Lessons in Sustainability: Forging a Better Future

Why we need to embrace new approaches to research, teaching and learning.

The year 2023 was named the hottest on record, and 2024 is on track to be even warmer. We are already feeling the impact of the climate emergency, but the problem runs deeper. Climate change is just one symptom of our planet’s health crisis. From resource depletion to social inequality, the challenges we face are interconnected and demand a comprehensive solution.

Beyond the endeavours of any one company or community, sustainability efforts must be coordinated and integrated into business if we hope to make a meaningful difference. To make a synchronised push for more resilient and just business practices that also deliver results, sustainability must be at the heart of business. We need new ways to understand sustainability and inventive methods to integrate it into research and teaching in business schools.

A new series, Lessons in Sustainability, looks at what this means in practice by exploring how sustainability features in the research and teaching activities of INSEAD’s nine academic areas.

Changing attitudes

Recent years have seen a noticeable shift towards the creation of more sustainable products. This is not just a result of companies becoming more conscious of the need to do the right thing but is being driven by increased consumer demands for more responsible goods and services.

Marketing professor Amitava Chattopadhyay explained how research shows that more consumers now care about sustainability and are willing to pay for truly sustainable offerings. “Younger consumers, Gen Zs in particular, are more likely to express this opinion. And in the coming years, these more concerned consumers will come to dominate consumer spending. Thus, sustainability isn’t something that is good to have but is necessary to have,” he said.

As a result of this evolving demand, internal strategy and finance teams must make informed decisions that meet market needs. Understanding market failures, negative externalities and how policy will create and shape markets allows tomorrow’s leaders to be better prepared to deliver value, according to Pushan Dutt, Professor of Economics.

This is a primary purpose of business. Long-term thinking can build significantly more value than prioritising short-term gains. Sustainability is therefore a central pillar of INSEAD courses, as today’s decisions must also consider value in terms of future environmental outcomes, social justice and ethical matters.

“The ‘why’ [of sustainability] is evident as a path to build long-term prosperity,” argued professor Manuel Sosa, Chair of Technology and Operations Management. However, as Sosa emphasised, “the ‘how’ [of sustainability] is more difficult.” In his own work, Sosa examines product design decisions that account for the end of the product’s life cycle in order to reduce waste and lay the foundation for a more circular supply chain.

Integrating sustainability

One thing is clear: sustainability is not the domain of any single department or function but must be fully integrated into all aspects of business. This has seen the boundaries of many academic areas expand and change.

For example, accounting and control must now measure and report on environmental and social externalities. This can be achieved through the design and implementation of impact-based accounting systems that consider green governance, alongside the valuation relevance of sustainability for capital market participants.

Business leaders must acquaint themselves with topics such as corporate purpose, the rise of stakeholder capitalism, and the link between mission, sustainability and financial performance. All of these aspects are incorporated into INSEAD’s Sustainability Measurement and Reporting elective course, spearheaded by myself and accounting and control professor Hami Amiraslani.

In approaching financial decisions, business leaders need to think about sustainability as a non-traditional finance question. Considerations include how ESG (environmental, social and governance) assessments can penalise “bad” firms by increasing the cost of capital, shifting shareholders’ and stakeholders’ expectations from short- to long-run objectives, and how lower returns represent a cost that investors might be willing to shoulder to ensure a firm does good. Profit goals that conflict with governance objectives can threaten the firm’s survival, making it essential to consider the impact of business models on society and the environment.

New executive education programmes, such as the Sustainability Leadership for Senior Executives online programme co-directed by finance professor Lucie Tepla and technology and operations management professor Atalay Atasu, have been developed to better equip leaders to understand and integrate these concepts into business frameworks.

The need for learning innovation

Chair of Organisational Behaviour, professor Stefan Thau, highlighted the increasing expectation by upcoming generations for organisations to balance economic growth with social considerations. These include ensuring fair working conditions, reducing inequalities and contributing to the safety of cities and communities.

Achieving these goals requires innovative thinking and teaching practices, which can be seen as both a challenge and an opportunity. One solution is using VR (virtual reality). For example, students can partake in an immersive learning experience by using a VR case study to discover the challenges faced by the leader of Fundação Maio Biodiversidade, a conservation organisation in Cape Verde, Africa.

It is also important to share examples of real-life innovation that are already making a positive difference. Case studies of organisations that have come up with new ways of working – such as “Enel’s Innovability: Global Open Innovation and Sustainability” co-authored by strategy professor L. Felipe Monteiro – are a powerful teaching tool. An Ethics and Social Responsibility award winner at The Case Centre Awards and Competitions 2021, this case demonstrates how one of the world’s largest power utilities companies has embraced innovation and sustainability to transform the energy sector.

The shift towards sustainability

The need to consider sustainability is now an economic reality. INSEAD is therefore preparing tomorrow’s leaders for this by ensuring that sustainability is integrated into our core and elective courses.

“This is the first year sustainability is embedded into our MBA curriculum, putting INSEAD at the forefront of the transition to a more diverse and sustainable future,” said INSEAD Dean Franciso Veloso.

“Bringing sustainability into the classroom and conducting rigorous research on sustainability can move the needle. When INSEAD alumni put the principles of sustainability into practice, they can create change,” Veloso added, noting that the first cohort to have experienced INSEAD’s new sustainability-integrated curriculum is about to graduate.

The fundamentals of business are changing. New, innovative ways of thinking and learning are required to deliver value in this shift. Even in the face of new challenges like climate change and conflict, business can and must meet the needs of our increasingly global society.