The Evolution of Sustainability and Organizational Management
I worked in and around the federal Environmental Protection Agency from 1977 through the 1980s and was able to make practical use of my two main intellectual interests: 1. Environmental policy and 2. Organizational management. These were two of the areas I concentrated in while in graduate school. For a long time, I thought of them as relatively distinct areas. In 1988, I wrote a management book called The Effective Public Manager and later I wrote a book about environmental regulation entitled Understanding Environmental Policy. But then I started to consider how issues like energy efficiency, waste management, environmental liability, and risk were becoming major concerns for organizational managers and major elements of the cost structure of private, public, and nonprofit organizations. It seemed that my two areas of interest were being merged. Organizational management was changing in response to our more crowded, polluted, and developed planet.
The changing nature of organizations and management led us to build a new management Master’s program we called Sustainability Management. Along with colleagues in the Earth Institute, I developed that curriculum in 2008 and 2009 and in partnership with the School of Continuing Education (now the School of Professional Studies), we launched Columbia’s MS in Sustainability Management in 2010. The program’s curriculum required management, finance, financial management, economics, statistics, and the regulatory environment of organizations—in my view, key elements for any management degree. But it also required three courses on the “physical dimensions of sustainability”: An organization’s use of energy, materials, the built environment, its waste management, and its environmental impact. At that time, sustainability focused on these physical issues—a new element of management education. In the book Sustainability Management, which I wrote around that time, sustainability was all about how environmental issues must now be factored into routine organizational management.
In the thirteen years since we welcomed our first sustainability management students to Columbia, the field has changed. The course I am teaching this semester to 95 students has evolved. Now I am teaching one of three sections of that course, to many more students than we taught in 2010, but the curriculum itself has changed along with the field. What I once called “sustainability management,” I now call “environmental sustainability”—a subfield of sustainability management. We now consider the field to also be concerned about organizational sustainability and community sustainability. These additional and broader concerns require that we focus on diversity, equity, inclusion, and access, as well as organizational transparency and governance, and finally, on the impact of the organization on its host community and society.
Well-managed organizations in the 21st century require sustainability management. In America, over 80% of our GDP is in the service economy, and when we manufacture food, clothing, shelter, and any other goods in America, much of that manufacturing requires automation and other forms of advanced technology. Modern farming utilizes satellite data, automation, and artificial intelligence to optimize the use of water, fertilizer, and pesticides. Advanced engineering, logistics, targeted marketing, and new communications channels require constant organizational learning and the continuous development and modification of organizational routines and practices. We live in a brain-based economy. Organizations must compete for the best brains if they are to succeed in the competitive marketplace.
If the organization’s culture is gender biased, racist, xenophobic, homophobic, or biased in any way other than fit for the job, it is artificially limiting the universe of talent it can recruit. In my view, that is a form of inadequate management. If its governing council meets in secret and does not disclose who makes decisions and why they’ve been made, then its governance risks decisions that are myopic and poorly vetted, and that too is an indication of inadequate management. If the organization does not consider its impact on the local community, then it may find its ability to expand compromised—as Amazon found when it tried and failed to locate its second headquarters in Long Island City. This lack of political sensitivity is also an indication of inadequate management. And finally, if an organization does not understand and seek to reduce its impact on the planet, it may find itself regulated and policed into crisis, bankruptcy, or nonexistence.
What we called sustainability management in 2010 is only a piece of the more complex field of management in 2022. While I have never taught in a business school, I do teach in the management curriculum of a public policy school, and I wonder how any type of organizational management can be taught these days without paying significant attention to sustainability management. The Securities and Exchange Commission is signaling this with their proposed Climate Disclosure Rules. According to Deloitte’s website:
“On March 21, 2022, the SEC issued a proposed rule that would enhance and standardize the climate-related disclosures provided by public companies. As SEC Chair Gary Gensler noted in his statement about the proposed rule, “Today, investors representing literally tens of trillions of dollars support climate-related disclosures because they recognize that climate risks can pose significant financial risks to companies, and investors need reliable information about climate risks to make informed investment decisions.” Under the proposed rule, a registrant would be required to provide disclosures about GHG emissions (with attestation for Scope 1 and Scope 2 disclosures), certain financial statement disclosures, and qualitative and governance disclosures within its registration statements and annual reports (e.g., Form 10-K).”
While the specific proposal will be modified in response to thousands of comments, and ideologues in Congress will challenge the SEC in the media and others will challenge the rules in the courts, the drive behind the rules are investors, and so it is likely that the rule will survive. Brian Croce, writing on the industry website Pensions and Investments observed that:
“The SEC unveiled the watershed proposal, which has broad backing from institutional investors and asset managers, in March… Some stakeholders in the business community and Republicans in Washington said the proposal exceeds the SEC’s authority… On the whole, asset managers supported the proposal in comment letters, but many offered suggested changes in a final rule. The largest money manager, BlackRock Inc., with $8.48 trillion in assets under management, said in its comment letter that it supports the SEC’s goal having public companies provide investors “with more comparable and consistent climate-related disclosures,” but also voiced concerns with parts of the proposal, including Scope 3 emissions reporting.”
At a minimum, the new SEC rule will help provide environmental sustainability with a role like that played by accounting and financial management in management education. CEOs must be able to read and understand a financial statement. Soon they will need to understand an environmental impact statement as well. The challenge to management education is that carbon disclosure requires faculty and students to understand the measurement of greenhouse gasses. Understanding environmental impacts will require an even greater understanding of the science of ecology and the environment. If all competent management is becoming sustainability management, management education that omits environmental and other sustainability concerns will be inadequate. The evolving field of sustainability metrics in the 2020s will resemble the development of Generally Accepted Accounting Practices beginning in the 1930s and continuing to the present. Sustainability presents a challenge to management education that resembles the sustainability challenges facing modern practicing managers.
As employment law evolves and environmental disclosure also becomes part of the regulatory environment, the demands on management grow. Modern managers must navigate a highly regulated and complex organizational terrain. Imagine the wrongful termination suits a manager would need to deal with if that manager adhered to the management practices of Donald Trump in The Apprentice. The apprentice subjected to “you’re fired” in one episode, would be accompanied by her or his employment lawyer in the next episode. Environment, social, and governance issues are now part of organizational management. The field of management must fully absorb and integrate the field of sustainability management.