ICYMI: A magazine for business sustainability professionals — Spring 2019

IN CASE YOU MISSED IT!

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SHEDDING LIGHT ON GENDER + NAVIGATING ACADEMIA

BY SARA SODERSTROM

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The Erb Institute is the University of Michigan’s partnership between the Ross School of Business and the School for Environment and Sustainability.

WE CREATE

WELCOME FROM THE FACULTY DIRECTOR

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hortly after I joined the Erb Institute in 2015, I was on the receiving end of a most interesting question from fellow new addition Carolyn Kwant. Carolyn had joined the Erb Institute as its Marketing and Communications Manager at around the same time that I became Faculty Director. She came with a background in product marketing, and she said a key to marketing the institute’s value proposition came down to a single, critical question: What is the Erb Institute’s product?

As a faculty member, I’ll readily confess to not having had to answer this kind of question before. We’re trained as academics to think about outputs, not products. Indeed, a marketing focus on products seemed—at first blush—a little heretical to me. But it didn’t take long for me to realize that—in addition to things like projects and publications, both of which are outcomes—the Erb Institute did indeed produce an important product.

That product?

Change agents.

The Erb Institute is in the business of developing the next generation of change agents who will transform how to think and work at the intersection of business, the impact sector and sustainability.

At the moment, most of these future change agents come from the Erb Institute’s highly regarded dual-degree graduate program, in which graduates receive an MBA and a master of science. Others come through the institute’s successful executive education offerings. And, as I write this, we are working hard to develop a new Erb-branded program aimed at undergraduate students in the Ross School of Business, and in the U of M’s Program in the Environment.

But, as successful as our existing programs are, it’s our goal to be even more influential. This means we aim to develop even larger numbers of future change agents.

So, if you’re reading this and know of rising sustainability champions working in the private or impact sectors who want to take the next step in their career, send them our way. We have just the MBA program for them.

And, if you know of working professionals who’ve been handed the reins to their company’s or organization’s sustainability agenda, send them our way, too. Our executive education offerings that front-line hands-on tools and approaches for real-world practitioners have been developed with them in mind.

Thanks to Erb Institute scholarships and funding resources, students often graduate with less debt than the average MBA.

Erb Institute students graduate with an MBA and MS in as little as one additional semester beyond the two-year MBA.

Double your: Degrees Internships Opportunities Impact Community Not your: Debt

At the end of the day, working in the Erb Institute is about always wanting to make a bigger impact. Our mission is to leverage the power of the private sector to turn today’s transformational ideas about sustainable business into tomorrow’s reality. To do that, we need to influence as many people as we possibly can.

Could that future change agent be someone you already know?

Or, maybe—just maybe—could that future change agent be you?

JOE ÁRVAI Faculty Director Erb Institute | Business for Sustainability

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IN CASE YOU MISSED IT! SPRING 2019 TABLE OF CONTENTS

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ICYMI! is a business-focused

publication sharing the work of the Erb Institute. In this and future publications, we will share how our research, teaching and engagement are providing ideas and frameworks that will help businesses move forward in meeting their sustainability challenges.

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TEACHING

COMMUNITY

TOM LYON TESTIFIES BEFORE CONGRESS ON CLIMATE CHANGE

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THE FUTURE OF BUSINESS SUSTAINABILITY: BUILDING A MORE INCLUSIVE ENVIRONMENTAL MOVEMENT

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he environmental movement has come a long way, spurring government policies and embedding sustainable practices into business. However, one area we have not been able to transform effectively is consumer behavior. Although the movement has grown over time, the ‘environmentally conscious shopper’ is still considered a niche consumer segment by retailers and marketers alike, which has ultimately limited the growth of sustainable consumption.” This was the prompt I was given during the start of my internship with the Environmental Defense Fund this summer.

Before coming to the Erb Institute, I spent a decade working as a marketing strategist.

In my experiences consulting with hundreds of retailers and consumer goods companies on their marketing and media strategies, I observed that most marketers still believe that the “sustainable shopper profile” represents a limited segment of the population: female buyers of their households, above the age of 40, with a household income of greater than $75K. Despite market research showing that the sustainable shopper encompasses a much broader segment of the population, marketers continue to create and market sustainable products only to shoppers who fit this narrow profile.

At the Erb Institute, and at the University of Michigan, we are deeply committed to addressing how the lack of diversity in the broader environmental and sustainability movement limits the movement’s growth. The implications are tremendous—since 1988, just 100 companies have been the source of 70 percent of the world’s greenhouse gas emissions, with people of color holding less than 1 percent of all senior executive posts. Recently, I had the privilege of co-organizing Erb’s first-ever

BY IVY WEI Diversity, Equity MBA/MS Candidate 2020 and Inclusion (DEI) panel alongside fellow Erb student Kathy Tian. The panel, comprised of three business leaders, all women of color—Boma Brown-West, Gloria Hwang and Erin Patten—spoke on issues at the intersection of business, sustainability and diversity, with a specific focus on the retail and consumer goods industry.

One of the most poignant points of the night came from panelist Erin Patten, CEO and founder of Da–O Detroit, a company that creates natural beauty and hair care products for

“We are basically saying that low-income people don’t care about the environment.

And that is just not a true statement.”

GLORIA HWANG, CEO and founder, Thousand Helmet

women of color. She spoke to how companies still lag in their efforts to bring diversity to the forefront of the sustainability movement. She stated that Da–O Detroit’s plant-based products, offered at a higher price point relative to category alternatives, struggles to be accessible to lower-income consumers. While Patten’s product inherently serves communities of color, she would like to create hair products that are accessible and affordable to people across the socioeconomic spectrum—sustainable products that serve all. Patten acknowledged that the high costs associated with creating a natural, plant-based, toxic-chemical-free end product makes this difficult.

Panelist Gloria Hwang, CEO and founder of Thousand Helmet, a bike helmet company rooted in a socially driven mission of reducing bicycle fatalities, acknowledged that more often than not, the costs of corporate social and environmental responsibility are transferred from the producer to the consumer, but that typically only higher-income consumers are willing or able to pay the higher premium price associated with sustainable products.

Sustainability as a movement ultimately needs to become more inclusive to gain widespread acceptance throughout society. In creating erroneous constructs of the “sustainable

shopper,” the sustainable consumption movement limits its own scale and success.

Says Hwang, “We are basically saying that low-income people don’t care about the environment. And that is just not a true statement.”

Indeed, as Patten noted during the panel, the segment of the population most likely to engage in many pro-environmental behaviors is low-income communities: “Those who are more prone to taking the bus or cycling on their bikes, or those who are more inclined to reduce usage and recycle, are generally those who cannot afford otherwise.”

Society’s biased notions of who does and does not participate in—and thus belongs to and does not belong to—the environmental movement harms both the sustainable consumption movement and the environmental movement at large. In imagining a more sustainable future, we need to see past biases and societal constructs. We need to reinvent the environmental movement to ensure that people from all backgrounds, identities and socioeconomic statuses see themselves as leaders in it. If they do not, we leave behind an entire segment of the population that would otherwise mobilize to address one of the biggest challenges of our time: climate change.

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How business can measure the impact—and ROI—of corporate sustainability

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In partnership with the Erb Institute, Innovation Forum recently hosted a conference in Detroit that delved into the best ways to assess materiality, build a business case and deliver impact at scale.

Participants from corporations, nonprofits and academia shared their approaches to measuring impact and return on investment (ROI).

They focused on fully understanding impact so that they can better drive strategy, justify budgets and communicate progress. Individual sessions ranged from ways to make board members really care about sustainability, to improving worker well-being, to industry-specific case studies. Following are some of the key discussion points from the event.

We are moving from “do less bad” to “do more good.”

The concept of business for good is slowly building momentum in the private sector. In the past, sustainability impacts often were born out of risk mitigation rather than strategy. Now, companies are moving from managing risk to innovating positive change.

This includes more “circular economy” thinking, as well as going beyond certification to more thoughtful and deliberate analysis and assessment.

Companies are trying to get more actionable information out of certification. And, through B Corp certification, companies are working to return value to all stakeholders, not just shareholders.

For investors, it’s good business to be sustainable. In an

ideal world, “responsible investment” would simply be “investment.” So, what are investors looking for that will make a responsible investment the right investment? They want to analyze risk and return, the longand short-term business strategy, and how the business innovates.

Companies must mitigate their full risks, quantify how their actions make them a better company, and address environmental impacts.

Meeting people (and companies) where they are is critical. This includes stakeholders, shareholders, consumers and

the C-suite. Participants agreed that sustainability should be fully integrated into the company’s core strategy, but people’s comfort levels with sustainable practices vary. Some companies need to walk before they can run, so they may not be ready for science-based targets yet.

Customers want to make an impact. How can companies be more transparent and give consumers the power to make influential choices? Companies are expected to make their supply chains both transparent and traceable—because consumers want to know where their products come from.

Storytelling can also help promote sustainable practices and ethical sourcing. “It’s a business opportunity to build trust with your brand,” one participant said.

Accountability and transparency help reduce a company’s risk. The stakes are especially high for human rights

risks. Companies have been making progress on issues such as forced labor. At the company level, one panelist said, addressing human rights is an issue of will, not ability: “If you want to make sure your supply chain is safe, invest in it.” In some areas, field workers are empowered to document and report risks or violations.

However, revealing risk can be problematic. As one participant put it, companies “want to know the extent of the problem, but knowing the extent of the problem puts them at risk” of punitive regulatory action.

The opportunity for collaboration and sharing in the pre-competitive field is huge. One pre-competitive recycling

coalition spans the value chain from retail to brand to supplier to container manufacturer—all the way back to the recycling infrastructure that “harvests” the container from the consumer after use. Industrydriven interventions can align market pull and push to strengthen the value chain toward the most sustainable value opportunities.

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In cross-industry collaboration, how do we create and support partnerships for sustainability? Academic

organizations and nonprofits can provide valuable support. One nonprofit uses scorecards, similar to investment scorecards, when working with apparel companies on deforestation in the Amazon. One NGO’s challenge to companies asks: Are you part of the problem, and, if so, do you have the power to fix the problem? Academic partners can add value to these partnerships by helping to assess risks and benefits through risk management models, for example.

Materiality—focusing on the impact your company makes—is important. This means focusing on only the targets or

goals relevant to your company. For example, some companies initially reported on everything in the GRI but later narrowed their focus to only those metrics that are material to the company. Further, materiality assessments should consider the future, not just the present. Some companies’ material issues have evolved to include emerging issues that, while not central to operations, are salient due to their newly understood importance. “Relevance changes through time,” one participant said.

We need market transformation. Through enterprise

integration, companies can operate better, faster, cheaper and with less energy, but that doesn’t get us to a sustainable world. We need to transform the entire business model into truly more forward-thinking models that drive market-level change.

We need more internal company support for sustainability action and change. Internal company

buy-in is critical for success. Translating improvements into dollars is complicated, but if you can do it, you can get the attention of company leaders.

One way to sell more sustainable practices is to leverage long-term data sets: Data from early sustainability success stories helps convince board members and elevates the conversation about sustainability.

Further, knowing your audience is critical: “The story you tell the CFO might not be the same story you tell the CMO,” one panelist said.

This buy-in can also be gained by challenging employees at all levels to innovate. For example, one carbon-neutral company started imposing a “carbon tax” on each of its teams—so that each team is responsible for paying for its own carbon use, including electricity and air travel. It encourages innovation and creativity, and it holds people accountable for what they actually do.

Young people want to make a difference, not just money. Companies that have made more headway on sustainability

are more attractive to new talent. Millennials, in particular, want to work for companies with which they share values. Companies need to demonstrate—and communicate—their progress and commitment to sustainability to all stakeholders.

