the built environment professions and that they study together. This may not seem particularly radical or innovative, but perhaps surprisingly, we are one of the few programmes, globally, that engage with the industry in this way. It is imperative that we support professionals in overcoming siloed thinking and help them to work together effectively. We create a safe educational space for people to ask honest questions of each other, and to help them understand each other better, so that when they return to their professional spaces, they are better equipped to collaborate with the other stakeholders they engage with. Our students gain a professional network beyond their disciplines that endures after their time with us. Many of our alumni tell us that they are still in touch with their colleagues and continue to use their diverse expertise to support their professional engagements.

We also support students in developing the skills to understand and evaluate emerging technologies and innovations. The world is rapidly changing, and what is true today may not be true in ten, five, or even two years. What professionals need is the skillset to understand and evaluate emerging opportunities. Being grounded within the academic context, we use the principles of

academic rigour to support evidence-based decision making. This is important for two reasons. First, that our students feel capable of evaluating the opportunities today and in the future for the benefits and risks associated with change. Applying an academic mindset to information helps to remove bias and ensure a holistic approach. Second, we use an evidence-based approach to support students in communicating their findings to other key stakeholders. We stress the need for impartial and clear evidence when building the argument for change, as it is far more compelling and convincing than relying on charisma or seniority.

We do all of this while providing current teaching on the challenges of sustainability and resilience in the built environment and looking at current and emerging technologies and innovations in order to address them. We teach professionalism, interdisciplinary practice, and leadership, focusing on the concept that any member of a team can find moments to step up to lead, regardless of contractual position or seniority. We explore the many professional or ‘soft’ skills required to positively engage and collaborate with other stakeholders. We look at decisionmaking across the lifecycle of projects and challenge our students to understand how the decisions they make on their part of a project can have impacts on others. We deliver all of this with evidence-based teaching so that students experience how this approach to knowledge is used, and we provide opportunities for them to engage in evidence-based assignments so that they gain experience in this skill set to bring back to the workplace.

Ensuring that our built environment is fit for the future of humanity is a fundamental challenge facing us today. We need leadership across the disciplines to seize the opportunities available and convert problems into action. I feel fortunate to play a role in helping numerous professionals from around the world feel more confident in stepping up to the challenge to build a true momentum for change.

“We have not been very good stewards of the planet, and the strain we have put on it is evident through climate change and the degradation of the natural environment.”

BIOGRAPHY

Dr Kayla Friedman is the course director for the University of Cambridge’s Master’s and Postgraduate Certificate in Sustainability Leadership for the Built Environment (IDBE) and a programme director in the postgraduate education team at the Cambridge Institute for Sustainability Leadership (CISL).

1 https://populationmatters.org/news/2024/07/the-road-to-10-billion-world-population-projections-2024/#:~:text=The%20United%20Nations%20(UN)%20has,billion%20in%20the%20 mid%2D2080s.

2 https://worldgbc.org/climate-action/embodied-carbon/

3 https://worldgbc.org/article/an-integrated-approach-to-a-sustainable-built-environment-the-co-benefits-of-resources-circularity/

4 https://nla.london/insights/skills-for-places-inspiring-future-city-makers

5 https://constructingexcellence.org.uk/wp-content/uploads/2014/10/Constructing-the-team-The-Latham-Report.pdf

6 https://www.researchgate.net/publication/263782010_Breaking_the_Vicious_Circle_of_Blame_-_Making_the_Business_Case_for_Sustainable_Buildings

How Business Schools are Driving

ESG, Sustainability, and

With all the back-pedaling in recent months on climate, ESG and sustainability initiatives, especially in the US, I hope that I can say this - without ruffling too many feathers - that the future of business can no longer be take, make and dispose (i.e. linear). It’s hard to deny the urgency of rethinking how we produce, consume, and discard so that we extract less, produce less and consume less (or better). And yet, we are now seeing businesses paradoxically scrambling to understand ESG and sustainable accounting frameworks, on the one hand, and trying to understand why the same investors who penalized greenwashing and called for strict net zero objectives in 2024 are now backing off or reversing course, on the other. So, the trillion-dollar question that is now looming for business schools everywhere: How can we train leaders to have the competence and the confidence to tackle these challenges headon so they are doing the right thing despite rapidly swirling and ambiguous political winds?

Challenge accepted!

At École des Ponts Business School, we take this challenge personally—after all, we’ve been “in business to make a better world” since 1987. As the business school of the renowned French engineering school,

Positive Impact EDUCATING FOR A (MORE) CIRCULAR L R

ALON ROZEN

EDUCATING LEADERS (MORE) CIRCULAR FUTURE:

FRÉcole nationale des ponts et chausséesInstitut Polytechnique de Paris (the ENPC), which is under the tutelage of the French Ministry of Ecological Transition, we are naturally proponents of triple bottom line accounting by which we take people, planet and profit into account. And we try to recruit participants who share our values and who want to make an impact themselves.

As this edition of CEO Magazine is dedicated to Green MBAs, please allow me to share with you some of the thinking and design that went into our LeadTech Global Executive MBA that we run together with EADA Business School in Barcelona. We have designed this program so that it sits squarely at the intersection of technology, innovation, leadership and impact (social impact, sustainability and circularity). And we don’t just pay lip service to the concept of a sustainable and circular economy: we teach it integrally, research it intensively, and encourage our students to live it authentically. Every single participant graduates not just with an MBA but with a certificate in Circular Economy. Why? Because in tomorrow’s world, it won’t just be a competitive advantage—it’ll be table stakes.

