By: Jalal *
I don't get bored using magic sentences from musicals The King and I Rodgers and Hammerstein's work, “That if you become a teacher, by your pupils you will be taught“Every time I have to talk and write about my feelings after interacting with those who are positioned to listen to 'lectures' from me. Whether it's in the context of lecture classes, training, or seminars, I keep on remembering that sentence, because it always proves to be true.
Anna Leonowens — an adventurer, teacher, writer and social activist from England — was asked to become a teacher for the children of the King of Thailand, Mongkut or Rama IV. What he later admitted was that he felt he got more than he gave to his students, the princes and princesses. Although I have never, to the best of my knowledge, taught princes and princesses, the sentiments I feel are exactly the same.
Since the beginning of 2017, I was asked to become a substitute lecturer for CSR and Business Ethics courses at Prasetiya Mulya University. December 14, 2018, is the last time for lectures for one class that I teach in this semester, and this week the other classes will also end. I will meet again with the next generation next year. Through this paper, I want to write a message to the students. The message that still feels I need to strengthen after I end the lecture, and a message that might be useful for those who are studying in various business schools.
However, my main motivation for writing this message is the infinite thank you to those who have made me better understand the business world from their eyes. In fact, I was their student throughout the semester, who became more understanding and, hopefully, wiser in looking at the business world in Indonesia. The experiences they shared in the classroom, and outside the classroom, it is fitting that I reply with what I know and I have not fully conveyed.
The world is very clear is experiencing a shift in the way of thinking about business. Primarily, this was marked by a shift in how a new generation of business owners and managers saw business relations with society and the environment. Business has been seen as a sector that provides the main opportunity for welfare improvement. And it seems that way. Unfortunately, business is also associated with a lot of scandals, and its social and environmental impacts are increasingly open to the eyes of stakeholders.
When stakeholder literacy meets information and communication technology, maximum transparency is the result. Now the company has been very difficult, if not impossible, to hide environmental, social and governance performance (environment, social, and governance, abbreviated as ESG) they produce. If there are still gaps to hide, the opportunity is for micro-to-medium-sized companies, and in the layman's eyes. Observant stakeholders can certainly find any ESG information they want to know.
Therefore, if companies want to have a good reputation in the eyes of stakeholders, there is no choice but to first improve their behavior and performance. Reputation, as defined by John Doorley and Helio Garcia, is the sum of behavior, performance, and communication, multiplied by authenticity. Good behavior and high performance are very important provisions, which can then be communicated to stakeholders at a level that is consistent with that behavior and performance. Inappropriate communication — both too low and too high compared to behavior and performance — will generate doubts in the minds and hearts of stakeholders. Moreover, if it turns out that both behavior, performance, and communication are apparently not authentic.
The Reputation Institute, in its latest survey in October 2018 shows that it turns out that corporate (social) responsibility is a reputation determinant. In the highest quadrant, which crosses between attributes and degrees of importance, three of the most important things for a company's reputation are obtained: positive impact on society, fairness in doing business, and ethical behavior. Other components, although important, are not as important as these three things.
This further strengthens the results of the most recent studies on the relationship between CSR and the company's financial performance. If we witnessed that the relationship between them tended to be muddy or neutral, now there is evidence that the relationship is positive, significant, and reinforces each other more and more. If it was blended value from Jed Emerson — the idea that the greater the benefits to stakeholders, the higher the company's profits — just a hypothesis, now accepted as a proven truth. Maybe in the future it will even be stated as a business axiom.
I still remember very well that when undergoing education at the elementary school level we are taught what is called 'economic principles', namely “with the smallest capital, to get the maximum benefit.” Whoever put that ideology into the curriculum, which is clear the sentence is so attached to the minds of many people. If I mention the first part of the sentence, no one can't continue it. That is a sign that the success of reproduction of capitalistic ideology into our minds.
Our memories are increasingly strengthened by the first answer that appears when I ask about business goals. No doubt, the students answered to get a profit. This is a very predictable answer. But, when I ask further about this question, then the realization that the first answer is only the result of mere parroting seems to arise immediately. In class, I explained that management theory leaders such as Thomas Donaldson from Wharton business school at the University of Pennsylvania and James Walsh from Ross business school at the University of Michigan had different answers. Their article both, Toward a Theory of Business, really disturbs the mind that was satisfied with the answer 'seeking profit'.