We should communicate with outsiders in clear ways.

All the conference attendees are sustainability people, but do they typically include outsiders in discussions about these issues? We are entering a moment of change, and companies need to evolve their messaging to tackle global issues together—these issues are too big for any one company to solve. A company should paint a picture of what its business should look like in 100 years. And sustainable practices can be presented as a way to future-proof the business.

A diversity of voices and perspectives—including political diversity—is necessary to drive meaningful change. Otherwise, progress will be—at best—incremental.

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with other partners (including other universities) and address the governance of these collaborations.

DEVELOPING CLIMATEBUSINESS STRATEGIES: PARTNERING WITH UNIVERSITIES FOR SCIENCE-BASED IMPACT An Erb Institute Affiliate Event at the Global Climate Action Summit n September 12, 2018, the Erb Institute convened a group of senior sustainability thought leaders to candidly explore two major sustainability issues: 1) innovative models and mechanisms for creating company-university partnerships for research and implementation of sustainability initiatives, and 2) discrete challenges that companies and business sectors face in sustainability strategy and operations, whose solutions can be advanced through university collaboration.

Key Points of Discussion

As an official affiliate event of the Global Climate Action Summit (GCAS), this Erb Institute roundtable brought together 21 thought leaders from business, nonprofits and universities.

The roundtable was conducted by Erb Institute Faculty Director Dr. Joe Ă rvai and former World Environment Center President and CEO Dr. Terry F. Yosie.

During the roundtable discussion, several key discussion points emerged: The business case for sustainability continues to evolve. This evolution continues particularly as customer and value-chain involvement changes the focus and scale of sustainability initiatives. Sustainability has become more directly connected to how an enterprise makes money and how it uses its profits to support sustainability.

Companies operate on shorter time frames than universities. With this in mind, academic partners must develop and demonstrate more nimble, future-focused research strategies and approaches.

Expertise, entrepreneurship and innovation will drive success.

Universities should focus their efforts on areas where they have deep expertise and demonstrated excellence. In addition to partnering with companies, universities must become more entrepreneurial and expand the role of sustainability in their own planning and operations.

Similarly, universities can tread into the spaces currently occupied only by consultancies and think tanks.

Systems-level training and talent development are critical. It is important that universities develop integrated, systems-level approaches to sustainability. For example, business and engineering schools should seek to integrate sustainability into their core curricula rather than establish sustainability majors that are separate from their core disciplines and competencies.

Multi-institutional partnerships will lead to deeper impact. Multi-university collaborations may be influential for several reasons. They could expand the scope and impact of sustainability research; they could also increase the talent pool of future graduates who have integrated sustainability into their core competencies.

Partnerships create opportunities to scale and advance impact. Universities should try to scale their collaborations

Opportunities for University-Company Collaboration

A key objective of the roundtable was to elicit opportunities and potential themes for university-company partnerships. Several important ideas emerged, including: Focusing on sustainability in design, research and development. For sustainability objectives to assume their rightful place at the front end of corporate strategy development, they cannot be treated as afterthoughts.

University-company collaborations in R&D can help identify next-generation products and services that are profitable, equitable and sustainable.

Value-chain assessment. Companies need assistance 1) assessing overlaps in their value chains, and 2) understanding how sustainability initiatives can provide business solutions and alignment across value chains. Universities also may be uniquely positioned to assess how climate change affects specific markets and their value chains.

Climate scenario planning. As companies increasingly adopt futurefocused strategies, they would benefit from partnerships with universities that have the expertise to facilitate and support science-based climate scenario planning for 2030 and beyond.

Development of carbon-accounting systems. In partnership with companies, universities may be able to respond to the emerging need for a universally adopted system for following carbon through economic transactions, similar to financial transaction systems.

Scaling collaboration. Universities ought to develop innovative strategies and approaches for designing, implementing and supporting collaborations that are intended to have an impact at a greater scale.

Evaluating progress and trends.

Universities can provide assistance in developing new sustainability metrics and data measurements that both 1) track sustainability progress and 2) provide deep market insights.

Going forward, the Erb Institute is planning future roundtable discussions like this one, to be held in different geographic areas and focused on additional business-sustainability topics. As part of our “Conversations With Consequence� series, these discussions will inform both the content and process for Erb engagement with companies on sustainability strategy and management.

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DIRECTOR’S CORNER Erb Faculty Director Joe Árvai and I took Erb on the road in November—to India!

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ndia is one of the institute’s priority emerging markets for sustainability impact, and we’ve been working with the India Centre for Responsible Business (CRB) to develop a partnership for research, teaching and business-engagement opportunities. Erb sponsored CRB’s annual “India and Sustainability Standards” conference this year, and Joe and I were asked to speak at the event in Delhi.

The conference brought together some 300 participants from companies, nonprofits, academia, government and multilateral organizations. With nearly 40 plenary and breakout sessions, the discussion covered a broad range of social, environmental, labor and human-rights issues.

However, three themes in particular stood out for me from the overall discussion.

First, the UN Sustainable Development Goals (SDGs) continue to gain momentum, not only among governments and nonprofits, but also among companies. This was never the case with the previous Millennium Development Goals, which were designed and delivered with little input from the private sector.

The SDGs provided the basic framework for the threeday conference. Joe built the SDGs into his plenary presentation on better decisions for a better world, and I was a speaker on a plenary panel discussing multi-sector partnerships for SDG implementation.

Implementation was my second takeaway. The dialogue on business sustainability in India is on the verge of cycling past the “Why does this matter?” to the “How do we do it?”, especially among company managers and executives. Of course, all this is easier said than done!

There are many examples of companies talking about how their day-to-day business models support this or that SDG. However, the bigger challenge is “additionality”—how to proactively target specific SDGs for impact ahead of time, instead of mapping company impacts to the

BY TERRY NELIDOV goals after the fact, and Managing Director then filling in the gaps with Erb Institute | Business a “sustainability journey.” for Sustainability Joe and I talked about this in the session we did on sustainability executive education, in which we outlined Erb’s management tools and decision-making frameworks for sustainability strategy.

Third, cross-sector partnerships were a central theme.

Erb teamed up with CRB, Aston School of Management and the Indian Institute of Management to conduct a roundtable on business-academic collaboration during the conference. Deep, rigorous research was the central collaboration opportunity discussed, with the caveat that it’s often a challenge to align academic research questions with companies’ practical—and immediate— needs for business solutions today. Erb will continue this discussion through future roundtables in this series.

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Erb in the Media

10/03/2018

TO MAKE SUSTAINABILITY REAL, MAKE IT PERSONAL rom the perspective of business, engaging employees is critical to developing and advancing a company’s sustainability goals.

The feeling is mutual from the perspective of current, not to mention future employees: A company’s sustainability goals are important to the process of attracting and retaining the top talent.

But meaningful engagement across the entire spectrum of a company’s operations can be challenging. Many employees are often unsure how their job roles connect with a company’s sustainability programs and strategies, and many companies find it challenging to integrate—and inspire—leadership on sustainability in the day-to-day activities in their workforce. The net result: Employees often end up being an underused and undermotivated resource in a company’s sustainability journey.

Dow recognized these challenges early on and began to address them with its company-wide commitment to 2015, and now, 2025 Sustainability Goals, which have sought to redefine the role that business plays in

society. A primary objective of the goals is to mobilize the human element—employees, suppliers, customers and the communities in which they live and work—to improve the well-being of people the world over.

To take the 2025 goals to the next level within the company, Dow collaborated with the Erb Institute of the University of Michigan in 2017 to design and launch the Dow Sustainability Academy. The Dow-Erb partnership has proven to be incredibly successful, productive, fun and, yes, sustainable. Dow brought to the table its decades of experience on making business sustainability real, and Erb brought its 20-year track record of being at the leading edge of research and teaching at the intersection of business, society and the environment.

The result of this partnership is a businesssustainability leadership and development program that provides Dow employees with the tools and insights they need to bring sustainability into their daily work. As part of the academy, Dow employees— selected as part of a competitive, application-based process—spend a week in training at the Erb Institute.

JOE ÁRVAI

NEIL HAWKINS

Faculty Director Erb Institute | Business for Sustainability, Max McGraw Professor of Sustainable Enterprise.

School for Environment and Sustainability and Ross School of Business

Incoming President Fred A. and Barbara M. Erb Family Foundation

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By thinking critically and creatively about sustainability’s role on the job, employees not only found answers to drive Dow’s sustainable practices but also established critical leadership skills.

HERE’S SOME OF WHAT WE HEARD: Avoid solutions that are attractive only because they are obvious or easy. One

team was asked to determine the theoretical limits of how much emissions can be reduced from each Dow site, plant, equipment and technology. The aim was to help Dow achieve its 2025 Operations Sustainability Goal of growing the company globally over the next decade without allowing the company’s greenhouse gas emissions to exceed its 2006 baseline.

Team members had to reach outside their area of expertise and talk with dozens of people across Dow sites to understand and catalog the possible opportunities. By asking questions and—importantly— challenging assumptions about what previously were thought to be the performance range of various technologies and equipment, the group was able to identify additional, significant opportunities for reducing emissions.

During this time, they learn from and interact with some of the world’s leading experts on a wide range of topics, from making the business case for sustainability and the policy backdrop against which business sustainability unfolds, to hands-on tools for implementing the elusive triple bottom line. When the in-class sessions come to a close, academy participants work on real-world projects related to one of the Dow sustainability goals and are given six months to use what they learned in Ann Arbor to complete them.

Recently, we had the pleasure of watching project teams from the second group of academy members present their project solutions to Dow leaders, as well as to the next contingent of employees chosen to be part of the academy. Each team passed along their advice to their successors in the academy, and it struck us while we listed to them that their learnings apply to not only academy participants but to anyone seeking to collaborate, stretch and grow at their company and in their career.

When you face challenges, remember that your vision and passion are your North Star. All the projects carried out by

academy participants require engaging in complex systems and with multiple stakeholders. In this kind of environment, sustainability objectives aren’t easy to define, and decisions must be made in an informationrich environment characterized by high levels of uncertainty.

One team, tasked with reducing food waste at a Dow site as part of the company’s goal to advance a circular economy, admitted that it was easy to get lost in rabbit holes or mired in red tape. However, by being true to their vision of what was possible, and by being persistent—“no” was not an acceptable answer— they were able to find both a workable solution for composting at a Dow site and identify local groups receptive and able to receive the compost.

Make “change agent” part of your job description. There’s a saying at Erb: When it

comes to sustainability in business, be prepared to invent the job you want and then go do it. In other

words, don’t wait to be anointed; a change agent is a title you can bestow upon yourself.

The same goes for participants in the academy. One group was tasked with identifying a single project that aligned neatly with Dow’s valuing nature goal; the requirements were that the project had to be good for business but even better for the natural environment.

Rather than identifying just one project, members took it upon themselves to identify one project each, for a total of three. From creating sustainable prairie habitat at company headquarters and planting native grasses to reduce erosion at a Seadrift, Texas, site to waste reduction at a plant in Freeport, Texas, these projects were heralded for their ability to cut emissions, rehabilitate the environment and bring business value to Dow. As we get set to embark upon our fourth Dow Sustainability Academy, we could not be more delighted by what we have seen from those who have graduated from it. By thinking critically and creatively about sustainability’s role on the job, employees not only found answers to drive Dow’s sustainable practices but also established critical leadership skills.

They learned to apply ingenuity and entrepreneurial spirit to address sustainability challenges, and to respond to sustainability opportunities.

They began to see that sustainability decisions are really opportunities for setting and then achieving objectives, and that business sustainability really is a journey that will require vision, leadership and course corrections along the way.