Not a nice-to-have, a better-to-have

Call it European values, but we are enamored with the core tenets of the circular economy – using assets longer (to extract and waste less), reusing assets more often (to produce less) and encouraging usership over ownership (to extract, produce and waste less). We see the circular economy as a more advanced and profitable business model that doesn’t sacrifice people, planet or profits along the way. Which means that going circular is not a nice-to-have, which generates good karma at the expense of higher costs; it is a better-to-have, which allows business to generate more positive impact together with higher profits.

More broadly, learning about sustainability is nice, but unless you practice it, it risks becoming an exercise in policies and pie charts, which is why, in addition to mastering the complexities of Circular Economy frameworks and ESG metrics, our students tackle Social Impact Challenges and learn how to leverage Tech for Good through our ReTech (Responsible Technology) Center. The name of our program, LeadTech, is a testimony to our vision that techies need to sharpen their leadership skills and future leaders need to sharpen their technology skills. Together with an advanced understanding and practice of sustainability, these components create a leadership ethos that transcends profits and ensures we keep people and planet in the loop.

However, the key to driving this change forward, especially in the current political environment, isn’t just the frameworks we teach or the projects we assign—it’s about equipping leaders with the ability to stand firm and advocate for sustainable action in the face of opposition. And let’s be clear: opposition is growing. As calls for a rollback

“Every single participant graduates not just with an MBA but with a certificate in Circular Economy. Why? Because in tomorrow’s world, it won’t just be a competitive advantage—it’ll be table stakes.”

on sustainability and climate action intensify, business leaders need more than technical acumen; they need a voice—and the courage to use it.

Why leaders must find (and fine-tune) their voice

The circular economy is not just an operational shift; it’s a cultural one that requires a new mindset. Driving this change in an organization requires leaders who can articulate the why, the what AND the how behind sustainability. They must be able to inspire teams, build consensus, and rally stakeholders around goals that may not deliver immediate returns (a horizon 1 timescale but critical for long-term resilience and impact on a horizon 3 timescale).

This is particularly vital now, as we are facing what I like to call the “sustainability boomerang” that is about to hit us all in the face. Detractors question the economic feasibility of green initiatives, frame ESG as a form of corporate or governmental overreach,

or, worse, deny the urgency of climate action altogether. Business leaders must learn how to counter these narratives—not with virtue signaling but with evidence and a clear vision for how sustainable practices are both the ethical choice AND the profitable choice. At École des Ponts Business School, we believe this voice is developed not just through knowledge but through experience. This is why our programs are designed to simulate the complexities of real-world leadership challenges. Our Social Impact Challenge, for instance, forces participants to develop a progressive narrative (change as transformational and beneficial) and leverage emerging technologies in order to confront the tough realities of implementing change in resistant environments. It’s not just about “being the change you want to see” — it’s about how to do it effectively.

Leadership in an increasingly polarized world

In today’s polarized world, simply knowing the right course of action isn’t enough. Leaders must have the emotional

intelligence, communication skills, intercultural maturity and business savvy to navigate difficult conversations and find value-creating win-win solutions. Once you understand that if someone loses, everyone loses, negotiations and difficult discussions are handled differently. And all discussions about new energy solutions, new business models, redesigned value chains, … are all difficult as they are new and relatively unknown. As people clamor for certainty in a more uncertain world, leaders must be able to connect the dots between sustainability, innovation, change and profitability for their boards, investors, teams and partners. To that end, our LeadTech Global Executive MBA emphasizes the development of what we call “responsible leadership.” This isn’t just a buzzword; it’s a practice. It means understanding the intersection of technology, innovation, and sustainability but also recognizing the human dimension of leadership—how to inspire others, build coalitions, and maintain a sense of purpose even when the path forward isn’t clear. It requires a growth mindset, embracing uncertainty, as well as the principles of lean innovation like experimentation (test and learn), empathy (co-innovation with the people you are solving problems for), and evidence (as in the famous quip, “in God we trust, all others bring data”).

Business schools as catalysts for change in a complex world

The world feels increasingly complex and uncertain. Within that context, it seems obvious that business schools need to be more than institutions of learning—they need to be incubators for systemic change, creative problem-solving, and new forms of collaboration. We have the unique ability to shape the next generation of leaders, equipping them not just with tools but with the mindset to tackle the grand challenges of our time. Whether it’s through the integration of Circular Economy certification, the inclusion of real-world impact challenges, or the creation of centers like ReTech that explore the societal implications of emerging technologies, École des Ponts Business School aims to lead by example and host the conversation. But we can’t do it alone. This is a collective effort—one that requires partnerships between academia, industry, and government. Together, we can ensure that sustainability isn’t seen as a trend or a luxury but as the foundation of a thriving global economy. And luckily, we keep finding kindred spirits wherever we look - whether in Spain (EADA and IESE), in China (Tsinghua School of Economics and Management) or in Japan (Shizenkan University) – such that my discussions with other deans leaves me encouraged and rationally optimistic. We are not alone.

The

road ahead

As I reflect on the state of leadership today, I’m reminded of a simple truth: progress is rarely linear. While I think that an oval economy (somewhere between linear and circular) is a more realistic ambition, I also know that there will be setbacks - as we’re seeing now with the wavering commitment to ESG and climate goals. But those setbacks are precisely why strong, principled leadership is so essential.

So, to conclude, if you are reading this article, you may be considering a “green MBA” for yourself. For this, I congratulate you. Whatever program you choose, please understand that sustainability is no longer a comfortable choice; it’s a growing necessity. Find a program that you believe will equip you to thrive in a world of uncertainty and guide you to finding an emboldened version of your voice. Learning these MBA skills, with the aim of using them to champion what’s right— is the ultimate competitive advantage. The question you should ask yourself isn’t whether you can afford to lead this change; it’s whether you can afford not to. And we all should be asking ourselves the same question.

