Have business schools helped or hindered social and environmental progress?

Has business lost more than it’s gained in terms of values over the last century? Tom Levitt, Associate Lecturer (Sustainability), Claude Littner Business School, University of West London, believes that there’s still room for them to learn more, do better, to help rescue our planet – and business schools should be encouraging that.

When writing ‘The Business of History’ Tom considered, amongst other things, the influence of business schools since Britain’s first, the University of Edinburgh Business School, opened in 1918. In this blog he discusses his book, which re-examines 32 companies previously highlighted in a 1925 publication, using an ESG (Environmental, Social, and Governance) framework to reveal how and why they changed, both before, and since then.

Prior to 1918, families dominated company ownership, frequently exhibiting their associated traditional values. Shareholding was a minority pastime but growing, though shares generally belonged to owners’ families, friends, and principal investors. Some early shares, such as in mid-C19 railways, delivered income to investors but rarely power; they became long-term savings vehicles, not the short-term assets of later years. The collective exercise of influence and control by shareholders was chaotic in Britain’s textile industry, post-WW1.

Business schools introduced company leaders to academic study, standards, and training. Companies obtained kudos from employing degree-holders in a population where fewer than one percent were graduates at all. Britain trailed America by a generation in this regard; our business schools needed to accelerate. But what would they teach?

The 1920s - 2000s

From the 1920s, the ‘Chicago School’ of free-market economists proved highly influential and British academics adopted that approach to capitalism. Milton Friedman’s rise started in the 1950s; his 1970 philosophy, that profit maximisation and shareholder interest trumped all, seduced business schools globally. Cold War propaganda was at its height and this American dream – wealth, opportunity, and power – contrasted with the cold, drab sterility of Soviet Communism. Friedman’s message to eager Westerners energised that educated elite, a tiny minority of powerful people. For them, profit was a potentially bottomless lake from which they could sup – because they deserved it. Producers’ needs were always secondary to the needs of those who exercised power.

Gross Domestic Product

Gross Domestic Product was presented at Bretton Woods in 1944 as a formula around which capitalist economies could coalesce to measure progress, despite the reservations of its creator, Simon Kusnetz. Western governments fed Friedman’s flames by adopting it as their principal measure of national success. Omissions from GDP criteria were deemed ‘externalities’ which, by definition, don’t count in Friedmanite economics. Thus, the cost of pollution, of the short-sighted over-use of natural resources and of the dangers of anthropogenic emissions since the industrial revolution all equal zero in the world of GDP.

This ‘confirmation’ that anything other than profit maximisation in the shareholder interest could be ignored was music to Friedmanite ears. GDP remains but a narrow and approximate measure of one aspect of performance.

Corporate Social Responsibility

The boy who told the emperor that he had no clothes was Howard Bowen, in 1953. The Illinois Keynesian economist advocated a three-fold approach which he called Corporate Social Responsibility (CSR). He said that businesses should:

• Create jobs and economic growth (Friedman would have agreed) and revenue from taxation (less keen);

• Behave ethically, implying a code underlining fairness, transparency, and justice (Friedman condemned this as external ‘interference’) and;

• Help to improve the conditions of society and the environment.

This last point was clearly so absurd that no-one took it seriously for 50 years; in McCarthyite America, it cost Bowen his job. When CSR finally did catch on, in the 1970s, it was usually superficial, transient, external to company missions, aimed at protecting (at best), and rarely enhancing the social and physical environment in any permanent manner.

British business schools boomed in the 1960s, finding it advantageous to pander to the powerful by mass-producing Chicago-style graduates. Subsequently cohorts of international students, a lucrative source of income, were alleged to want this.

Sustainability

Even the word ‘sustainability’, incorporated into political debate in the 1980s, implies protecting rather than improving conditions. In his 2021 book, ‘Net Positive’, Paul Polman advances Bowen’s third point, advocating for business to deliver more than mere sustainability – clinging onto cliff edges is so undignified.

21st Century

In the 21st century some companies became self-aware and led a debate of which Bowen would have approved. They realised that their use of natural resources couldn’t be sustained, their exploitation of distant supply chains was immoral and their endless poisoning of the atmosphere downright antisocial. Although the UN Global Compact has been around for 20 years, and has 20,000 business adherents, it took until 2015 for the United Nations to challenge businesses to think about their planetary role through the Sustainable Development Goals. Although many responded well, action is still too little and too late. In the last ten years British business schools have started to rise to this challenge, finding steel in their backbones, as Martin Kitchener and I demonstrated in our 2021 Chartered ABS report, ‘Business Schools and the Public Good’.

Has business lost more than it’s gained in terms of values over the last century? There’s still room for them to learn more, do better, to help rescue our planet – and business schools should be encouraging that. But is there time?

Tom Levitt focuses on sustainability at the University of West London and is the author of The Business of History: Tales and Lessons from Two Centuries of British Commerce