And they found that, no matter their job titles, they could actively incorporate tools for sustainability into their jobs—and into their lives outside of work—in order to be champions for lasting, positive change.

That’s a win for employees, for Dow and Erb, and— most important—for society.

The Erb Institute wishes to thank Neil Hawkins for his longtime service on the institute’s Strategic Advisory Council, including his term chairing the council.

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Erb in the Media

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09/14/2018

ARCS President Tom Lyon on business leadership and climate change

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housands of delegates were in San Francisco for the Global Climate Action Summit, which showcases the commitments of states, cities and businesses to cut their greenhouse gas (GHG) emissions and protect the Earth from further dangerous warming. This is an urgently needed response to the U.S. vow to become the only country in the world to back out of its climate commitments under the 2015 Paris Agreement.

Many large U.S. companies participated in the summit.

As the President of the Alliance for Research on Corporate Sustainability (ARCS), a consortium of leading business schools, I am excited to see so much participation by the private sector.

At the summit, 21 companies in the technology sector, led by Salesforce, announced a set of new climate commitments in the form of the Step Up Declaration.

The coalition voiced support for the Mission 2020 goal of “bending the climate curve” by 2020, in order to put the planet on a trajectory toward a cooler world. Each of the individual members announced its own specific commitment, ranging from Salesforce’s promise to use 100% renewable energy by 2020 to Tech Mahindra’s goal of cutting GHG emissions 50% by 2050. Importantly, the participants recognize they need to work “collaboratively with others—across all sectors of society, including individuals, corporations, civil society, and governments.” This is a welcome step, but how far can it take us towards meeting the goals of the Paris Agreement?

The Emissions Gap

The Paris Agreement of 2015 represented a radical new approach to international climate policy. Instead of seeking international agreement on an umbrella policy that would cover the whole world, countries were invited to offer whatever “Nationally Determined Contribution” (NDC) they liked. Every country in the world has made an NDC. The goal is to cut the current

emissions level of about 53 billion tons (known as giga-tons, or GT) of carbon dioxide per year to at or below 42 GT per year by 2030.

As one might expect from a purely voluntary agreement, however, the sum total of the individual NDCs falls

BY TOM LYON short of what would be required to meet the Faculty Member Erb Institute | Business goal of holding global for Sustainability, warming “well below” Dow Chemical Professor 2°C (preferably 1.5°C). of Sustainable Science, Careful estimates Technology and suggest that if all Commerce, Ross commitments are School of Business, fulfilled, the Paris School for Environment Agreement could and Sustainability potentially get us about 1/3 of the way to hitting the 1.5°C target, but the planet would still be likely to warm by 3°C over pre-industrial levels.

1/10 of 1 giga-ton, and less than 1% of the low estimate of the emissions gap. Although it is a welcome step, it is simply not enough to move the needle.

The United Nations Environment Program (UNEP) reports each year on the “emissions gap” between what has been promised and what would be needed to hit climate goals. Its 2017 report, the most recent, estimates that by 2030, we will be 13.5 GT/year above the 2°C trajectory and 19 GT/year above the 1.5°C trajectory. These values constitute the emissions gap.

How much of that gap can be filled by commitments from the private sector?

Moreover, companies need to be transparent about their advocacy. Citizens are rightly concerned that too much lobbying goes on behind closed doors, and that too many companies talk a “green” game while “lobbying brown” in Washington, D.C. True climate leaders need to be best-in-class on both transparency and public advocacy.

NewClimate Institute and the Climate Group have inventoried the climate commitments made by sub-national entities such as cities, U.S. states, and companies. As of 2017, companies had made commitments totaling about 100 million tons of carbon dioxide equivalent (MtCO2-e) per year. This is

Even if the private sector were to increase its commitment by a factor of 10, to 1 GT/year, this would only fill about 7% of the gap. Such steps are certainly worthwhile, and the companies making such commitments can be justly proud of them. But given the urgency of the situation, and the limits to private action, a new model of business climate leadership is needed.

A New Vision of Business Leadership on Climate Change

The Alliance for Research on Corporate Sustainability recently released a Statement on Business Leadership and Climate Change that offers a new vision. Signed by dozens of leading academic researchers, it starts from the premise that the profit motive alone is not enough to solve our climate problems. The emissions gap analysis drives this point home—voluntary action by the private sector simply cannot solve the problem. Action by nation-states is crucial to any serious solution. Thus, the most important thing for a company to do, if it takes climate seriously, is to lobby powerfully and publicly for a stronger policy response.

The Step Up Declaration from the tech sector is a very welcome step forward. We can only hope that it will spur similar actions by companies in other sectors with even bigger carbon footprints. And we must remind tech CEOs that if they really want to show meaningful business leadership on climate change, they must also step up as vocal lobbyists for stronger policy action.

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Erb in the Media

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01/22/2019

SHUTDOWN’S ECONOMIC IMPACT IS A FORCEFUL REMINDER OF WHY GOVERNMENT MATTERS As the United States endures the longest shutdown in its history, Americans are getting a taste of life without government.

ANDY HOFFMAN Faculty Member Erb Institute | Business for Sustainability, Holcim (US) Professor of Sustainable Enterprise, Ross School of Business, School for Environment and Sustainability

ELLEN HUGHESCROMWICK

The absence of some services is clearly visible, such as a buildup of trash at national parks or longer lines at airport security checkpoints. Others, like those felt primarily by businesses, are less noticeable but arguably more important, such as an inability to get a small business loan or limited service from the IRS, Securities and Exchange Commission and other key agencies.

Collectively they show that government matters. But once the shutdown ends and the memories of the pain and discomfort it caused begin to fade, the visceral reminder Americans got of this message may fade with it.

As scholars of business and policy, we believe it’s essential that Americans not forget. In fact, the shutdown provides a good opportunity to reflect on the government’s vital role in the free market and find a better balance between regulation and business.

How the shutdown is affecting business

The partial shutdown, in its fifth week, has left about 800,000 government employees either furloughed or working without pay, affecting more than 10 agencies.

This has resulted in the slowing or halting of a great deal of activity, including food safety inspections, initial public offerings on the stock market and the approval of new craft beers.

And these costs are felt by citizens as the risks grow to their food, the environment and other things.

Economists warn that long-term impacts could also

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undermine confidence as businesses, consumers and investors lose faith in political leaders’ ability to make constructive policies.

The White House’s own economists estimate that every week of shutdown reduces growth by 0.13 percentage point, meaning the economy has already taken a hit of half a percent. If it goes for another week, total costs could exceed US$6 billion, which is more than what the president is demanding for his border wall.

And yet Americans won’t even know the actual impact because many of the government workers whose job it is to collect and measure economic activity have been sent home.

Hamilton and public goods

While the shutdown crystallizes what the absence of government feels like, the debate over its proper role in business is as old as the American Republic.

For example, Alexander Hamilton, the nation’s first Treasury secretary, wrote eloquently about the need for the government to get involved in markets, specifically through the establishment of a national bank. He called it a key public institution that “facilitates and extends the operations of commerce among individuals. Industry is increased, commodities are multiplied, agriculture and manufacturers flourish: and herein consists the true wealth and prosperity of a state.”

Beyond a central bank, “public goods” often require the protection of a set of laws. Examples include the environment, national defense, national parks, consumer protection and advanced research that helps seed inventions and create the industries of our future.

Author Michael Lewis, in his book “The Fifth Risk,” details many of the important yet little-noticed functions that government agencies handle better than private industry, such as the protection of food safety or the oversight of spent nuclear resources.

Further, he shows how a functioning economy depends on civil servants using the best data and science available to provide vital services to all Americans.

To offer just one example of the federal government’s positive role in fostering innovation, its creation of the Defense Advanced Research Projects Agency in 1957 gave us the internet, GPS, stealth aircraft and countless other technologies used in non-defense sectors today.

On the flip side, the absence of proper regulation can lead to serious economic and personal damage, as we saw during the global financial crisis a decade ago.

And only government—through regulatory agencies and smartly designed laws—is in a position to prevent another crisis. Indeed, fears are growing that another one may be on the horizon as a result of Wall Street excesses or financial bubbles in housing or debt.

The point is that in all these cases, the question is not about “no government” but about how much, what kind and which level (state or federal).

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It’s good news in our opinion that Americans seem to be increasingly abandoning the view that government should stay out of business and the market. And more are embracing an expanded role.

Americans’ evolving views

Toward a better balance

It’s good news in our opinion that Americans seem to be increasingly abandoning the view that government should stay out of business and the market. And more are embracing an expanded role.

But instead of a debate over the right balance for government, American politicians and others have denigrated government as “the problem” or, more recently, “the swamp.” The terms are meant to say that government is alternatively inept, obstructive or corrupt.

In 2011, half of Americans polled by Gallup said there’s “too much” regulation. The latest survey, taken in late 2018, found that just 39 percent felt that way—the lowest in a decade—with a growing share saying that the balance is “just right.”

This comes at a time when the Trump administration is boasting about the number of regulations it has eliminated. Yet these surveys suggest Americans don’t simply want fewer regulations, they want better ones.

Even more encouraging in our view is a Cato survey from 2017 that found that large majorities of Americans “believe regulations, at least in the past, have produced positive benefits” and that “regulations can help make businesses more responsive to people’s needs.”

One area where people see a value in government regulation is the financial sector, which is seen as rapacious and in need of more monitoring.

And 1 in 4 Americans surveyed by Gallup said there’s “too little” regulation, a figure that hasn’t changed much in recent years. This suggests that a notable number of Americans don’t trust the private sector and think that government is necessary to curb market excess and other problems.

They do this to take advantage of the still too widespread view that government has no role in markets and that regulation represents an unwarranted intrusion on business. This is a misperception that dismays both of us, motivating the very article you are reading.

While there certainly are problems with special interest influence in government and bureaucratic inefficiency, the enterprise as a whole remains central to the operation of capitalism and the markets. After all, capitalism is a set of institutions designed by government in concert with business and civil society.

As National Affairs editor Yuval Levin points out, even Adam Smith, the Scottish economist who wrote the foundational texts on capitalism, argued that “the rules of the market are not self-legislating or naturally obvious.” Rather, Smith said, the market is a public institution that requires rules imposed on it.

So we believe it is time to return to the basics and launch a new effort at reinventing government to improve how the various branches and levels interact with each other and the market.

At the same time, it’s important to provide more public education on what government does, and why, and solicit feedback from citizens on how to do it better— including at the ballot box.

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WHAT MAKES A GOOD SUSTAINABILITY LEADER Research by Former Erb Postdoctoral Fellow JUDITH WALLS

hat kind of leader can move companies toward better social and environmental performance? Research has shown that evaluating certain individual traits can help identify the leaders of tomorrow who will have the tools to address the serious sustainability challenges businesses face today. Former Erb Institute Postdoctoral Fellow Judith Walls describes these traits in “The Power of One: Leadership and Corporate Sustainability,” recently published in The European Business Review.

Environmental experience

People who have attained enough experience to become experts have the power to influence others. More specifically, “Experience with environmental issues, whether gained through life or a former job, affects how we think about topics like sustainability. Experience going as far back as our childhood can affect the level of commitment we have to protecting the natural environment,” Walls wrote. A person’s experiences with the environment serves as a filter through which he or she processes information and makes decisions. Research with Andrew Hoffman found that the more environmental experience leaders have, the more likely they were to consider their businesses’ effect on the environment.

Educational background

CEOs with MBAs are more likely to voluntarily disclose information about their company’s environmental performance, and CEOs with law degrees are the opposite, according to research with Ben Lewis and Glen Dowell.