“We have the unique ability to shape the next generation of leaders, equipping them not just with tools but with the mindset to tackle the grand challenges of our time.”

BIOGRAPHY

THE PRICE OF CORPORATE AMERICA’S CARBON EMISSIONS: $87 TRILLION

The long-term societal cost of greenhouse gas emissions exceeds the total market value of the corporate sector.

Accounting for the costs of climate change is an increasing focus globally. In 2024, the United States alone had 27 “confirmed weather/ climate disaster events with losses exceeding $1 billion each,” according to the National Centers for Environmental Information.

W ho will pay these costs?

One idea is to create “climate superfunds” by charging companies for the costs of climate change. New York State, for example, enacted a law in December that makes fossil-fuel companies fund a climate-change adaptation cost recovery program. But some research suggests that the price of climate change is more than public companies can possibly pay.

CARLA FRIED

The external costs generated by emissions from US companies may total $87 trillion and outweigh the market value of those companies, according to Chicago Booth’s Lubos Pastor and University of Pennsylvania’s Robert F. Stambaugh and Lucian A. Taylor.

T heir calculations are based on year-end 2023 emission levels, forecasts of future emission levels, and a baseline assumption of the cost of those emissions. If the US were to achieve the emission reductions laid out in the 2015 Paris Agreement, which seeks to hold global warming to less than 2°C above preindustrial levels, the researchers estimate its carbon burden would decline by as much as 32 percent. But that goal is now seen as overly optimistic, they write. (And President Donald Trump has withdrawn the US from that agreement, as he did in his first term.)

The US government began tracking the economic cost of climate-related disasters in 1980. In that decade, 33 climate disasters caused at least $1 billion in damage (adjusted for inflation), with a total cost of nearly $220 billion. In the three years from 2021 to 2023, 66 large-scale disasters caused more than $441 billion in damage.

And that only includes the direct immediate cost of climate disasters, such as replacing damaged buildings and homes and accounting for business interruptions. There are also many consequential indirect costs, which can play out over decades, including health issues, disruptions to productivity, and stresses on the food and water supply.

In calculating the future societal cost of greenhouse gases, or the “carbon burden,” Pastor, Stambaugh, and Taylor used the social cost of carbon metric produced by the Environmental Protection Agency. The SCC estimates the economic impact of an additional metric ton of CO2 emissions. For

their study, they also pulled in government data forecasting emission levels for the overall economy, and added company-level emission forecast data from finance company MSCI, which they rolled up into industry-level forecasts.

A massive footprint

An analysis of carbon emissions through 2050 finds that many US industries’ carbon burdens far exceed their market value. In energy, accounting for customer use, among other actions taken outside the scope of the company, pushes the burden past 20 times market cap. Meanwhile, fossil-fuel financing is a major contributor to the finance sector's carbon burden.

As with calculating a net present value for a stock’s dividend, forecasting the future cost of emissions requires an embedded discount rate. The researchers focused on 2 percent as the rate, which experts in social discounting— who make a cost-benefit determination in the present about the future value of a given policy—deem most appropriate. The discount rate for the EPA’s SCC forecasts was also 2 percent.

T he researchers adopted the framework of the Greenhouse Gas Protocol. This globally followed system sorts greenhouse gas emissions into Scope 1 (direct emissions from a company’s own operations), Scope 2 (indirect emissions used to generate the

Industry carbon burden as a multiple of market capitalization

Scope 1: Direct emissions from a company’s own operations

Scope 2: Indirect emissions from a company’s purchased energy

Scope 3: All other indirect emissions in a company’s value chain

JON HUGHES, OLAF SCHATTERMAN, AND JASON SMITH

The U.S. administration’s rapidly shifting trade tariffs and other countries’ responses have shocked global supply chains. These tariffs are likely to impose significant costs on companies that rely on overseas production and multi-national supplier networks. Because tariffs apply at the point of entry, they increase the cost of goods immediately, impacting margins, pricing, and competitiveness. For many firms, these added costs cannot be passed on to customers, especially in price-sensitive markets.

“Businesses with global supply chains must move beyond a narrow focus on cost efficiency at the unit level under normal operating circumstances to embrace circularity, responsibility, and resiliency as core principles that can help mitigate severe negative financial impacts from supply chain shocks.”

The Fragility of Global Supply Chains

Over the past few decades, globalisation and technological advancements have enabled companies to build supply chains that span the globe. Today’s supply chains are intricate, interconnected webs designed for efficiency, specialization, cost savings, and improving overall competitiveness. For example, components might be sourced from China, assembled in Mexico, and sold in the U.S. Long, multi-tiered supply chains are inherently susceptible to disruptions. The efficiency—and complexity—of these systems comes at a cost: fragility. A flood in Southeast Asia can delay shipments of critical components. A pandemic can grind manufacturing hubs to a halt. A single policy decision—such as a new tariff—can sharply increase costs and upend supplier relationships. The challenge for companies is navigating such external shocks and keeping them from disrupting business operations or threatening profitability. All this makes resilience just as important as efficiency.

In the current environment, the question facing business leaders is clear: What must my business do now to mitigate the impact of tariffs while building a more resilient, sustainable supply chain for the future?

The answer lies in both short-term tactical responses and long-term strategic shifts. Let’s explore both—with real examples from major companies.

Short-Term Actions: Tactical Mitigation

Companies must act quickly to buffer the likely negative financial blow of tariffs. These short-term tactics can help mitigate immediate impacts.

1. Build Inventories Ahead of Deadlines

Given the 90-day pause on most new tariffs announced by the Trump administration in April 2025, there may be a window for importers to accelerate shipments and stockpile goods at lower cost. While this strategy increases holding costs and ties up working capital, it has the potential to provide a buffer against possible cost increases.