They opened the article with the question “Law is to justice, as medicine is to health, as business is to …“From there, it immediately appears that the goal is always greater than the way to achieve it. Law was created to achieve justice, as medicine was created to achieve health. So, the answer for business purposes must of course be greater than the business itself. Are profits greater than business? Not. 27-page article published in the journal Research in Organizational Behavior Vol. 35/2015 argues that business is created to bring optimal prosperity (optimized collective value) all stakeholders are not just profits for their capital owners.
That's how it is. The theory of business has shifted so far from the position in the 1970s as if it was won by Milton Friedman and his followers. Now, Edward Freeman with his stakeholder theory is what most progressive business people follow. The transformation of a business that is only centered on the economic interests of businessmen, becomes a business that serves the interests of stakeholders is happening. And that's what was recorded by business academics.
Business Schools Also Change
Take for example Harvard Business School (HBS), which is often stated as the best business school. There the shift occurs very strongly. The reason for the shift is very clear: many HBS alumni are associated with various crises that lead to mistrust in the business world. Efforts to reclaim public trust in business must be done, or the business itself will suffer losses due to their unavailability.
Max Anderson and Peter Escher were two HBS students who were then moved to create The Oath MBA, as one way to arouse awareness of all business school graduates. One of the points of the oath is “I will strive to create sustainable economic, social, and environmental prosperity worldwide. Sustainable prosperity is created by the enterprise producing output that is a long run that is greater than the cost of inputs for consumption“Since the oath was rolled out by the 2009 HBS MBA Force, thousands of MBAs around the world have taken oaths a la Hippocrates's oath in the medical world.
When in 2012 John Coleman and others examined what was done by HBS alumni, they found that they had become business leaders who were far more concerned with social and environmental aspects. Therefore, the books written by them are given a title Passion and Purpose: The Best and the Brightest Young Business Leaders Stories. They are the best and brightest who are the fastest changing business people who aim to change the world for the better. They take a lot of social business as their choice of life.
The shift did not just happen at HBS. If we examine all the best business schools in the world, it will be clear how much the shift is happening. In the article Management as a Calling, which was published on Stanford Social Innovation Review September 2018 edition, one of the most respected academics in business sustainability, Andrew Hoffman writes: “Without question, what do we need to do is amend the MBA? They will possess awesome power as business leaders, and with that power comes great responsibility and an obligation to create benefits for all of society.“
Hoffman, who also teaches at Ross's business school — although the above quote might make people think he is in the Marvel Cinematic Universe with Spiderman — proposes that business schools make seven fundamental changes to business goals, namely to prosper all stakeholders. The changes are: (1) providing guidance to understand the business world at the beginning of the program, or even before the decision to enter the program; (2) creation of courses which explain the nature, evolution and future of capitalism critically; (3) teaching about responsible lobbying; (4) teaching about the objectives of the corporation; (5) teaching related to natural science, including the impact of business on the environment, and its consequences for business in the future; (6) teaching related to social and political sciences, including the most important social issues to be considered for business success; and (7) providing career guidance at the end and after the program.
The proposal is very comprehensive, and rests on the most progressive business school experiences in the past decade. The change has indeed been felt for a long time, so the UN has an initiative The Principles for Responsible Management Education (PRME). Until now, there have been 650 business schools and management who signed it. However, that number is of course still far from adequate, because there are far more business schools around the world that have not referred to its principles.
PRME introduces 6 principles of management education, namely purpose, values, method, research, partnership, and dialogue. The first principle, for example, is translated into business or management school appointments as follows: “We will develop students to work towards a sustainable and global economy.“Meanwhile, the fifth principle is stated as:”We will interact with managers of business corporations to extend our knowledge of their challenges in meeting social and environmental responsibilities and to explore joint effective approaches to meeting these challenges.“
For me, future generators of sustainable value is a very appropriate description for current business and management school students. Therefore, it is very important for these students to know the biggest challenges of business in the future. And, among those challenges, I am now fully aware, climate change is clearly one of the most important things for students to understand so that they can later become business leaders who can create sustainable values / benefits for their stakeholders.
Preparing for Climate Change
Ahead of the first meeting in this semester, Andrew Winston wrote an article titled The Scale of the Climate Catastrophe Will Depend on What Businesses Do Over the Next Decade in the October 2018 edition of the Harvard Business Review. At the beginning of the year, the World Economic Forum described in The Global Risks Report 2018 that the three risks with the greatest impacts and opportunities are extreme weather events, natural disasters, and failure of climate change mitigation and adaptation.