“This finding leads us to hypothesise that CEOs with MBAs are better at spotting the win-win opportunities of engaging in sustainability activities, whereas CEOs with law backgrounds view voluntary disclosure as a risky strategy that exposes a company to greater scrutiny or litigation,” Walls explained.

Tenure

CEOs who have been in their position for less than two years are more likely to voluntarily disclose environmental information, “as they have more freedom and willingness to experiment with new strategies,” Walls wrote. Ongoing work with Shih-Chi (Sana) Chiu suggests that new CEOs pay more attention to stakeholders’ social and environmental demands than their longer-tenured counterparts do—because they reassess their companies’ current situation more readily, while more tenured CEOs tend to maintain the status quo.

Roadblocks

Sometimes, leaders from a certain era or culture can hinder companies’ progress toward sustainability. For example, a board of directors made up of people from an older generation is less likely to be open to gender equality, and companies headquartered in conservative areas are less likely to have women directors.

Stepping up

One leader can do only so much on his or her own, but if the right leaders do step up, there’s room for optimism about companies tackling difficult sustainability problems. An emerging and critical field of research is looking at how leaders can build high-performing organizations that have a positive impact on the environment and on society. These leaders are at the helm of businesses and, because of their positions, can influence the path of business toward more enduring and sustainable outcomes.

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Thomas Lyon’s Congressional Testimony

BY ALLISON TORRES BURTKA

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n February, Thomas Lyon, Senior Policy Scholar at the Georgetown University Center for Business and Public Policy and University of Michigan professor, was invited to provide testimony before the House Committee on Transportation and Infrastructure on how federal infrastructure policy could help mitigate and adapt to climate change.

Lyon encouraged the use of market-based policy instruments such as congestion pricing because they allow flexibility on the part of the private sector, encourage innovation, and reduce the costs of taking action on climate change.

The importance of this flexibility is apparent in the transportation industry. As of 2017, the transportation sector had surpassed the electricity sector as the country’s largest emitter of greenhouse gases. Lyon

explained that well-intentioned U.S. government involvement in the form of standards, initiatives, partnerships and research has attempted to ramp up alternative fuel options. However, over the last several decades, U.S. policy toward alternative fuels has jumped from one technology to another, which has “has sent confusing signals, making it hard for the auto industry to make long-term investment plans for alternative fuel vehicles.” Favoring one technology solution over another can also lock an industry into a technology that turns out to be inferior, he explained.

This issue is especially important in the heavy truck market, Lyon said. Different manufacturers are producing heavy trucks powered by electricity, hydrogen fuel cells and natural gas. But it’s too early to tell which of those will be best, “so it’s important for policy to allow for flexibility,” he said. Factors like supply-chain constraints and the rate of consumer acceptance come into play for automakers.

“A market-oriented approach would take a modest view of government’s ability to lead the deployment of any particular technology,” he said.

In encouraging the adoption of electric vehicles, research suggests that financing electric charging stations may be more effective in encouraging adoption than subsidizing vehicle purchases, Lyon said, and he recommended a thoughtful approach to creating public-private partnerships on that front. Also, making charging standards compatible across manufacturers would decrease duplicative investments and expand the electric vehicle market, he said.

Lyon pointed out that economists have long advocated market-based solutions for environmental problems.

“This approach minimizes the total cost of achieving a given level of environmental protection, and provides dynamic incentives for innovation in pollution control.”

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WHAT DOES SOCIETY LOOK LIKE IN THE FUTURE OF THE ANTHROPOCENE? A Q&A WITH ANDY HOFFMAN

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WE HAVE ENTERED A NEW GEOLOGIC EPOCH, CALLED THE ANTHROPOCENE, that recognizes people’s effect on the Earth’s ecosystems—harming them in ways that are likely irreversible. So what will Anthropocene society look like in the future? Erb faculty member Andrew Hoffman and P. Devereaux Jennings, of the University of Alberta, recently published “Institutional-Political Scenarios for Anthropocene Society” in Business & Society, which delves into that question and how sustainability will be redefined in the Anthropocene. It argues for a new way of thinking—and a new approach for environmental and social sustainability research.

Hoffman and Jennings have talked about their research in Business and Management Ink and published a book, Re-engaging With Sustainability in the Anthropocene Era, that discusses how organizational theory and an appreciation for culture change can help us navigate a new course. Here, Hoffman talks with the Erb Institute about rethinking the system we operate in and how to change it.

before and after. So if we’re going through a Re-enlightenment now, one big difference is that this time, we have a market and corporations. They are a major force in this social shift, so I think this paper and the idea of the Anthropocene could be useful to corporations as they start to think about long-term planning.

In your article about institutional-political scenarios, what are you arguing, in a nutshell?

If it’s only corporations, it’s going to be driven by money, and it will not focus on the core of the issue. If it’s only technologists, it’s only going to be driven by technology, and the result will be equally inadequate. But if it’s a full Re-enlightenment, then religious values, community, education, technologies and corporations all have a role to play. And certainly, that’s a more attractive future than just “We’re going to use technology to get ourselves out of this.” We need to have a new sense of ethics, judgment or values to go with it.

Scientists say that the Anthropocene began in the mid-1800s, with the invention of the steam engine. Then in 1950, with the Great Acceleration, our impact on the environment increased dramatically. But the way I see it, the conversation about the Anthropocene has been dominated by the physical sciences. What Dev and I are trying to do is add the social science component to the conversation. What does Anthropocene society look like? What are the norms and rules that will prevail? Will they bring us to a Re-enlightenment, or will we not adapt at all?

If we don’t come to terms with this new reality, we’re really in deep trouble. The Intergovernmental Panel on Climate Change, in their last report this past fall, said if we don’t come to terms with climate change in the next 12 years, damage to the global climate will be irreversible. And climate change is just one marker of the Anthropocene; there are eight other “planetary boundaries” that scientists have identified. These are boundaries beyond which we should not go if we want to maintain a safe environment for the Earth. And we’ve crossed three of them already: climate change, species extinction and nitrogen pollution. Another five are being monitored. Only one is in decline: ozone depletion. Technology, like alternative drive trains and renewable energy, will help us get part of the way in solving these issues, but they must be accompanied by cultural and institutional change both to get us to change our behavior and demand these and other technologies be developed.

What are the three scenarios you envision?

They are “Collapsing Systems,” which is dystopian, the worst scenario; “Cultural Re-enlightenment,” which is the utopian one; and in the middle is “Market Rules,” where the market rules dominate. Market Rules will make some progress, but it won’t get us all the way, because at the end of the day, a Tesla’s a nice car, but it’s still another car. This requires a different way of thinking. If you take the Anthropocene seriously, we now have a collective challenge as a global species to manage the global environment. So how does that manifest itself in values?

I think the Pope’s encyclical starts to do that. There’s a new set of values here: We can’t just worship technology. We can’t just pursue unlimited economic growth.

Perhaps we need to have some values of sufficiency—of “enough is enough,” of “material goods don’t define our value.” This is important for recognizing and changing our deepest values. If people connect environmental protection with what they espouse at the church, synagogue, mosque or temple, then society will shift in dramatic and meaningful ways.

How might business leaders start to think differently about some of these things?

Business is a major part of our society. If you look at the major cultural shift of the Enlightenment of the 18th century, our conceptions of ourselves and the environment, and the relationship between the two, were fundamentally different

Who will drive this shift?

For example, we are still a society driven by consumption. We’re 7 billion people, soon to be 9 billion people, and we simply cannot consume in the same way going forward. The market can only get us so far. Somewhere in there, we have to have values and ethics and a shift in our ideas of who we are—and how we are connected to the environment.

Why are a corporation’s efforts to reduce its environmental footprint not enough?

When a company announces they’ll do a 20 percent reduction in CO2 emissions by 2030, that’s nice, but it’s not going to solve the problem. You have to go carbon neutral. Reducing carbon is not changing the system, it’s about eco-efficiency— changing out your light bulbs, making your buildings more efficient. It’s just optimizing what you’re already doing. To go carbon neutral, you have to totally change how you think. It has to be a fundamental shift.

Where do you expect to see that kind of shift?

One area that’s going to be fundamentally different is food. The amount of meat we eat will diminish. The environment cannot support 9 billion people who want to eat a big T-bone steak every night like Americans do. It’s just not possible. So how do we think about alternative forms of protein, whether that’s insects, like crickets, or plant-based meat substitutes, like Impossible meat, or vegetarian lifestyles? What will come with that perhaps is a set of ethics. Maybe, in the future, we will look at all animals with the same compassion that we hold for cats and dogs.

Have you seen some businesses that are starting to operate differently?

No one’s really grasping it, but there are companies trying to figure it out. They are opening that Pandora’s box and asking those deeper questions. Toyota has pledged to be carbon neutral by 2050. How are they going to do it? Who knows, but you won’t find the answers if you don’t begin asking the really tough questions.

Also, Patagonia is pushing the boundaries. Through its Common Threads and Worn Wear initiatives, the company encourages people to buy used clothing and teaches them how to repair clothing with its repair kits. The World Business Council for Sustainable Development has been asking the question: Is there such thing as sustainable consumption, and what does that look like? These are the questions we need to ask. That is what the Erb Institute is here to do.

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WHEN YOU REALIZE IT’S NOT JUST YOU SHEDDING LIGHT ON GENDER + NAVIGATING ACADEMIA How two professors are bringing awareness to gender issues in higher education: Erb Institute Staffer Carolyn Kwant talks with Sara Soderstrom, University of Michigan, and Assistant Professor Maria Farkas, Department of Management, Imperial College Business School

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We’re not crazy.

SARA SODERSTROM Assistant Professor of Organizational Studies and Program in the Environment Erb Institute | Business for Sustainability

This journey started one and a half years ago. The Academy of Management (AOM) begins accepting proposals in January of each year, with decisions handed down in March for the August meeting.

While pursuing the tenure track, Sara Soderstrom had begun noticing a pattern of female colleagues encountering roadblocks that just did not seem to appear for most male colleagues on similar paths. She had the sneaking suspicion that she was not alone in this thinking. For many junior researchers, a lack of upward mobility begins to be internalized as their own fault. It begins to feel normal. Halfjokingly, she and a friend, Maria Farkas, tossed around the idea of a proposal titled: “… And yet she persisted.”

What’s the 4-1-1 on women in academia?

The good news: More professors than ever are pursuing tenure-track positions.

That said, the growth of women faculty currently on this track or already tenured in business schools has been frustratingly slow, with the Association to Advance Collegiate Schools of Business finding just “32.3 percent of all Associate Professors and 20.2 percent of all Professors being reported as female in 2015–16.”

Accompanying the statistics is an uncomfortable feeling rippling just under the surface that, while it’s an uphill battle for anyone pursuing a tenure track, that climb is steeper for women. And it is. So, what exactly is going on? There is research that is starting to verify that women are not cited as often as men, and that when women co-author, they tend to be credited less often.

The notoriously long peer-review process?

That process can be even longer for women than for men. Last, the holy grail of tenure—a tenured position can take years if it happens at all. Research has shown that “women are not only disadvantaged in their likelihood of receiving tenure

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More professors than ever are pursuing tenure-track positions. That said, the growth of women faculty currently on this track or already tenured in business schools has been frustratingly slow. overall, but are less likely to receive tenure in the departments where they began their assistant professor careers. Women also receive tenure in less prestigious departments than men in their fields, on average.”

You’re not crazy.

Soderstrom and Farkas had both experienced this phenomenon in isolation but knew they were on to something bigger. They wondered: How can we open this conversation to a larger group and, given the state of affairs, what can we do proactively? For starters, they reached out to Jane Dutton at Ross about an idea for a panel. Jane gave sage advice, noting that “there is a risk that an event such as this could leave people not only angry, but hopeless.” Jane challenged the team to find a way to weave in the stories that would leave people energized, inspired and connected—and would highlight various positive and possible outcomes.