Example: In response to earlier waves of U.S.-China tariffs, Home Depot proactively increased its inventories of tariff-affected products to avoid cost increases. The company’s CFO noted in earnings calls that they accelerated some shipments ahead of tariff deadlines to mitigate financial impacts and ensure stock availability during key sales seasons.

2. Negotiate Across the Value Chain

Businesses can work collaboratively with suppliers, manufacturers, and distributors to share the pain tariffs bring. Rather than absorbing the resulting higher costs alone, companies can renegotiate terms, seek temporary cost-sharing agreements, or push for discounts. In some cases, contracts may include tariff-related clauses that enable such discussions.

Example: Ford Motor Company has faced tariff-related cost pressures, especially around steel and aluminium. Rather than absorb all costs or pass them to consumers, Ford initiated renegotiations with some suppliers to share the burden. They also reviewed contracts with upstream providers to revisit pricing models tied to raw material costs.

3. Diversify and Shift Suppliers

Where tariffs are countryspecific, shifting procurement to suppliers in other nations—whether in Southeast Asia, Eastern Europe, or Latin America—can provide immediate or partial relief. While not always simple (due to regulatory, quality, or capacity issues), even a partial shift in sourcing may help dilute the impact of tariffs.

Example: Apple, highly dependent on Chinese manufacturing, has been shifting parts of its supply chain to other countries like India and Vietnam. For instance, iPhone production has increasingly moved to Foxconn and Pegatron facilities in India to reduce exposure to tariffs on goods made in China and other geopolitical risks.

Long-Term Strategies: Building Resilient Supply Chains

Implementing circular business models naturally drives reshoring and nearshoring strategies by bringing manufacturing closer to end markets. While labour and manufacturing costs per unit may be higher in domestic or nearshore locations, advancements in automation, robotics, and additive manufacturing as well as the avoidance of tariffs can help offset these expenses. Shorter supply chains also reduce lead times, transportation costs, and exposure to geopolitical risks. Moreover, they make your business more resistant to supply chain shocks that can incur significant one-off financial impact like additional (express) transport costs, lost sales, and the cost of switching suppliers at short notice. It is critical that companies consider these risks and costs along with their profitability pursuit and take a broader strategic perspective.

“By designing products for reuse, remanufacturing, and recycling, companies can reduce dependence on raw material imports that may be subject to tariffs or scarcity.”

While tactical responses provide breathing room, the long-term goal must be to build supply chains that are not just efficient, but resilient to a range of supply chain disruptions. Here are some ways companies can make supply chains more resilient and more sustainable.

Adopt Circular Supply Chains

Circular supply chains focus on minimizing waste, reusing materials, and extending product lifecycles. By designing products for reuse, remanufacturing, and recycling, companies can reduce dependence on raw material imports that may be subject to tariffs or scarcity.

Example: Philips has embraced circular economy principles across several product lines. By designing medical devices for remanufacturing and reuse, they reduce dependency on virgin raw materials—some of which are subject to geopolitical or tariffrelated risk. This not only cuts environmental impact but also strengthens supply security.

Reimagining your supply chain can build the resilience required to weather unpredictable times while increasing its sustainability.

Trade tariffs serve as a reminder of how interconnected and exposed the global economy can be. While the immediate effects of tariffs are financial—higher costs, margin pressure, and sourcing challenges—the broader lesson is strategic.

Businesses with global supply chains must move beyond a narrow focus on cost efficiency at the unit level under normal operating circumstances to embrace circularity, responsibility, and resiliency as core principles that can help mitigate severe negative financial impacts from supply chain shocks. It is our strong belief at ERM that those who adapt quickly in the short term, while investing in long-term resilience through circular business models, will not only weather the current tariff storm but thrive in the volatile, uncertain global economy that lies ahead.

PROFILE

ERM is the world’s largest advisory firm focused solely on sustainability, offering unparalleled expertise across business and finance. ERM partners with clients to operationalize sustainability at pace and scale, through a unique combination of strategic transformation and technical delivery capabilities.

BIOGRAPHIES

Jon Hughes, Consulting Partner, EMEA.

Olaf Schatterman, Global Service Leader (Sustainable Products and Supply Chain).

Jason Smith, Regional Service Leader.

The survey found that in their external marketing and communications, impact funds emphasized social or environmental impact slightly more than financial returns. But in their internal management practices, they prioritized financial expertise when hiring and developing staff, evaluating performance, and designing compensation systems. This disconnect suggests that “while most funds adopt the rhetoric of impact investing, many struggle to ‘walk the talk,’” the brief noted.

According to the brief, its relevance derives from a paucity of insights into how impact funds balance their twin goals of social impact and financial returns in their internal practices and reward structures.

“There’s been a persistent question in the impact investing field concerning how investors should balance their commitment to impact and their commitment to financial returns,” said Michael Brown, head of research at the ESG Initiative and a coauthor of the brief. Brown’s co-authors are Wharton management professors Katherine Klein and Tyler Wry. Klein and Wry are also

“There’s been a persistent question in the impact investing field concerning how investors should balance their commitment to impact and their commitment to financial returns.”

faculty co-directors of the Wharton Impact I nvesting Research Lab, which is part of the ESG Initiative.

The research findings are based on survey data from the Impact Finance Research Consortium, a collaboration between the Wharton School, Harvard Business School, and the University of Chicago Booth School of Business.

“To meet impact investors’ ambitious social and environmental goals, funds need deep expertise to discern which investment opportunities are most promising and which sound good but are unlikely to deliver the impact they promise.”

Key Findings

The survey asked respondents to describe the extent to which their funds emphasized financial goals and expertise versus impact goals and expertise in their marketing and communication to prospective investors; in their hiring, training, and performance evaluation of staff members; and in their compensation system. The survey asked them to indicate their extent of agreement or disagreement with various statements on a scale of 1 to 5, where 4 equates to “agree” and 5 equates to “strongly agree.”

