The S&P 500 removed Tesla from its ESG Index last month over the electric automaker’s lack of a low-carbon strategy and questionable business conduct. The move drew ire from CEO Elon Musk, who called ESG metrics “a scam” and “the devil incarnate.”
The decision highlights the difficulty in making and meeting requirements around environmental, social, and corporate governance, which is garnering increased attention these days from investors and consumers demanding that companies do better. Business schools are also feeling the pressure.
“Increasingly, we educators are facing questions: Is our research responsible? Are we contributing to the larger society? Are we helping companies and governments with the research that we do? Because research is pretty expensive,” said Serguei Netessine, a Wharton professor of operations, information, and decisions.
Netessine is one of the founding members of Responsible Research in Business & Management (RRBM), a global organization dedicated to exploring those questions. He also served as a co-organizer of the 2022 Responsible Research Summit, together with Wharton professor David Reibstein, current RRBM President, and Wharton professor Thomas Robertson. The on-campus event was held earlier this month and it was sponsored by Wharton, INSEAD, and RRBM.
While there is no universally accepted criteria for ESG, it’s clear that measuring it matters. About one-third of global assets are now assessed on ESG, and the funds invested in those could top $50 trillion, Netessine said. Meanwhile, business schools are working to integrate ESG into their programs to meet new accreditation standards and rankings.
“If you look at what our customers want, which is our students, there is huge demand for courses on environment, on social responsibility, on good corporate governance,” Netessine said. “Some people don’t care. Others do. But what we know is younger populations, younger generations are much more attuned to ESG issues. Going forward, I believe this will become much more important. This is how our students are going to be selecting business schools.”
‘A Bridge Between Science and Practice’
Wharton has launched several initiatives that focus on problems of critical importance to students, faculty, and society. They include the ESG Initiative, which will investigate when, where, and how ESG factors affect business value, and the Coalition for Equity & Opportunity, which will collaborate with industry to dismantle systemic barriers for underrepresented individuals and communities.
“I am not exaggerating when I say that responsible, impactful research is in our DNA. But at the same time, I share in your concern that the incentive structures that undergird academic research are broken,” Wharton Dean Erika James said during her opening remarks at the summit. “As a professional school, we are in a unique position to serve as a bridge between science and practice. It is our duty and responsibility to take a data-driven, scientific approach to identify the underlying causes of today’s global business challenges and come up with solutions to societal issues.”
James noted two recent pieces of faculty research that demonstrate how science can be brought to bear on these issues. The first is from professors Judd Kessler and Corrine Low, who developed a new methodology to study hiring bias called Incentivized Resume Rating. The research helps firms understand and narrow the gap between their good intentions and actual hiring practices so that they can make meaningful change.
The second is from professor Katy Milkman, who is co-director of Penn’s Behavior Change for Good Initiative. During the first year of the COVID-19 pandemic, her team conducted two mega-studies on the best communication methods to encourage vaccine adoption.
“The data and insights that emerge from our research must be widely disseminated to reach the current and future leaders and decision-makers who need them to affect policy, organizational decisions, and economies around the world,” James said. “Ultimately, we want to elevate the impact of business scholarship.”