An idea gathers momentum

In a moment of serendipity, Soderstrom and Farkas ran into Emily Block, a faculty member at the University of Alberta.

Block shared her story of overcoming challenges on her path to tenure and noted how happy she was in a new role.

As Soderstrom and Farkas reflected on what type of program may be helpful to women academics, they kept coming back to Block’s story. They decided they wanted to hear the stories of women at various levels: those who had obtained tenure at their original institutions and those who had not and transitioned into equally compelling new roles. They wanted to find women who were willing to share their real stories and showcase their persistence.

Invitations were sent to a number of vocal and recognizable academics who were either leading centers, pursuing research in this area or simply recognized for their experience navigating this path. They were totally unprepared for every one of them to accept emphatically. continued >

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Not a STEM issue

The link to sustainability

STEM (science, technology, engineering and math) has become a common catch-all for issues related to women’s advancement in academia. Farkas opined that it isn’t that simple. “Evidence of bias exists across disciplines. This is a gender and academia issue that requires some internal reflection on the part of business schools.” Soderstrom and Farkas executed a pilot survey to a subset of AOM members that explored topics related to their perceived ability to reach their career goals, including mentorship, networking, confidence and ability. The data showed that, relative to men, women were more likely to experience their workplace as sexist, disrespectful and unjust. Women were also more likely to frequently feel negatively about their ability to meet career goals in academia and were more likely to consider leaving the profession.

It’s not just a STEM issue—these issues cut across all dimensions of management academic careers: research, teaching and service. Soderstrom and Farkas have since modified the survey, and the new one will be distributed to a global sample of faculty from the top 100 international business programs to gain global insights.

It became apparent that these needs have multiple layers. For example, Soderstrom notes, “the surface was barely scratched on how race or ethnicity plays into these important conversations. Academics of color have unique, but related, struggles, which are then exacerbated from a gender perspective.” The pilot study did find that women perceive far more bias and unjust behaviors toward colleagues of color than men do.

Not alone

The team was thrilled with both the response to their survey and their blockbuster panel line-up. In the end, about 120 people said they would attend the symposium. As women (and men!) stood against walls and sat on floors in a room that was supposed to fit 90, the final count exceeded 200. The event drove several positive outcomes: • A true sense of community, camaraderie and network support.

The concept of each academic becoming a “mirror,” with the responsibility to reflect others’ strengths. Building this supportive network of women who are advocating for each other enhances connectivity, raises the stature of women academics and ultimately serves as inspiration for other women, effectively completing the feedback loop.

• A commitment to continued engagement, to actively develop workshops and discussions to establish more formal structures to support women in academia • Women also began to see their roles in different lights. One participant noted, “This helped me realize that, as a tenured professor, I have a lot of privilege to help others.”

The basic concept of equity is tied to organizational sustainability. Soderstrom took care to underscore this fact and encourage academic institutions to consider the social dimension. “If organizations are not engaging a diversity of employees nor respecting their talents in an equitable way, they are losing out.

Ultimately, the activities carried out by the organization will never be as good as they can be.” Soderstrom added, “The problems are becoming more complex and affecting us all, and business schools are charged with developing the future leaders who will be tasked with solving these problems.

Programs that neglect to include the diversity of voices in faculty and research are missing the better solutions.”

Learning and next steps

The team also realized that there is room to carve out a space for allies—to encourage them and to give them the skills and resources needed to support women.

Farkas notes, “There is a real need to recruit and encourage allies. How do you build a welcoming space for the allies that help build opportunities and paths for advancement? How do you help individuals who simply don’t recognize these barriers—and foster awareness?”

Some challenges are universal, but there are surprisingly unique needs at different levels as well: graduate students who are just starting to teach, junior faculty who are trying to get published, and tenured faculty who want to explore how this privilege can be deployed to support engagement and advocate for change.

Even basic levels of assistance can make a huge difference and be a very visual, public display of support. For example, providing child care at AOM would improve accessibility for women.

Soderstrom and Farkas are striving to publish this research in an academic publication and are fine-tuning the AOM proposal for next year. Coincidentally, the theme for next year is Understanding the Inclusive Organization. Women need

There is a real need to recruit and encourage allies.

How do you build a welcoming space for the allies that help build opportunities and paths for advancement?

How do you help individuals who simply don’t recognize these barriers—and foster awareness?

MARIA FARKAS

support and help navigating. In the coming year, the team is doubling down on a proposed workshop at AOM with multiple tracks to help meet the demand for support across various divisions supported by their research.

Last, the team recognized an underrealized opportunity for discussion. While attendees were hanging on every word of the panelists, they too have stories, questions and opportunities that need to be both heard and answered. Women in academia need space to connect and learn from each other.

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WHY SUSTAINABILITY SHOULD INCLUDE

POLITICAL ACTIVITY Based on research by THOMAS P. LYON

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orporate social responsibility (CSR) and sustainability initiatives have gone mainstream, but

they are missing something important: They ignore corporations’ political actions, including lobbying and campaign funding, which can drastically alter corporations’ environmental and social impact. In some cases, companies cynically engage in the strategy of “talking green while lobbying brown.”

Corporations report on social and environmental sustainability metrics but typically not on political ones, which can allow them to get away with irresponsible lobbying activity.

Metrics for political activity

The metrics used to evaluate corporate sustainability ignore the ways businesses shape public policy. But that is beginning to change. A new addition to the GRI Sustainability Reporting Standards framework is standard 415, on disclosure of an organization’s support for political causes, which “can provide an indication of the extent to which an organization’s political contributions are in line with its stated policies, goals, or other public positions.” It specifies lobbying and contributions to political parties, politicians and causes, and it also notes that such contributions can present corruption risks.

In “CSR Needs CPR: Corporate Sustainability and Politics,” published in California Management Review, authors Thomas P. Lyon et al. argue that corporations should be as transparent about their corporate political responsibility (CPR) as they are about their environmental and social responsibility. Assessments of corporations’ social and environmental performance should include their support for (or opposition to) public policies that affect sustainability, they argue.

Other organizations have moved in this direction as well. The Organization for Economic Cooperation and Development has issued guidelines for transparency and integrity in lobbying. These developments “suggest we are at the cusp of a new wave of demands for political accountability,” the researchers wrote.

The landscape

The researchers offered three suggestions:

Some parts of civil society are starting to lean in this direction. Through the We Are Still In movement, a coalition of U.S. business, education and local government leaders voiced their support for upholding the U.S. commitments to the Paris Agreement on climate change. In the social arena, Apple CEO Tim Cook publicly opposed a religious freedom law that critics warned would allow discrimination against samesex couples. And after President Trump’s widely criticized response to the neo-Nazis in Charlottesville, Va., numerous CEOs resigned from the President’s Manufacturing Council.

Still, most companies do not provide information about their political activity.

Companies are understandably wary of backlash, the researchers wrote. In fact, “New research shows that firms that have faced a social movement boycott shift their political action away from campaign contributions and towards more covert forms such as lobbying or CEO donations.”

Also, some companies appear to be using their sustainability initiatives as cover for their political efforts to block change. For example, Rhode Island Sen. Sheldon Whitehouse has written about the oil industry: “Given the industry’s massive conflict of interest, there is every reason to believe they are playing a double game: trying to buy a little credibility with these public comments while using all their quiet lobbying muscle to crush any threat of bipartisan action on the carbon pricing they claim to espouse.” Lyon and his team argue that such secrecy is problematic.

What companies can do to embrace transparency on political activity

1. Fully disclose your corporate political activity. “Dark money and lobbying are unpopular with the public and with civil society actors, and the pressure for political disclosure is unlikely to abate,” the authors wrote.

2. Align your political activity with your public pronouncement and CSR efforts.

If you publicly support gay rights, don’t support a political candidate who opposes same-sex marriage.

3. Support public policies that will enable the private sector to better pursue sustainability efforts and commitments. Companies can support policies that allow them to act more responsibly without putting themselves at a competitive disadvantage. “[W]e expect firms (especially those that wish to be seen as leaders) to support public policies that are in their enlightened, long-run self-interest,” the researchers wrote.

The concepts of sustainability should be broadened to include a more holistic understanding of how a company affects the social and natural world. “[A]s demands for political transparency grow, it will become increasingly difficult for companies to execute a strategy that involves contradictions between virtuous public statements and self-serving lobbying and other political activities,” the researchers wrote.

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DO

PEOPLE

CHEAT WHEN NO ONE’S LOOKING? IMPLICATIONS FOR ENVIRONMENTAL MANAGEMENT

Based on research

by JOE ÁRVAI

Many environmental management programs offer people incentives to engage in conservation activities. But these activities, carried out on a local level, often are difficult to monitor. Are people inclined to cheat to get the incentives? Research led by

Rohit Jindal of the MacEwan University Business School in Edmonton, Alberta, and Erb Institute Faculty Director Joe Árvai set out to answer this question. Their research, entitled “To Cheat or Not? Results From Behavioral Experiments on Self-monitoring in Vietnam,” by Rohit Jindal, Joe Árvai, Delia Catacutan and Dam Viet Bac, was published in Strategic Behavior and the Environment.

The researchers used a household survey and field experiments to see whether participants in rural Vietnam would behave honestly when collecting incentives for their participation, or whether they would take more than their fair share. Going against previous research that has found cheating to be common, the researchers found little cheating behavior. Their findings show that people do not necessarily cheat when unsupervised.

The research took place in five villages in the province of Bac Kan. Much of the land is covered by forests, and policymakers see the potential to improve people’s incomes through managing forests sustainably.

The experiments mimicked a typical scenario that provides payments for ecosystem services (PES). For example, some PES programs pay local land stewards for valuable ecosystem services like carbon sequestration.

Bac Kan is a key site for Vietnam’s PES program, and Vietnam is one of the 13 countries where a program called Reducing Emissions From Deforestation and Forest Degradation (REDD) is being piloted.

THE SURVEY

Through a household survey, respondents were asked to predict whether their neighbor would take more than their fair share when offered cash or maize seeds for filling out a survey. Ninety-nine percent said their neighbor would collect the correct amount, even when unmonitored. The survey looked at pro-social norms of trust and cooperation in the community, and it found a high level of trust and honesty.

THE FIELD EXPERIMENTS

Respondents were asked to fill out a questionnaire on local agriculture and forestry practices and, as an incentive for doing so, were offered either cash or hybrid maize seeds. After they completed the questionnaire, they were sent to another location to collect their designated incentive—going either individually or in pairs.

Participants were told to collect their own incentive (a designated amount of money or maize) as well as an equal amount for a resident of a neighboring village. When they arrived, they found more than twice the designated

amount there—giving them the opportunity to take more than they were supposed to. With some participants, monitors were at the site to record what they took, and others were unmonitored (to their knowledge).

The researchers measured how much each person took for himself or herself and for the neighbor. Most participants collected the right amount, and the lack of monitoring did not encourage people to take more than their fair share.

When people were not monitored, they collected extra compensation in 12.3 percent of cases—but 31.8 percent collected less than the designated amount, which the researchers attributed to weighing errors when collecting and weighing maize seeds. They also found that people were more careful when collecting cash than when collecting maize. “Even when people are honest, they are more cautious (stricter) in dealing with cash than with in-kind incentives,” the researchers wrote.

Whether participants went to collect their incentives by themselves or in pairs did not matter. What did matter was the amount they collected for their neighbors. “The biggest difference is when people collect compensation for themselves versus for others. On average, respondents collect 12.6 percent less compensation for their neighbor than when they collect compensation for themselves,” the researchers noted.