On average, survey respondents said that their funds’ marketing and communication emphasized a “dedication to achieving strong social and/or environmental impact” (average rating of 4.5) more than a “dedication to achieving strong financial returns” (average rating of 4).

But internally, the priorities were reversed. For example, survey respondents reported that “to earn the trust and respect of senior managers,” it was more important for associates to have “strong expertise and experience related to finance” than “strong expertise and experience related to social and/or environmental impact.” The brief’s starkest results related to compensation — specifically carried interest (fund managers’ share of investment profits). The survey results showed that impact funds were much more likely to base carried interest on the fund’s financial performance than on its social and/or environmental impact.

Drawing from the findings, the brief raised two pertinent questions: Are the funds guilty of ‘impact washing,’ where they fail to integrate their proclamations of social commitment into their internal practices and incentive structures? Or, do they find it inherently challenging to measure their social

impact? A combination of those two factors may explain the patterns the study revealed, the brief stated. It called for continued research on the misalignment between stated goals and operational realities in impact investing.

For sure, many impact funds are consistent in emphasizing social impact in both their communications and their reward structure for employees. “This study identifies highlevel patterns and trends in the impact investing field, although there are outliers in the survey sample that deviate from the general patterns we’ve identified,” Brown said. For instance, some of the funds surveyed placed equal emphasis on training and rewarding their personnel to achieve both social/environmental impact and financial performance, he added.

“Most impact investors report that they perform very well financially and also invest in ways that align with their impact thesis,” Wry said. In fact, many funds, and many of their investors (limited partners, or LPs) “don’t perceive a tradeoff between creating social impact and market-rate financial returns,” he added. But there are exceptions he pointed to: for example, “catalytic” impact investors, who consciously sacrifice financial returns to create greater impact, but these funds only represent about 15% of all impact investors, he noted.

“Many LPs have a sincere desire to create impact through their investments, as do many fund managers, but this is very hard to see if a fund doesn’t have an effective impact measurement strategy,” Wry said. “In comparison, financial performance is easy to measure, so there’s a real risk that this dominates, and funds fail to deliver meaningful impact … or worse, create unintentionally negative outcomes.”

Measurement challenges are part of the explanation for the study’s finding that many impact investors don’t link employee compensation to impact performance, he added.

But without more satisfactory measurement of social outcomes, funds are vulnerable to criticism for “impact washing,” Wry continued. “But my sense is that this isn’t very common. The bigger issue is that a failure to measure social and environmental impact gives license for cynical investors and entrepreneurs to claim the ‘impact’ banner when their only real interest is to create financial returns and aggrandize themselves.”

“Precise measurement of impact performance is definitely challenging,” Klein noted. “At the same time, I believe it is both possible and important for impact investing funds to cultivate and reward impact expertise among their staff members through hiring, training, performance evaluation, promotions, networking, and more. To meet impact investors’ ambitious social and environmental goals, funds need deep expertise to discern which investment opportunities are most promising and which sound good but are unlikely to deliver the impact they promise.”

Takeaways for Impact Funds

The brief advised impact funds to design internal systems that “genuinely balance financial and impact considerations,” sharpen their impact measurement tools, and reset compensation practices to better reflect their impact goals. “Our findings suggest that many investors could do more to operationalize their dedication to impact in how they run their funds,” said Brown, who created a research-based primer to help leaders implement effective impact measurement systems.

Wry advised “serious impact investors” to invest in developing “a reasonable impact measurement strategy.” Such a plan should clearly lay out the logic for how each portfolio company creates social or environmental impact, and identifies a few KPIs that can be used to track them, he said. “This will allow the fund to have more confidence that it’s creating impact, help to see instances of mission drift in portfolio companies, and report impact data that can help them communicate with and raise future funding from impact-focused LPs.”

Wry offered a couple of examples of firms that have advanced in impact measurement. One is 60 Decibels, which gathers social impact data on impact across multiple sectors. Another is private equity firm TPG’s research arm Y Analytics, which calculates the “impact multiple of capital” for each company before making an investment decision.

Impact funds that want to develop impact metrics and link them to compensation could begin by asking their LPs to specify “clear and meaningful metrics,” Wry continued. Next, they could have their approach audited by an outside agency and link that to the compensation of partners, he added. “They shouldn’t let perfect be the enemy of good.

Start small, learn what works, and keep iterating and improving.”

The top three sectors in which the surveyed funds invested were food and agriculture (45%), energy, and health care (36% each), followed by environmental protection/conservation and education. In terms of focus by the United Nations’ Sustainable Development Goals, nearly 60% of the funds focused on “decent work and economic growth,” followed by “good health and well-being” (48%), and “climate action” (42%).

ACKNOWLEDGEMENT

Republished with permission from Knowledge at Wharton (http:// knowledge.wharton.upenn.edu), the online research and business analysis journal of the Wharton School of the University of Pennsylvania.

AMITAVA CHATTOPADHYAY

In today's rapidly evolving business landscape, the pursuit of sustainability has become increasingly vital. With consumers, investors and employees placing greater emphasis on responsible corporate behaviour, businesses must navigate this shift strategically.

Using research on the agrifood sector, which is a major contributor to greenhouse gases, resource depletion and social inequities, I outline three steps that can empower businesses to achieve real, sustainable impact at scale, driving positive change profitably while meeting stakeholders’ expectations.

A key mantra of business is to focus on and understand your customers. This mantra applies equally even as firms aspire to create genuine sustainable impact at scale. As we discuss below, the key to effecting real change that moves the business towards driving both social impact and profit lies in understanding what your consumers really want.

