​​​Full Transparency - Business School Did Not Prepare Me For My Job

IThis past year, I graduated from one of the nation’s top business schools and received a graduate degree in management. I dove into the trials and tribulations of strategy, finance, and economics. I read case study upon case study. I participated in extracurricular consulting competitions. And don’t get me wrong, it was a great education. I loved being taught by professors distinguished in their field and learning from my peers whose perspectives were different from mine. The reality is, however, it did not prepare me for a job as an Environmental, Social and Governance (ESG) Analyst.

You might think this doesn’t apply to you if you don’t work directly in ESG. What would an investment banker need to know about carbon emissions or Diversity, Equity and Inclusion (DEI)?  The truth is that in today’s ‘new normal’, all jobs need some level of ESG orientation at a functional level to prepare for the future. We are all in the same boat, and currently, it's sinking. It seems I’m not the only one who feels this way. According to the Global Business Coalition For Education, “while job postings requiring green skills grew at 8% annually between 2017–2022, the share of green talent has grown only 6% in the same period” meaning business schools are lacking in providing the education necessary to prepare society for the transition to a net-zero economy. 

We already live in a world in which increased regulatory and stakeholder pressures are driving companies to make net-zero pledges. It is nearly impossible to do so, however, without closing this gap between the supply and demand for ESG talent. Large companies like Deloitte, PwC, and Bain, are investing massively in education and training initiatives for their employees to help close this gap. But how is it that our education system is falling short not only of what is expected, but also of what is necessary to succeed?

The truth is that business schools are lacking in preparing their students for jobs in the new normal of business, a new normal in which ESG has landed front and center. Not only does this inhibit companies trying to reach net-zero pledges, but it also slows our society’s progress on reducing, transitioning and adapting to climate change. In order to meet the growing regulatory and stakeholder demands of transitioning to a net-zero economy, business schools need to step up their game and supply their students with ESG knowledge, skills, and credentials. If I were a betting woman, I’d put my money on the next three points:

1 - We Need New Case Studies

I’m a big fan of the case study method. I like the idea of using real-world situations to gain a deeper understanding of complex problem solving. I learned a lot about strategy by-way of classic Harvard Business School (HBS) case studies throughout my time in graduate school. Most cases were about classic strategic business concepts like competitive advantage, inimitability, and horizontal and vertical integration. Today, ESG strategies are becoming an essential part of how businesses operate, yet in class we barely grazed the surface of how to use different tools, like Porter’s Five Forces, to manage topics such as carbon emissions, DEI solutions, and organizational transparency.

My work today requires me to focus heavily on strategy, but not in the traditional sense. Yes, having an ESG strategy is a strong competitive advantage nowadays, but what exactly encompasses an ESG strategy? What are the pillars that drive an ESG strategic plan? I’ve learned that materiality assessments and disclosure requirements serve as the basis for any robust ESG strategy. Instead of looking at the market and analyzing competitors, we are analyzing ourselves. Strong ESG strategic planning sets hard objectives and metrics. We measure financial and non-financial performance, giving us a holistic view of the risks and opportunities at hand. Finally, the input of all stakeholders is necessary to make an ESG strategy as strong as possible. It’s not just a process involving the C-suite and board of directors; here, everyone is involved as a decision-maker and problem solver.

This type of strategic thinking should be honed in business schools through a variety of newer case studies. There are examples everywhere in today’s world, and understanding strategy in a more diverse way can strengthen problem-solving capabilities. Even when building out a regular corporate strategy, ESG can serve as a strong differentiator. Consumers are drawn to companies that push renewables in their supply chains, have responsible labor practices, and focus on having a strong impact in their communities. In other words, today’s ‘new normal’ emphasizes ESG and we should learn how to manage its implications through a strategy lens if we want to strengthen the overall direction of the businesses. Case studies are a great way to learn about its complexities through real-world examples.

2 - Let’s Talk Carbon Accounting

Carbon accounting serves as the basis for any discussion regarding carbon neutrality, which is currently a big focus for businesses world-wide. The E of ESG has become the main focus in any discussion of carbon neutrality or net-zero. By definition, Greenhouse Gas accounting quantifies a company’s Greenhouse Gas (GHG) emissions and supports proper goal-setting and reduction planning. Since it's important to have some sort of functional understanding of every part of a business, I would have benefited from learning how to measure a company’s climate impact, not only its financial impact. Today, all companies need to engage in carbon accounting in order to meet increasing regulatory requirements and stakeholder expectations regarding emissions and climate risk disclosures. For instance, customers are expecting companies to be transparent with their GHG emissions numbers and long-term goals, with customers willing to pay a premium for products and services provided by a more sustainable company versus a conventional competitor.

I'm an analyst, not an accountant or data scientist, yet the topic of GHG accounting comes up a lot in my day-to-day life now. And it sucks to admit, but it's the truth: I still have no idea how carbon accounting actually works. But thanks to my colleagues at Rho Impact, you better believe I’m getting there. If business school would have taught me about the fundamentals of carbon accounting, I would be in a better position to assist our clients in their carbon reduction efforts and long-term planning. So, business schools, if you’re reading this (and I’m looking at you University of Michigan) , it’s time to teach students not only how to measure financial impact but also climate impact. This will ensure everyone is on board in reducing carbon emissions, whatever your professional role may be.

3 - Managing the Regulatory Environment

One of the first projects I worked on was providing a summary of ESG regulations in major markets around the world. Business Law was one of the core classes for my graduate degree, yet there was no mention of ESG regulations. Business law is complicated and nuanced, yet seems to be set in stone. There is a set way to go about things, as it's an established field with a great amount of precedent. The ESG regulatory environment, on the other hand, is fresh. It is rapidly evolving and is full of uncharted territory. Most of the regulatory environment around ESG has to do with disclosure regulations, and while the issues we are talking about are not new, the fact that we now have to measure and manage them is.

Material issues such as carbon emissions, diversity in the workplace, and organizational transparency have always been relevant. The difference is that now businesses are required to measure and manage them. There is a significant gap between the understanding of such issues and how to accurately account for them. In such an unprecedented environment, it becomes difficult to disclose a company’s material issues without fully understanding how to quantify them. In business school, I learned about things such as patent law and how to set up LLCs. And while, again, it's important to have a basic understanding of business law, it would have also been helpful to understand that there are spaces where law practices are unprecedented, and that all law isn’t just set in stone. When it comes to law, working in ESG means having to stay current with the science and data that is informing the continuously evolving regulatory environment.

Conclusion

Just like everyone, I’m learning on the job. My company has been a huge support in educating me on the fundamentals of working in ESG and in giving me the tools necessary to understand its nuances. However, the question still remains: could business school have actually set me up for success in my field? The answer is no, not in its current state. The reality is that higher education institutions need to focus more on how we should apply the concepts learned in class for the realities of today’s business arena. We leave business school with a general understanding of strategy and accounting, but when it comes to applying them, there is a big gap that needs to be filled. It is becoming ever more important to learn how to apply the concepts we learn to ESG, in order to actually help businesses transform. Without application, all we can do is talk concepts. Business schools, students are looking for more. We are looking for a comprehensive education that reflects the fact that ESG is becoming a reality in every function of a business. We don’t only want to understand business, we want to be able to practice it, and that’s virtually impossible in today’s world without learning about and applying ESG concepts and frameworks to real-world situations.