IMPLICATIONS

These results have both theoretical and practical significance, the researchers noted. “Our work shows that many existing models of human behavior are unable to predict the outcomes that we have observed,” they wrote, pointing to the need to conduct behavioral experiments in the field and not just in lab settings.

Also, local context and social norms about honesty and abiding by the rules are important, the researchers noted.

“We find that instead of broadening, moral wiggle room may become narrower in societies with strong norms around honesty, trust, and law abiding behavior. In such cases, subjects face little distress in choosing honest behavior even when they are not being watched by others,” they wrote. “The calculus of benefit-cost analysis, or of arguing with their inner self to cheat a little bit does not seem to arise.”

The finding that people are unlikely to cheat—and the importance of local context and social norms—may be useful in designing monitoring arrangements for PESbased community forestry projects that are under way around the world, the authors noted.

ICYMI! SPRING 2019

THE BENEFITS AND PITFALLS OF SETTING SCIENCE-BASED CLIMATE TARGETS IN PRACTICE

Lessons learned from Sustainable Brands’ 2018 New Metrics conference

BY MERRIAM HAFFAR Postdoctoral Fellow Erb Institute | Business for Sustainability

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SBTs fall under the wider umbrella of context-based approaches to corporate sustainability. These approaches also include the Center for Sustainable Organizations’ Context-Based Sustainability Methodology, the World Wildlife Fund’s 3% Solution and Autodesk’s Corporate Finance Approach to Climate-Stabilizing Targets (C-FACT) Methodology.

Proponents of these approaches argue that a company’s sustainability cannot be meaningfully evaluated without an external (non-self-referential) point of reference.

The need for such a context-based approach to corporate sustainability practices was a common theme that ran through many of the New Metrics conference presentations this year.

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or the maximum amount of carbon that can be emitted globally without exceeding the 2°C global warming threshold. This budget (and how it is distributed over time) is then projected down to the company level through various allocation mechanisms, based on either a sectoral, absolute or economic-based approach.

The benefits

The participants said their companies were primarily motivated to go through this target-setting process by the belief that: 1. SBTs help companies anticipate upcoming climate regulations. According to the participants, setting SBTs allowed the companies to more concretely demonstrate their commitment to the COP21 Paris Agreement. Setting SBTs also allowed the parent companies to mitigate the potential regulatory risk of carbon taxes.

2. SBTs are more robust and defensible. Because SBTs are grounded in climate science, many participants perceived these targets as more rigorous, meaningful and objective than the kinds of self-referential GHG reduction targets that they were using previously. This made SBTs an easier sell internally. Because SBTs are ambitious and long-term in nature, internal buy-in is critical in achieving them.

had the great opportunity to host a roundtable discussion on setting science-based targets at Sustainable Brands’ 2018 New Metrics conference in Philadelphia in October.

Science-based targets (SBTs) have received a growing amount of research interest and company attention over the past five years. Currently, 515 companies worldwide are engaged in setting and validating SBTs through the Science Based Targets Initiative—a steep increase from the 14 companies that were engaged in this process four years ago.

SBTs are a form of greenhouse gas (GHG) emission targets that are aligned with the goal of maintaining global warming below 2°C. These targets link organizational-level emissions with global-level thresholds, effectively situating a company’s sustainability impacts within the global context.

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The challenges

The participants ran into several challenges throughout the target-setting process. These included:

New Metrics roundtable

The roundtable was an informal discussion with over 30 participants, primarily from companies that were either interested in setting SBTs or were in the early stages of doing so. The discussion was informed by my own research in this area, specifically into how science- and context-based targets—and the various methodologies behind them—are being taken up.

The roundtable began with a top-level overview of what science-based targets are, and the process in which they are set, and then moved into the participants discussing their own experiences with SBTs— specifically, the motivations behind their interest in setting SBTs and the challenges they face in doing so.

Calculating science-based targets

SBTs are built on the premise that all companies have a responsibility to do their part to limit global warming.

Acting on this responsibility involves calculating a SBT that is specific to the company’s own context and its projected growth rate. The first step involves calculating the global carbon “budget,”

1. Availability of GHG emissions data. Setting SBTs depends on certain key data inputs, including the company’s GHG emissions and its activity for the chosen base year. Also, some methods have set the year 2005 as the recommended base year, and some participants lacked sufficient GHG emissions data from that year, which limited the methodologies available to them.

2. Balancing ambition and attainability. Another challenge was setting a target that was both ambitious enough to make a meaningful impact and still attainable within the proposed time frame.

A key recommendation that emerged from the discussion included preparing an implementation cost strategy that detailed the financial plans for implementing and ultimately achieving the target. On the other hand, SBTs have recently been criticized as not being ambitious enough. These critics say companies should go beyond a sciencebased climate target and explore ways to be carbon neutral, or even carbon positive.

The roundtable allowed the participants to share their experiences with each other, and it also provided a look at how far companies have come in setting SBTs and some of the roadblocks they are dealing with.

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THE FIVE S OF SUPPLY CHAINS WHO, WHAT, WHERE, WHEN AND WHY CORPORATIONS SHOULD CARE

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ot a month goes by without a media campaign linking the supply chain of a well-known brand with unsavory labor practices or environmental mismanagement. Such exposés can devalue brands and reduce well-meaning corporate sustainability initiatives to hypocrisy. Beyond financial and reputational risks, a corporation that doesn’t know its supply chain can be caught flat-footed when the regions it sources from are rocked by political and environmental upheaval.

Answering the five Ws of their supply chain allows companies to reduce these risks and simultaneously address unsustainable practices related to their business. Every high school student knows the five Ws: who, what, where, when and why. These are the key exploratory questions to ask when tackling any problem. Yet research has shown time and again that corporations often cannot answer the five Ws of their supply chain beyond their immediate suppliers. The rampant outsourcing, supplier fluidity and vast distances that typify modern production make answering the five Ws a formidable task for any corporation. Operating in this information vacuum minimizes corporations’ agency and maximizes risk.

My research with Associate Professor Joshua Newell develops an approach to demystify supply chains and answer the five Ws. We reconstruct supply chains using transaction-level data on imports and exports of individual companies,

BY BENJAMIN document analysis and algorithms. This GOLDSTEIN allows us to identify the Postdoctoral Fellow companies in supply Erb Institute | Business chains, locate their for Sustainability activities with high geographic specificity and associate them with damaging environmental or labor practices. For instance, our work on the international rubber trade implicates the supply chains of U.S. multinationals with Lalan Eco Latex (who), a company linked to land grabs and deforestation (what) in the Weliya Forest of Sri Lanka (where) that occurred in 2014 (when). With this knowledge, we can also start to ask the deeper question of why this happened.

By answering the five Ws, our research provides the facts necessary for corporations to reflect on how they can proactively address the social and environmental risks deep within their supply chains. Will dropping a troublesome supplier be enough, or are wider technological, institutional, behavioral or economic transformations needed to eradicate injurious practices? As long as the five Ws remain unanswered, the steps corporations can take to address risks and advance their sustainability agenda are severely limited.

Our research shows that with a little data—and a lot of grit—it is possible to answer the five Ws of a corporate supply chain. If you answer the five Ws of your supply chain, you can identify hotspots of negative environmental and social impacts and solve problems before they happen.

Look for Ben Goldstein and Josh Newell’s research in an upcoming edition of the Journal of Industrial Ecology titled, “Industrial Ecologists Could Learn from Activists and Social Scientists by Studying the Supply Chains of Specific Corporations.”

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SIMPLE INTERVENTIONS CAN HELP INHIBIT THE SPREAD OF FAKE CLIMATE CHANGE NEWS ON FACEBOOK Research by Lauren Lutzke, M.S. candidate in Behavior, Education, and Communication; Caitlin Drummond, Erb Institute Postdoctoral Fellow; Joseph Árvai, Erb Institute Faculty Director

BY LAUREN LUTZKE

ake News” has become a hot topic covered by a variety of legitimate reporters and news outlets.

But, despite the widespread coverage, we have not yet learned how to prevent the average internet user from spreading false information online.

If a person is inclined to self-educate, many websites do offer tips for spotting fake news; however, simply having these tips available for those who seek them doesn’t mean that people will actually use them. And as far as we know, no studies have even tested whether using these guidelines and tips will actually help people spot fake news and refrain from sharing it.

Inoculating people against fake news

So, along with the co-advisors of my master’s thesis— Drs. Caitlin Drummond and Joe Árvai—I set up an experiment to find out if guidelines could help prevent the spread of fake news. In the study, people were exposed to guidelines for evaluating news online right before they saw a piece of news on Facebook. The guidelines told people that before evaluating news on Facebook, they might want to ask themselves the following questions to gauge the trustworthiness of what they were about to read: Do I recognize the news organization that posted the story?

Does the information in the post seem believable?

Is the post written in a style that I expect from a professional news organization?

Is the post politically motivated?

We also wondered if simply reading these guidelines would really be enough to make a difference. So we created another condition in our experiment. This time, different people read the same guidelines but also rated, on a scale of 1 to 10, the importance of each one for helping people to detect fake news. We anticipated that this additional task would help participants more deeply process and realize the relevance of each guideline.

After considering the guidelines, people were shown a Facebook post based on fake news about climate change. For example, one of the fake news posts we used came from the partisan website Breitbart, which stated, “Now 400 Scientific Papers in 2017 Say ‘Global Warming is a Myth.’” While we hoped exposure to the guidelines would make participants more skeptical of the fake news they were seeing, we did not want these guidelines to encourage greater skepticism of real climate news. So, in addition to testing them on fake climate news, we also tested them on examples of legitimate climate news from sources like NASA and USA Today.

Do guidelines affect the spread of fake news?

This experiment provided important insights that may help us limit the spread of fake news on social media. We found that, compared to people who did not see guidelines of any sort, people who were exposed to our guidelines were less likely to trust, “like” (in Facebook-speak) or share posts based on fake news.

Reassuringly, reading or interacting with the guidelines had no effect on people’s responses to posts based on real climate news, meaning familiarity with

these guidelines does not make people more skeptical of legitimate information.

The effect sizes in our research were small, meaning the degree to which people were less likely to trust, like or share posts based on fake news was small.

But it’s important to remember that the internet is a massive place, and that the challenges posed to our society by fake news are not trivial. So, when guidelines like the ones we studied work even just a little bit, they can lead to big changes in how society thinks and behaves.

You might be asking yourself why people interested in business and sustainability should care about fake news on Facebook.

Social media platforms like Facebook are businesses— ones that have been productive sources of revenue for shareholders and investors. Thus, their legitimacy as sources of public information is important to the economy. But, most important, we know that disinformation about climate change on social media serves to dampen both public concern and people’s willingness to seek and support much-needed sustainability action by businesses and governments.

Our research shows that companies like Facebook can deal with fake news by implementing solutions that have been tested with positive results. For example, guidelines like ours could be incorporated into social media interfaces and newsfeeds to help inoculate users against fake news.

We hope Facebook and other social media platforms take our advice. And we’re willing to bet that Mother Nature hopes so, too.

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Executive Education in India

BY TERRY NELIDOV

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he Erb Institute took its successful sustainability executive education program on the road to Delhi in November. The institute was a partner to India CRB’s annual conference “India and Sustainability Standards 2018.” Erb Faculty Director Joe Árvai and I represented the institute at the three-day conference, which is one of India’s leading businesssustainability events each year.

We took advantage of the conference platform to host a roundtable with a small group of business leaders from some of India’s largest transnationals. Drawing on Ross Executive Education’s network in both Mumbai and Delhi, we brought together representatives including the Tata Group, Aditya Birla Group, Larsen & Toubro, DCM Shriram and Jubilant Life Sciences.