1. Explore, experiment and innovate

Companies can benefit from developing social impact projects in isolation first, in order to give them the space and freedom to thrive. This allows organisations to solve societal problems and then search for opportunities to profit from successful schemes.

One way to rapidly scale social impact initiatives is by strategically using funds that have no expectation of a return on investment. For instance, Indian multinational Mahindra Group used corporate social responsibility funds to improve water availability in a waterstarved district of 32 villages in Madhya Pradesh, central India. By enhancing local

farms’ access to water and to information about better agricultural practices, the project led to a threefold growth in per capita income. This in turn enabled the farmers to pay for Mahindra’s products and services and increase their income further.

To date, the project has brought Mahindra a return on investment comparable to any for-profit initiative. The success hinged on Mahindra using CSR funds to empower communities, not just providing handouts. This created a new customer base and helped to foster stronger levels of trust through transparent cooperation.

2. Focus on customer needs

Once you have a project with potential, the next step involves understanding your customer's needs. Specifically, which of the 17 Sustainable Development Goals (SDGs) resonates most with your key customers and how does your narrative align with their priorities? If your SDG priority is different to the consumers’, they are not going to care about your project.

This customer-centric approach ensures that your efforts appeal to the target audience, increasing the potential for positive impact and market traction. Swedish oils and fats producer AAK did exactly that with its CSR project supporting women shea nut collectors in West Africa.

The project, called Kolo Nafaso, helped AAK establish a direct link with these producers to improve productivity and ensure the collectors received fairer compensation. Through the scheme, AAK looked to not only impact the lives of the women shea collectors but to also address issues related to deforestation, water usage and their carbon footprint, all while enhancing the quality and supply of raw materials.

As a CSR project, Kolo Nafaso was initially focused solely on growing the number of participating women. However, AAK soon realised that to expand the project further it needed to increase demand for its product.

AAK sold to a wide range of large corporations including Ferrero, Mars, L’Oreal and Burt’s Bees, each of which was looking to address different SDGs through their sustainability efforts. By analysing customer press releases, stakeholder magazines, impact studies and annual sustainability reports, AAK was able to identify the different SDGs that different clients were targeting as part of their own sustainability messaging.

With this insight, AAK promoted greater collaboration between members of the C-suite, the marketing team and those working on the direct trade programme. Those on the ground in West Africa would identify the different SDGs the project could

“The journey towards sustainable impact demands courage, creativity and commitment from businesses.”

In 2023, Solvay completed the strategically planned and highly anticipated separation of its business into two independent entities: (the new) Solvay and Syensqo. The move was designed to better capture market opportunities, drive growth, and enhance the Belgian chemicals multinational’s strategic focus by segregating its core operations from its high-growth specialty businesses.

The “new” Solvay (once referred to in the company’s document as EssentialCo) inherited Solvay’s foundational activities, including soda ash, peroxides, and silica –industries with stable, long-term demand but lower growth potential. EssentialCo aimed to establish a focused platform for reliable, cash-generative businesses that

THE POWER RINGFENCING EFFICIENT TRANSITION

underpin industrial applications worldwide. Meanwhile, Syensqo (or SpecialtyCo) would concentrate on high-growth markets with differentiated products, such as advanced materials, composites, and specialty solutions for selected industries.

This separation allowed both companies to manage and operate their assets with greater clarity, a more specialized and appropriate management, and the necessary agility in their respective markets, empowering them to seize growth opportunities that align

“The spin-off of an ESG-heavy unit is a complex but effective way for a company to find growth, streamline its operations, and accelerate its green transition.”

This strategic ringfencing not only clarifies a company’s value proposition but also has the potential to accelerate the green transition. By isolating and managing ESGheavy assets separately, companies can drive progress in their sustainable business units while addressing the complex, longterm sustainability challenges of traditional assets. Ultimately, this segmentation helps companies achieve a balanced, forwardlooking growth strategy, meeting consumer expectations while advancing green transformation goals.

There are several strategies companies can deploy to pursue ringfencing of highimpact assets. Each strategy offers a variation in the organizational complexity and level of sustainability responsibility the company retains, allowing it to choose the best fit for its business model and long-term goals.

We envision four archetypal strategies depending on how companies want to mix and match complexity and sustainability.

QUADRANT 1: RINGFENCE ESG-HEAVY ASSETS IN A SEPARATE UNIT

High sustainability responsibility, low transformation complexity

The company keeps ownership of assets with significant ESG challenges but segregates them into a separate business unit

within the group. By doing so, it retains all the sustainability responsibility and gains some strategic focus benefits with minimal transformational complexity. This strategy can enable the company to capture new growth segments, enhance talent retention, and better position itself for the green transformation.

Many companies across industries have adopted different versions of this solution. The global bank HSBC created a Climate Solutions Unit to focus on sustainable finance, carbon markets, and investment in climate-friendly initiatives. By setting up this specialized unit, HSBC could align with the green transformation without a full-scale restructuring, attract talent passionate about sustainability, and adapt to the growing demand for green finance.

Swedish automaker Volvo acquired Polestar in 2015 and later ringfenced its electric vehicle (EV) operations under the Polestar brand. Still part of the Volvo Group, this separate entity could be dedicated to high-performance EVs, enabling Volvo to retain its main, traditional vehicle business while positioning Polestar to capitalize on the fast-growing EV market. This allowed the brand to innovate more freely within the EV segment without disrupting its core operations and enhanced Volvo’s appeal to talent interested in green technology.

Lastly, Nestlé established its Health Science division to focus on nutrition, health, and wellness products, aligning with the shift towards a more health-conscious consumer market. By targeting emerging markets in health and sustainability, Nestlé was better able to attract talent interested in innovation within nutrition science and could position itself as a proactive player in the shift toward healthier consumer choices.