Along with the emergence of Winston's article, the Intergovernmental Panel on Climate Change (IPCC) released its latest report, which states that the world only has 12 years to control climate change at a maximum increase of 1.5 degrees Celsius — a safe threshold for human life. Beyond that, especially if we go beyond the 2 degree Celsius rise, life will change greatly. The environment will be increasingly damaged, and social harmony will be in ruins. And the business is clearly not going to survive, let alone progress, in such a situation.
Until now I still have no idea how the majority of businesses in Indonesia seem to be unmoved, not inching from practices that are no longer in the long-term business sense. I know that the IPCC report will not reach the eyes of business leaders, but are they no longer reading HBR and WEF publications? If the HBR and WEF warnings are no longer taken seriously by business people, I don't know what else to use data and argumentation.
In fact, both the HBR and WEF publications that I mentioned underline two things: if businesses ignore the risk of climate change, then they will pay a very high price; on the contrary, if the business manages the risks of climate change correctly, they will reap a variety of business opportunities. In class, I have stated that in general if a business also works to realize SDGs, then according to BSDC and AlphaBeta calculations in 2017 globally there is an opportunity of USD12 trillion per year that can be obtained. The latest publication of The New Climate Economy published in September 2018 reveals that specifically related to climate change (SDG13) the total business opportunities that arise until 2030 are at least USD26 trillion.
Maybe it was the fault of the experts who had been too struggling to persuade politicians and bureaucrats to change. The IPCC report until now only provides summary for policymakers. Even though, as Winston stated, it is the company's response that will determine the impact of climate change that the world will feel. Why isn't there summary for business leaders made by the IPCC? If the reason is because the IPCC is an intergovernmental institution, it seems that such barriers need to be breached. The United Nations itself now has a UN Global Compact whose contents are companies.
It might also be a mistake for people like me, who are exposed to the latest developments in climate change-related science, have access to talk with business leaders, but are less serious about being a bridge between the two. Reflecting on the experience of interaction in the classroom, and how I build the lecture syllabus, it is very clear that I still lack that understanding. How can the three highest risks, as included in the WEF report, not be enough for me to discuss in class?
This awareness will clearly make me correct the syllabus for future lectures — as suggested by Hoffman. And, writing made on closing day The 24th Session of the Conference of the Parties to the UNFCCC (COP24) further reminded me of the importance of knowledge about climate change in lectures on corporate social responsibility.
Waiting for Action Ethan Hunt
The students who attended my class must have realized how much I was a film enthusiast. Besides, of course, durian enthusiasts. Among the action films that I like, serial Mission: Impossible are among my favorites. Not only because the cinema version was better made, but also because of the sentimental value of television viewing that I witnessed when I was a child. Sentence “your mission, you should choose to accept it… “very attached to my head.
Now, I see that business challenges are very hard, not just heavy. In Mission: Impossible II, boss the main hero Ethan Hunt, Mission Commander Swanbeck, played by Anthony Hopkins said: “Mr. Hunt, this is mission difficult, it's mission impossible. “Difficult” should be a walk in the park for you.“At the end of this paper I felt the need to state that the challenges of the business in the future were no longer just entering into the difficult category. Business will not be like a walk in the park for reliable business people and professionals.
The various world changes that are currently taking place, including and especially climate change – also the challenge of the Industrial Revolution 4.0 which, according to Klaus Schwab, will be fully present in 2025 – will make business in Indonesia an extra-heavy, extra-attractive challenge. Just like Ethan Hunt, business people and professionals will run around avoiding danger, scrambling to avoid obstacles; but also will use all their toughness and ingenuity to find opportunities in achieving their mission. The mission, as I said above, is to produce optimal benefits for all stakeholders, including shareholders. The world situation that is changing rapidly is both a challenge and an opportunity that must be considered and utilized to achieve this mission.
So, to business school students, who will and are becoming Ethan Hunt in the business world in Indonesia, my message, as one of your stakeholders, is as follows: “Your (business) mission, you should choose to accept it, involves the discovery and sharing of optimized values for all your stakeholders. The stakeholders will be proud of achieving the mission, the stakeholders will proudly acknowledge your actions. This disc will self-destruct in five seconds. Good luck“
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* Jalal write essays on sustainability, corporate social responsibility, and social business. He holds a number of positions in these fields, including being a reader in the field of corporate governance and political ecology at Thamrin School of Climate Change and Sustainability; head of the Indonesian Social Investment advisory board; sustainable financial advisors in Transformation for Indonesian Justice; member of the National Commission on Tobacco Control; and the founder and commissioner of the WISESA social company. He was also one of the Indonesian Green Axis declarators.