MBA students offer ideas on how companies can negate impacts from a changing environment
By Carmen Nobel, Harvard Business School Working Knowledge
Last fall, first-year MBA students at Harvard Business School received a new assignment in their mandatory Technology and Operations Management (TOM) course. The topic: How climate change affects business.
"Choose a company or non-profit organization whose operating model is likely to be significantly affected by climate change's physical manifestations and/or related regulation, including threats and opportunities associated with mitigation and/or adaptation," the assignment read. "Describe how the organization is likely to be affected, the steps the organization is taking to address those effects, and describe and justify what additional steps you think the organization should consider implementing."
Some 929 students took the Climate Change Challenge, analyzing organizations including Toyota, General Mills, Maker's Mark, Amazon Web Services, and Vail Ski Resort. Their responses, each 800 words or fewer, can be read on a public blog called Open Knowledge, which was designed to let HBS students discuss business issues with each other, and to share their ideas with the rest of the world. (Because the posts are public, students have the option of whether to post under their own names or under a pseudonym.)
"We launched the challenge to expose students to the broad array of ways climate change is affecting organizations," says Mike Toffel, Senator John Heinz Professor of Environmental Management at Harvard Business School and the head of the TOM course, who spearheaded the challenge. "It's affecting the energy sector and agriculture, of course, but it's also affecting supply chains and operations."
The challenge was a pedagogical shift for HBS, which traditionally teaches management lessons via in-depth case studies about individual organizations. "Instead of presenting students with a case that distills a management scenario, this assignment required students to do research and cite reputable sources," Toffel explains.
The new class format "allowed the students to appreciate the diversity of ways in which climate change affects companies and companies react to climate change," says Assistant Professor Chiara Farronato, who was among several professors who taught the challenge. "For some, it's a nuance; for others, survival depends on their response to climate change. Climate change is multifaceted. It has many physical manifestations, regulatory standards, consumer preferences, and levels of uncertainty. One case study would have focused the discussion on one example, whose generalizability would have been limited given this diversity."
The blog posts cover a wide swath of industries that grapple with climate change.
"Many of the students wrote about the industries and companies they were most familiar with, which led to a remarkable diversity of posts," says Assistant Professor Ariel Dora Stern. "Students discussed the business implications of climate change in contexts ranging from fast fashion to cloud computing and from banking and financial services to leadership issues facing coastal municipalities. I believe we all came away with a deeper understanding of the ubiquity of climate change as a challenge for business leaders of the future."
- Nikhil Dewan looks at how water scarcity affects a beverage giant in Is Coca Cola Staying Ahead of Climate Change? The blog post discusses the company's 2007 pledge to replenish all the water is uses by 2020, and then takes a critical eye toward next steps. "Coke's Replenish projects are not always to the aquifer from which the water was originally sourced," he writes. "The strongest critics question the act of 'balancing' when depletion of a certain community aquifer is mitigated by replenishing water in another community aquifer that may be hundreds or thousands of miles away. I personally believe that Coke must double down on efforts to ensure that replenishment actually benefits the communities that were impacted by its operations."
- Having lived through Hurricane Sandy, another student considers climate-change-related insurance claims in Insuring the End of the World: Allstate at the Intersection of the Causes and Effects of Climate Change. "In this rapidly shifting landscape, it is imperative for P&C insurers like Allstate to continue to adapt, not just to the newly arisen risks from climate change, but also to the opportunities to serve their clients better," writes the student under the name "TOM."
- And "SWSC" digs into the environmental impact of the apparel industry in The Nike Model: Garbage In, Sneakers Out. "With 666 factories in 43 countries and 1,000 retail locations across continents, Nike's widespread operations and supply chains require significant amounts of water and energy to produce, package, and ship its merchandise to points of sale across the globe," the student explains, going on to discuss what the company is doing to shrink its environmental footprint—and improve its reputation.
Other posts focus on entrepreneurial ventures borne of the need to fight climate change. "For many companies, climate change poses a threat to their current operating model," says Assistant Professor Kris Ferreira. "However, there are also a few examples of companies or startups for which climate change actually poses opportunities."
For instance, a post entitled Climate Change ... Understanding the Meat of the Problem looks at Impossible Foods, a food-tech company looking to create a veggie burger that tastes like a hamburger. "Livestock is responsible for more greenhouse gas emissions than all transportation exhausts combined," writes David Mravca, and the company is banking on people who care about that. "Impossible Foods is taking advantage of the effects of climate change to successfully obtain funding (approx. $180M), to build its brand, bring on staff, develop a great product, and market its product to the public," Mravca writes, "… and it's getting an advantage because of all the climate change articles being published and paid for by other groups."
To prepare for the class discussion on the Climate Change Challenge, students were told to read a few of each other's blog posts, along with the note Climate Change in 2017: Implications for Business, written by Rebecca M. Henderson, Sophus A. Reinert, Polina Dekhtyar and Amram Migdal.
The professors who taught the Climate Change Challenge focused on the business implications of climate change and presented the issue as an established scientific reality. "We wasted no time debating whether climate change is real: in the scientific community, there really is no such debate anymore. The note we assigned beforehand presented a summary of the science and its projections, and we focused our assignment and class discussion on what organizations are saying and doing about it," Toffel says.
Each instructor picked five or six student posts to discuss in class. "I deliberately called on students with very diverse opinions to see if they could be swayed or constructively argumentative," says Senior Lecturer Christina Wing. "In many cases, the blogs in conjunction with the classroom discussion open students' eyes to potential alternatives to issues and a new way of thinking. In the end, the majority of my students were very open-minded."
The broad lesson of the challenge is that climate change matters to the world of business, and virtually no industry is immune to the change.
"I think our students developed an appreciation for the breadth of consequences of climate change across industries and the sheer scope of this problem," says Assistant Professor Joel Goh. "Unlike a traditional case discussion, where we go really deep into analyzing the operations of an individual company, here they had to grapple with how this single phenomenon is impacting organizations across industries that we don't even usually think of as being related. The sense I got was that many students coming into class already understood, cerebrally, that climate change is a big problem, but the class session and discussion made this problem real for them, showing them that it isn't just an issue for policymakers and scientists, but that it has tangible implications for the companies and industries that they themselves will work or invest in."
The assignment also provided practical experience in summarizing and proposing solutions for a business problem—in 800 words or fewer.
"Today, all managers must write two-page memos," says Shane Greenstein, the Martin Marshall Professor of Business Administration. "A blog post is a version of that. This assignment provided great practice at being short, punchy, engaging, and to the point."
Image by Patrick Clapp