These examples highlight how ringfencing enables companies to pursue growth in new, sustainable segments while keeping legacy operations intact, enhancing focus, and fostering innovation.

QUADRANT 2: SELL AND LEASE BACK ESG-HEAVY ASSETS

Low sustainability responsibility, low transformation complexity

Selling ESG-heavy assets but continuing to operate them under a lease contract from the purchaser allows the company to reduce its direct sustainability liabilities while retaining operational capacity and control.

A key advantage of a sell-and-leaseback arrangement is its relatively low complexity. There’s no need for significant restructuring, new management teams, or complex regulatory approvals, making it a less disruptive yet effective way to address sustainability challenges. Additionally, this strategy unlocks capital that can be invested to capture growth opportunities in sustainable sectors. From a reporting perspective, accounting rules allow companies selling high-emission assets to transfer ownership – and the liability for the associated Scope 1 emissions – to the buyer. Under the Equity Share Approach, companies can continue to use their divested assets through lease-back agreements while reporting the related environmental impact as “value chain” Scope 3 emissions – effectively transferring the responsibility for any ESG impact to the buyer. This approach risks being perceived as greenwashing when stakeholders view the move as an attempt to hide or sidestep any negative environmental impacts rather than actively addressing them, especially if the buyer has a poor green track record.

Several companies from different sectors have used sell-and-leaseback strategies to manage their assets, even in contexts unrelated to sustainability. In 2023, British Airways sold and leased back four large aircraft (two Boeing 787-10s and two new Airbus A350-1000s) to Griffin Global Asset Management. The airline freed up capital for investments while retaining fleet access, enabling better adaptation to market changes.

“By isolating and managing ESG-heavy assets separately, companies can drive progress in their sustainable business units while addressing the complex, long-term sustainability challenges of traditional assets.”

Tesco, the UK-based grocery giant, has leveraged this strategy to optimize its real estate portfolio: starting in the 2000s, it initiated a large-scale program to monetize its property holdings. In 2024, a BNP Paribas offer document highlighted a deal in which Tesco sold seven Tesco Express assets across central and southern England and leased them back under a 15-year agreement. This arrangement typifies the sell-and-lease-back model, whereby Tesco retained operational control of the assets while transferring ownership to another party. This strategy allowed Tesco to generate significant capital that was then reinvested to strengthen its core retail operations.

In conclusion, the sell-and-lease-back strategy can provide an effective way for companies to manage their ESG-heavy assets, capture growth in sustainable sectors, and support their green transition, all while keeping organizational disruption to a minimum. However, it is important to recognize the potential risks from accusations of greenwashing, depending on the nature of the assets and the type of buyer involved.

QUADRANT 4: FULL DIVESTITURE OF ESG-HEAVY ASSETS

Low sustainability responsibility, high transformation complexity

Selling assets entirely with no future involvement offloads all environmental and social responsibility to the buyer. While this may involve complex negotiations, significant organizational change, and financial restructuring, it allows the company to distance itself fully from the associated high-impact activities. An advantage of this strategy is that it can expedite a company’s green transformation by allowing it to focus resources exclusively on sustainable initiatives. While divestment removes direct sustainability responsibility, similar to the sell-and-lease-back strategy, it risks greenwashing criticism if not communicated transparently because stakeholders may view it as an attempt to merely offload and avoid being accountable for any environmental impact.

In 2021, Finland-based Neste divested its fossil fuel-related assets to focus on renewable energy. This extreme form of ringfencing enabled the firm to reallocate resources toward developing greener products, thereby transforming its portfolio. Today, the company is recognized as a global leader in renewable fuels, playing a critical role in worldwide decarbonization efforts. In the early 2000s, Ørsted (then Dong Energy) embarked on a transformative journey to address regulatory and environmental pressures. By pivoting from fossil fuels to renewable energy, Ørsted successfully reshaped its business model.

Beyond growth: why ringfencing might work for you

Strategic focus, the ability to capture more granular growth opportunities, sharper capital allocation, and access to a specific investor base are often cited as key drivers of ringfencing. This move enables each entity to align its resources and management with distinct goals, serving as a catalyst for unlocking value. It was in this context that Ilham Kadri, CEO of Solvay, announced in an investor call on 15 March 2022 about Solvay’s separation into two companies:

“By launching two independent, strong companies, we will create two new leaders in our industry, each with sharpened strategic focus, well-positioned to enhance value for shareholders, customers, and team members alike.”

Based on our research, including cases such as Solvay, we’ve found that ringfencing can offer distinct advantages that address the complexities of sustainability transformation and stakeholder engagement – not only with regard to CO2 emissions as considered in the examples above but in a much broader context of ESG. For example, the Solvay spin-off enabled its two new companies to follow distinct “customized” sustainability policies: more aggressive for Syensqo, with targets to reach carbon neutrality by 2040 and to reduce Scope 1 and 2 greenhouse gas emissions (GHG) by 40% by 2030 (compared with 2021); while Solvay committed to carbon neutrality by 2050 and to reduce Scope 1 and 2 GHG emissions by 30% by 2030 (compared with 2021).

Here are three benefits to consider from a ringfencing approach:

● Sharper sustainability strategies. Ringfencing enables companies to develop and execute targeted sustainability strategies tailored to each entity’s unique ESG profile. For example, the greener entity can focus on accelerating its transformation and capturing opportunities in sustainable markets, while the browner entity can focus on managing highimpact operations and long-term decarbonization. By dividing these

“In an era of urgent challenges, ringfencing offers a practical, forward-looking solution for companies committed to leading the charge toward a more sustainable future.”

responsibilities, management teams can dedicate their efforts to more specific, well-defined objectives, enhancing the impact of sustainability initiatives.