The two-hour session was a no-holds-barred discussion of Erb’s hands-on and impactfocused approach to sustainability executive education, followed by—more important— participants’ feedback on how best to adapt our offerings to the unique context of India.

Drawing on our recent programs like the Dow Sustainability Academy in Michigan and the Chinese Automotive Executive Development Program in California, we provided a high-level overview of the Ross Executive Education approach, the Erb Sustainability Management Toolboxes, and how our faculty members’ focus on the opportunities created at the intersection of stakeholders, policy-makers and firms can ultimately lead to organizational changes in culture and corporate decision-making.

We received lots of feedback on how to adapt our executive education program to the growing need in India. The candid advice from one of the CSOs at the table was, in essence:

I only talk about business strategy with my CEO, never sustainability strategy. You should, too! The issues that you’re raising here, and your approach to teaching business about them, reflect today’s reality that sustainability can’t be addressed in one office while other, more “traditional” business issues get addressed in another. The time is now for a fully integrated approach.

The social and environmental risks and opportunities that are part of a company’s sustainability portfolio must be considered part-and-parcel with all of the other aspects of company strategy and operations.

Good advice! And not just for executive

education, but more broadly, for how to get things done in complex global organizations.

India is a priority region for the Erb Institute, and we hope to have more opportunities to work with Indian companies, both in India and beyond, to get things done for social and environmental impact!

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Erb Faculty Andrew Hoffman honored with Distinguished Scholar Award at Academy of Management

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ach year, the Academy of Management recognizes four outstanding individuals who have made significant contributions

to the field of management through their service, research, innovative teaching methods, breakthrough developments, and more over the course of their career. The 2018 Career Achievement Awards were presented at the 78th Annual Meeting of the Academy of Management.

One of four Distinguished Scholars, Erb Institute faculty member Andrew Hoffman was awarded this honor in the Organizations and the Natural Environment Division.

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CASE STUDY

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The Erb-branded case study program was established by Professor Andy Hoffman as a way to engage students in addressing timely and topical sustainability issues through various lenses. Case studies help improve flexibility in considering alternatives and allow students to compare their decisions with actual outcomes.

Here we share a newly developed case on WeWork, a company that is rethinking office space as community.

Here is a brief summary: WeWork, a company that provides shared workspaces, has taken a stand on sustainability. It has committed to carbon neutrality by 2023, and it has stopped serving meat to its employees as well as reimbursing them for meals that contain meat—because of concerns about the environment and animal welfare.

But the company gets significant funding from Saudi Arabia, indirectly—money that comes from the sale of crude oil reserves. And Saudi Arabia is tied to various human rights violations, including the murder of Jamal Khashoggi. So WeWork’s values conflict with Saudia Arabia’s actions.

Through looking at WeWork’s situation, this case study delves into the role corporations play in society. Should they consider whether their investors’ values align with their own? Should a company be held responsible for its investors’ actions, or does a duty to shareholders trump such ethical questions?

The case study enables students to:

• recognize external factors that may influence financial investments • debate the ethics of accepting investments from parties that do not align with the company mission • evaluate the boundaries of corporate values and individual employee values • question the need for companies to take a political stance

Interested in having your company featured in a case study? A successful case

study requires three key components: a topic that fits the pedagogy of a business school classroom, a protagonist around which the story centers and a central tension or question to focus discussion. Once these components have been established, faculty and select students will work with the company to develop the storyline and the necessary data. Please contact the Erb Institute for more information: ErbInstitute@umich.edu.

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ACADEMY

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he Dow Academy is a partnership between Dow Chemical, the Erb Institute and Michigan Ross Executive

Education, designed to help Dow employees collectively contribute toward the achievement of the Dow 2025 Sustainability Goals. In January, a multidisciplinary team of University of Michigan faculty delivered the fourth edition of the Dow Academy. Through the training, Dow employees learn the technical aspects of sustainability analysis and business strategy, as well as real-world implementation through hands-on tools and team projects.

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Erb Sustainability Management

TOOLBOX SERIES L A N D S CA P

Diversity, Equity + Inclusion

Materiality Assessment

Triple-Bottom-Line Decision-Making

E AS SES

Human Rights Risk

Sustainability Strategy

SM

Global Value Chains

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ENT

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Metrics + Reporting

y| So c ial Iss u es

Stakeholder Engagement

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Conceptualized around the Erb Sustainability Life Cycle, our toolbox series springs from a stakeholderbased view of the firm, which elevates the interests and expectations of a broad range of stakeholder groups (not just shareholders) in company decision-making.

The toolbox series begins with Stakeholder Engagement, which provides a framework for mapping stakeholders and identifying their key interests and expectations around the company’s sustainability impacts. Next, the Materiality Assessment and Sustainability Strategy toolboxes prioritize stakeholder issues against business drivers and craft a coherent sustainability strategy around a small set of strategic pillars. Global Value Chains

a l I ss

C u e s | T h e B u s i n e ss

as

Each toolbox is designed as a simple, step-by-step approach to actually doing sustainability at the company level. extends sustainability strategy from corporate HQ out to complex, remote and often opaque global value chains, while the Human Rights toolboxes drill down

r e fo

S

on the UN Guiding Principles on Business & Human Rights and their application through human rights risk assessment and business integration. Diversity, Equity + Inclusion offers a lens to apply to all company decision-making to create thriving, diverse and inclusive workplaces.

Metrics + Reporting closes the loop, bringing GRI principles to sustainability reporting and crafting a coherent plan for authentic communication back to stakeholders, around the very issues and concerns that the toolbox series started with. Last, TripleBottom-Line Decision-Making is the lynchpin toolbox that applies Erb Faculty Director Joe Árvai’s signature decision-analysis framework to goal-setting, decisionmaking and feedback loops across all of the toolboxes.

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TOOLBOX SERIES

THE BUSINESS CASE FOR SUSTAINABILITY

Increasing numbers of organizations are charting new territory as they embed sustainability into both products and processes. But how does this work get started? More specifically, what are the reasons behind the investment of time and resources (such as financial and human capital, and technology)?

What is the business case for corporate sustainability?

This latest toolbox in the series provides an overview of the business case for advancing sustainability, specifically addressing the role(s) and elements of the business case, as well as juxtaposing the risks with the potential for growth, innovation and new markets. It complements previous sustainability toolboxes that the Erb Institute has developed to help sustainability practitioners understand and manage organizational sustainability.

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CREATIVE FINANCING FOR

DEVELOPING MICROGRIDS IN PUERTO RICO In the wake of Hurricanes Irma and Maria in the fall of 2017, more than 3 million Americans were left without power across Puerto Rico. It took nearly 11 months for the local utility to restore power in some cases. During the hurricanes’ immediate aftermath, numerous life-saving services were lost due to the lack of power, such as emergency services, freshwater pumping plants, refrigeration, and wastewater treatment plants.

According to the government of Puerto Rico, Hurricane Maria caused 2,975 deaths.

As various government agencies did their best to rebuild, many looked to microgrids—electrical systems with numerous loads, generation assets, and the ability to “island” from the main grid—to increase community resilience to future grid outages.

Microgrids’ ability to connect and disconnect from the grid provides resilience by allowing independent, localized operations.

Resilience has recently become a hot topic in the energy sector, as climate change has increased the number and size of grid disturbances. The historical solution to increase resilience has been diesel generators, but experience has shown that they are unreliable, and diesel supply chains often are disrupted after natural disasters as well. Microgrids that incorporate solar photovoltaic (PV) and battery storage, on the other hand, are increasingly popular in Puerto Rico, where solar insolation levels are high and the systems are perceived to be a superior product for providing resilience when it is needed most.

Some of the people interested in developing renewable energy microgrids are philanthropic donors of Rocky Mountain Institute (RMI), where I interned over the summer. RMI is a nonprofit “think and do tank” that recently launched an initiative and partnered with

BY CONNOR COX

Resilient Power Puerto Rico (RPPR), a San Juan-based nonprofit dedicated to increasing the share of renewable energy across Puerto Rico. RMI’s goal is to help develop a portfolio of renewable energy microgrids in Puerto Rico with RPPR and philanthropic support.

MBA/MS Candidate 2020

Given the widespread devastation on the islands, these foundations sought to maximize the number of microgrids developed. One phase of my project involved analyzing nontraditional financing mechanisms that foundations and donors can use to increase their impact. Traditionally, philanthropy has taken the form of direct grants. While grants can create a limited number of demonstration or proofof-concept projects, they often fail to spur continued private investment. The two primary alternatives to grants are: 1. Low- to no-interest loans.

The donor takes on the underwriting process and management of a portfolio of microgrid loans. This increases the impact of donated funds by using loan proceeds to issue more loans. It allows for a recycling of capital over time.

2. Loan loss reserves (LLR) with partner cooperative or commercial banks.

An LLR encourages banks to originate microgrid loans by providing a safety net of funds from which banks can draw in case of individual loan defaults.

Once familiar with the technical and economic risks of microgrid projects, the banks can make loans independently. By engaging the private sector, philanthropic donors can indirectly scale their impact by 10 to 20 times.

RMI had not yet chosen between these alternatives when my internship ended, but given the immediacy of the need in Puerto Rico, low- to no-interest loans may be favored in the short term. As RMI and the foundations better understand the economics of these microgrid systems, they will be better able to engage with banks and explore LLRs. Puerto Rico’s electrical system is poised for a radical transformation. Its government recently announced plans to go 100 percent renewable by 2050, quite a change from where it stands now, with less than 3 percent of its energy coming from renewable sources.

To better protect against future storms and natural disasters, renewable energy microgrids are emerging as a low-carbon solution to increase community resilience.

Creating this industry and proving the economics of microgrid business models will take time and money. Endeavoring philanthropic donors can spur the development of renewable energy microgrids in various ways. Their organizational expertise and risk tolerance will determine what financing mechanisms best suit their objectives. While necessary and helpful, philanthropic efforts alone will not be enough.

Puerto Rico needs continued support as it seeks to comprehensively reform its energy sector in upcoming years. Solar PV and storage microgrids are one promising approach to this challenge, and they are helping to create a brighter future for Puerto Rico.

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Extending inclusiveness to people with disabilities

ALEX PACE

KELSEY PACE

Disability Advocate, BAS 2018

MBA/MS Candidate 2020

eople with disabilities constitute the largest minority group, at an estimated one in six people globally, but their needs often are overlooked. Businesses and other organizations that aim to be more inclusive might opt to create an environment where these people’s needs are understood. However, it is often difficult to recognize the best way to make changes. To effectively engage people with disabilities, managers need to understand disability and how their products touch disability, and how businesses can use their position to further promote education and advocacy while also building customer and employee relationships.

What is disability?

Disabilities may fall into several broad categories, including physical, cognitive and emotional. Disabilities affect people of all genders, ethnicities, races, geographical locations and socioeconomic statuses. Disabilities are rarely static, with many people experiencing short- or long-term disabilities over their lifetime.

The definition of disability has evolved. Traditionally, it was viewed in two distinct ways: 1. The medical model: This model defines disability as a physical impairment that requires treatment. Because it does not include social factors, it can ostracize disability communities. For example, the deaf community typically does not consider deafness as something that needs to be fixed.

2. The social model: In response to the medical model’s narrow definition, this model states that societal norms restrict people with disabilities.

The International Classification of Functioning (ICF) bridges the gap between the medical and social models, and it is now widely used as the standard professional and educational model. In the ICF model, the disability is not the health condition but the impairment to functioning. And disability status can change based on the situation: A person using a wheelchair would have a disability when attempting to enter a building with only stairs, but not when entering a building with a ramp. Its goal was to create a universal tool for describing health conditions across cultural and geographic borders. The ICF defines disability through the person’s functioning, and it involves all positive and neutral interactions between the health condition and the contextual factors of their situation. These interactions are separated into body functions, activity and participation. Disability is caused by the breakdown of functioning in one or more of these areas.