● Enhanced stakeholder engagement. Ringfencing allows companies to engage more effectively with external stakeholders, such as investors, regulators, NGOs, and activists. The greener entity can attract sustainabilityfocused investors and comply with stringent regulatory standards, while the browner entity can demonstrate its commitment to addressing high-impact challenges by engaging constructively with activists and regulators. By presenting clearer and more focused ESG profiles, both entities strengthen their ability to raise capital, meet stakeholder expectations, and build credibility.

● Attracting new talent. In an era where younger employees increasingly seek alignment between their values and their employer’s mission, ringfencing offers a powerful tool to attract and retain top talent. By establishing distinct entities with clear and focused missions, companies can build motivated, skilled workforces that are deeply aligned with each entity’s objectives.

A clear path to transformation

Ringfencing ESG-heavy assets from ESG-light ones is more than just a financial strategy – it can be a powerful catalyst for unlocking value and accelerating a company’s green transition. While we have featured some examples from the energy industry to showcase our ideas, we believe that this approach could be deployed to address ESG issues beyond energy and emissions. Consider supply chain and labor issues, for example, where companies face reputational, regulatory, or operational risks due to unethical practices in one division or part of its supply chain. In the 1990s, Nike’s reputation took several hits because of allegations related to child labor in supply chains. While Nike did not explicitly use any of the strategies outlined in this article, it effectively “ringfenced” the problem by isolating supply chain reforms while continuing its core business operations. Nike set up separate governance structures to manage its supply chain ethics and then implemented stricter labor standards and audits for its manufacturing partners.

Times have changed, and a similar backlash today could bring down an entire company. However, a well-executed ringfencing strategy would shield the company from a financial or reputational collapse due to issues in one division. Through a proactive approach, the affected company could maintain trust with customers and investors while working toward ethical reform in a contained, more controlled environment (and with less “noise” from other parts of the business).

By isolating and separately managing their ESG-heavy assets, companies can focus their sustainable business units on growth and innovation without the operational and reputational constraints of carbon-intensive operations. This approach smooths the path to sustainability and positions businesses to capitalize on emerging opportunities in more sustainable markets. In an era of urgent challenges, ringfencing offers a practical, forward-looking solution for companies committed to leading the charge toward a more sustainable future.

IN FOCUS:

Good bank, bad bank

The concept of a good bank and a bad bank is about creating focus and clarity in financial strategy. In times of distress, banks with troubled assets often divide themselves into two entities: the “bad bank,” which takes on high-risk, non-performing assets, and the “good bank”, which retains healthy, low-risk assets. This separation allows each entity to focus on its specific goals and challenges.

The bad bank has a clear mandate to manage, restructure, or dispose of toxic assets without affecting the operations of the more profitable segments. It becomes a focused unit dedicated to handling risks and maximizing the recovery of value from distressed assets. The good bank can concentrate on its core, stable business operations, free from the burden of problematic assets. This focus enables the good bank to attract investors, rebuild trust, and expand its services without the distraction of managing losses. By separating the two, the bank prevents the bad assets from impacting the good ones. As long as they remain combined, investors and counterparties would be uncertain about the bank’s financial stability and performance, which hinders its ability to borrow, lend, trade, and attract capital.

IN SUMMARY:

Choosing the right strategy

The four ringfencing methods offer unique advantages best suited to different strategic goals and organizational contexts. But how to choose? Here’s a guide on when to use each:

Quadrant 1: Ringfence ESG-heavy assets in a separate unit

This approach is suitable for a company that wants to maintain ownership and sustainability responsibility of high-impact assets but seeks focus and agility without major restructuring. It is ideal for companies with stable, cash-generative ESG-heavy units and a need to balance legacy operations with growth in sustainable segments.

Quadrant 2: Sell and lease back ESG-heavy assets

This method best suits companies seeking lower complexity when unlocking capital and reducing sustainability responsibility while retaining operational control over high-impact assets. As it reduces direct ESG accountability by transferring ownership to the buyer, this solution comes with high greenwashing risks. There is also the option of the “partial sale” of some assets, mixing the complexity of divestiture with the operation control of a sell-and-lease-back transaction.

Quadrant 3: Spin off ESG-heavy assets

Suitable for companies ready to fully separate ESG-heavy units to allow both the parent and new entity to focus on their core strengths. This approach is useful when a company’s high-impact operations risk diluting overall performance and market value and when a separate entity can operate with its own management, strategy, and ESG focus. The complexity is high, but the potential to unlock value and provide a clear sustainability path for both entities can outweigh the challenges.

Quadrant 4: Full divestiture of ESG-heavy assets

The preferred solution for companies aiming to completely distance themselves from high-impact assets and redirect all resources toward sustainable growth. This method is highly transformative and best suited for companies committed to pivoting fully into green segments. As in Quadrant 2, this strategy carries high reputational risk because it reduces the sustainability responsibility by transferring the “hot” assets to another entity.

BIOGRAPHIES

Salvatore Cantale is Professor of Finance at IMD. His major research and consulting interests are in value creation, valuation, and the way in which corporations structure liabilities and choose financing options. Additionally, he is interested in the relation between finance and leadership, and in the leadership role of the finance function. He directs the Finance for Boards, Business Finance, and the Strategic Finance programs as well as the Driving Sustainability from the Boardroom program and the newly designed Bank Governance program.

Frederikke Due Olsen holds an MSc in Finance and Accounting from Copenhagen Business School (CBS) and MBA (with Honors) from IMD. With a background in equity research and short stint within university teaching, previous employers include SEB Group, Carnegie Investment Bank and CBS. Passionate about greenfield renewable energy investments, she works for Copenhagen Infrastructure Partners within its Flagship Investment Team.

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