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TIPS FOR TALKING ABOUT DISABILITIES More tips on talking about disabilities are available from the ADA National Network, and the Department of Labor offers strategies to build inclusive environments.

PERSON FIRST. A disability may be an important aspect of a person, but he or she is not defined by only the disability.

THERE IS NO “NORMAL.”

DISABILITIES ARE CONTEXTUAL.

DO NOT MAKE ASSUMPTIONS.

Normal is the assumption that there is a “right way” to be a person.

Poor eyesight is a disability without corrective lenses, but not with them.

Physical disabilities do not mean cognitive disabilities.

Assisting someone with a disability without asking is often patronizing.

For example, if we look at a common short-term health condition, a broken arm, the personal contextual factors are the person’s demographics (a 15-year-old boy). The environmental factors include his relationships with family and friends, that he plays basketball on the freshman team, and he is an honors student. The affected body functions are impairments to his grip and thumb mobility. Activities are the limitations due to the impaired body functions. In this case, he has difficulties holding a pencil and dribbling a basketball. Participation, involving situational restrictions at the broadest scope, includes sitting out during the playoffs in basketball, not completing assignments for school, and not riding his bike with his friends.

ICF looks at individuals as people first and then assesses their functioning.

This definition of disability has been adopted by many therapeutic institutions, which teach this model for person-to-person applications. This process avoids patronization and deindividuation, the common pitfalls of the medical and social models. The ICF is important for businesses because understanding disability enables employees and customers to maximize their functioning, leading to higher productivity and promoting long-term, inclusive brand recognition.

Reasonable accommodation

To include people with disabilities, reasonable accommodations are essential. The Americans with Disabilities Act (ADA) requires public and private institutions to adapt environments to allow people with disabilities to function without barriers. Institutions are required to provide these reasonable accommodations except when the changes cause undue hardship, such as substantial expense.

Companies that fail to embed the idea of reasonable accommodation within their culture will miss major opportunities for growth. For many years, the cosmetics industry failed to acknowledge the market for non-Caucasian skin tones. Some major cosmetic companies still do not produce products for a full range of skin tones. Fenty Beauty was able to take this gap in product offerings and turn inclusivity into significant profits. This same concept could be applied to disabilities.

Kelsey Pace is an Erb Institute dual master’s student. As a sustainability advocate, she wishes to create an inclusive environment. Alex Pace has a degree in Community Health from the University of Illinois in Urbana Champaign and works with people with disabilities, including personal care and advocacy. He hopes to clarify many misconceptions surrounding disabilities.

DON’T PITY, AND SEPARATE ACCOMPLISHMENTS FROM DISABILITIES. Praise shouldn’t include mention of a disability.

Companies applying ICF

Nike has authentically embraced inclusion by signing an athlete with cerebral palsy to a professional contract. This move, as part of Nike’s “everyone with a body is an athlete” campaign, builds additional customer loyalty and inclusive brand recognition.

Inclusive organizations strive to provide reasonable accommodations to all stakeholders, not just employees. Target recently launched several lines, including sensory-friendly clothing, as well as children’s and adults’ adaptive clothing lines. Target is not only expanding their market share but also demonstrating their commitment to enabling accessibility.

Gamemakers have also started to approach accessibility barriers with reasonable accommodations. Madden Football, designed by EA sports, was thoughtfully designed to be accessible to people with visual impairments through the use of vibrating controllers, audible menu options and adjustable contrast.

American Eagle’s lingerie brand realized the value of inclusivity several years ago when it launched the “Aerie Real” campaign, a company promise to use everyday women in non-photoshopped advertisements. This campaign boosted sales significantly. Aerie took another step toward inclusivity by introducing models with various disabilities. Notably, the brand has a model wearing an insulin pump and a model who is a para-athlete.

Apple enlisted the help of the American Council of the Blind, the Cerebral Palsy Foundation, and the National Association of the Deaf to develop emojis representing various disabilities, including a motorized wheelchair and a service dog. Apple has stated that this is a “starting point for greater representation for diversity within the emoji universe.” This move increases representation in an important form of communication for many people.

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BUILDING RESILIENCE AT PG&E Andrea Kraus, MBA/MS 2016, first worked with

Pacific Gas and Electric Company (PG&E) through her Multidisciplinary Action Project (MAP) as an Erb student. Then she joined the company as part of a two-year rotational program, and now she is a product manager for PG&E’s Microgrid Strategy Implementation team. She recently talked with Erb about her work.

What does the Microgrid Strategy Implementation team do, and what’s your role in it?

Our team is housed within PG&E’s Grid Innovation and Integration (GII) group, whose mission it is to design, test and integrate innovative solutions to accelerate PG&E’s transition to the sustainable grid of the future.

But we in the Microgrid Strategy Implementation team are also in the interesting position of being on loan, so to speak, to the Community Wildfire Safety Program— one of PG&E’s core operations groups. We’ve had the fascinating task of scaling up innovations previously developed by creative field engineers and GII to support PG&E’s massive wildfire risk reduction efforts.

Specifically, our team is standing up a new program called Resilience Zones. During dry, windy months, PG&E and other California utilities may need to turn off electricity to some areas when extreme fire danger conditions are forecasted. This is called a “public safety power shutoff.” Activating one of these shutoffs is a really tough call—doing so dramatically reduces ignition danger, but the trade-off is that communities may go without power for hours or days at a time.

We’re developing Resilience Zones to ease the burden that proactive power shutoffs place on communities.

We’re installing equipment that enables us to safely isolate town centers from the rest of the grid and keep electricity running to central community resources when the wider area needs to be shut off. While homes in forested areas with overhead wires may experience an outage, our new program will enable residents to maintain access to basic shared services such as grocery stores, gas stations and pharmacies nearby. I’m

really passionate about this project because it builds climate resilience in a community-centered manner.

What is your day-to-day work like?

Our team is laser focused on ensuring our pilot site (currently under construction) is ready to operate during the upcoming wildfire season. My daily work involves lots of cross-functional collaboration to achieve this milestone. I’m working with public affairs personnel to ensure government officials and community representatives have a strong voice in how Resilience Zones will serve their communities.

Engineers in Electric Operations are helping us update traditional engineering design standards and write operating manuals for personnel in the field and in our distribution control centers. And we continue to work with groups in GII to move toward using clean energy resources as generation sources in Resilience Zones.

Although PG&E is investor-owned, we are at the center of a participatory public process in which regulatory entities and public advocacy groups play a very active role in shaping the work we do. So a big part of my job also includes responding to requests from these parties for more information about what we’re planning, and thinking through how we can integrate multiple interests in the solutions we develop. It’s not the fastest process, but I strongly believe in the public, transparent, participatory nature of it.

Has this experience shifted your perspective of how sustainability initiatives work?

Definitely. I continue to be passionate about the decarbonization and decentralization of the energy industry, but working on Resilience Zones has taught me to think more creatively about how to move toward those objectives. I’ve come to appreciate the power of driving change via modular designs that incorporate some traditional elements that core operations groups are already deeply familiar with and can build on. Initially, our Resilience Zones will be energized using mobile diesel generators, because that’s what has traditionally been most reliable and available

I encourage Erbers to do what energizes them, directly in a sustainability role and through the countless other ways in which we can positively impact people while immersing ourselves in what we love.

to support restoration efforts during emergency outages. However, we utilize a “plug and play” design for Resilience Zones, meaning they’re generationagnostic, and it’ll be relatively simple to use cleaner mobile generation sources once they meet our reliability needs.

ERB INSTITUTE THANKS

PETER AND CAROLYN MERTZ

Working for PG&E has also made me more focused on the importance of building sustainability initiatives that benefit people across socioeconomic lines. I appreciate PG&E’s mandate to serve; we can’t segment and select our customers the way many companies in the sustainability space do. I encourage Erbers to continue pushing sustainability initiatives to be accessible to all.

It’s not easy, but it’s a critical challenge.

How have you put your Erb Institute education to use?

Erb’s focus on systems thinking helped me adopt a more patient, big-picture-oriented mindset, which is crucial to the work I’m doing. Erb professors, staff, visiting speakers and students pushed one another to understand how different systems interrelate. It’s not enough to focus on just one sustainability goal or metric. That mindset has been very helpful as I work on building resilience within such an expansive industry.

On a more tactical level, I’m very grateful that my MAP project connected me to PG&E for the first time, and that my Master’s Project focused on urban climate resilience. Both experiences tie directly to the work I’m doing now and gave me the confidence to enter such a complex space.

Finally, Erb’s coaching program shaped me into a stronger leader. I’m a better listener and feel better able to support those I work with as a result of being an Erb coachee and coach.

What else have you taken with you from your Erb experience?

In the Erby spirit of community involvement and systems thinking, I stepped up as a director of PG&E’s Women’s Network—an employee resource group with over 2,000 members. I direct an action-based leadership development program for which I recruited three women at PG&E eager for professional growth, matched them with mentors, and coached them as they took on an eight-month project developing recommendations for how PG&E can better support women leaders in operations.

It’s been an incredible learning experience, and I feel lucky to work with passionate people who value this kind of involvement in projects outside of their primary roles. On the surface, it may not be clear how climate resilience and gender equity connect, but they certainly do for me—I’m passionate about both, and am better at what I do as a result of actively engaging in both areas. There’s so much good work to be done—I encourage Erbers to do what energizes them, directly in a sustainability role and through the countless other ways in which we can positively impact people while immersing ourselves in what we love.

We would like to take a moment to thank Peter C. and Carolyn P. Mertz for their unwavering support of the Erb Institute. Peter is the executive chairman and founding partner of Global Forest Partners. With over thirtyfive years of forest management experience, he has seen firsthand how the Earth has been affected by both a changing climate and economic pressures. Peter and Carolyn recently endowed the institute with a gift of $500,000 for the Erb Fellowship Fund. Monies from the fund will directly support the academic expenses of eligible Erb Institute students.

Peter and Carolyn have long nurtured a joint interest in the Erb program and students: “We believe that the Erb Institute serves a critical role, acting as a nexus between business and environmental issues. Students in this program are exceptional, and we want to help offset the additional tuition costs associated with this important program. Erb students improve the Ross School of Business by raising awareness about environment and sustainability issues on campus and beyond. At the same time, they improve SEAS by fostering a greater understanding of the positive impact that free markets may bring to society and the environment. Graduates of this program have the critical tool set to make sound economic analysis part of the calculus when considering environmental issues.”

Faculty Director Joe Árvai said, “Within the Erb Institute, developing future change agents is our most important contribution. The support of Peter and Carolyn Mertz has been critical in delivering on this aspect of our mission. They have been steadfast champions of the Erb Institute’s students since before I arrived on campus as its director. Their latest gift to the institute will help attract the brightest and best emerging business and sustainability leaders for many years to come. Thanks to their financial assistance, graduates of the Erb Institute will continue to lead the way when it comes to addressing the many pressing challenges— and opportunities—that unfold at the nexus of business and sustainability.”

Peter also serves on the Dean’s External Advisory Board for the School for Environment and Sustainability at the University of Michigan, as well as on the National Campaign Leadership Board in the Victors for Michigan Capital Campaign.

The Erb Institute is the University of Michigan’s business-sustainability partnership between the University of Michigan’s Ross School of Business and the School for Environment and Sustainability.

We work with business leaders to help them improve company competitiveness through enhanced social, environmental and economic performance. Our degree programs prepare students to be future business leaders for sustainability, while our research and executive education prepare current business leaders for what’s next in sustainability.

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