The idea that it is the business of business schools to teach future execs how to solve social and environmental problems – along with such traditional topics as finance and marketing – has been slowly infiltrating B-schools around the world.

 

“This is a movement led by MBA students and it’s clearly picking up steam,” observes Paul Kleindorfer, professor of decision sciences at Wharton. “It recognizes that the unfettered corporate machine will not act quite in the way we would like.”

 

But instead of just calling for new laws regulating corporate behavior, these 21st century student activists seek to influence business behavior by influencing business education. 

 

The pioneer of this movement is a 10-year-old San Francisco-based organization called Net Impact, which identifies itself on its website as “the most progressive and influential network of MBAs in existence today.” Its stated mission: “To use the power of business to create a better world.”

 

Business historians will recognize this is not a new concept. To cite just one example: Back in 1912, mail-order magnate Julius Rosenwald spurred the creation of this country’s farm agent system by sending $1,000 ($18,600 in 2003 dollars) to any county willing to hire an agricultural expert to advise its farmers on how to become more productive. Rosenwald reasoned that creating a better world for America’s farmers was ultimately good business: If the then-mostly poor farmers could earn more, they would order more from his company – Sears, Roebuck. And so they did.

 

Net Impact seeks to revive this kind of thinking in the modern business environment. Originally called “Students for Responsible Business,” the group was founded by 17 MBAs who had been awarded internships by a “socially conscious” business executive’s group called the Social Venture Network. The MBAs saw a need for a similar socially conscious student organization and set up chapters at their respective schools.

 

Today, Net Impact has 80 chapters world-wide. Thirty were added in just the last year alone, according to Kirsten Olsen, the organization’s director of chapter relations. “Our membership of 5,000 now includes professors and alumni as well as current MBAs,” she says, “and our last annual conference drew 1,000 attendees.” The first, in 1993, drew 150. 

 

Measuring ‘Social Return’

As those numbers indicate, the movement, though growing, can’t claim to represent majority MBA thinking. In fact, last year, the Aspen Institute issued a report entitled “Where will they lead?” after surveying some 2,000 MBAs from 15 B-schools on their attitudes about business and society. BusinessWeek magazine summed up the report’s findings as: “The philosophy MBAs live by is less likely to be ‘doing well by doing good’ than ‘show me the money.’”

 

Yet, MBA interest in “doing good” has been noticeable enough to draw in Aspen’s Institute for Social Innovation through Business. The Institute has joined with the environmental think tank World Resources Institute to measure the extent to which graduate schools of business are reacting to this movement.  

 

Responses from business schools have run all the way from doing-nothing-at-all (the majority) to developing an entirely new curriculum. In-between reactions include incorporating information about social and environmental concerns into B-school courses, sponsoring contests to motivate students to come up with private enterprise solutions to such problems, and using B-school expertise and resources to help businesses in low-income communities get started or to improve the management of non-profit organizations.

 

These doing-good activities are described by a variety of names, including “social entrepreneurship,” “social ventures,” “social impact management,” “sustainable enterprise” and “environmental management.”  

 

What’s most notable about the majority of such activities is how recent they are. Money magazine took note of this last year in an essay headlined, “Do some strange happenings at Harvard’s business school foretell a deeper change?” It explained that in the year 2000, 85% of the entries in the annual Harvard Business School business plan contest were for dot.coms that defined doing good as offering on-line golf reservations or gourmet cooking instruction. But in 2001 came the “strange happenings” – 11 of the 41 entries were for nonprofit or socially oriented companies. That prompted the contest to set up a separate “social enterprise” category for entries. (This year, 2003, that category accounted for 12 of the 52 entries.)

 

Three years ago, a contest called the National Social Venture Competition, which is open only to business plans that incorporate positive social change into their profit calculation, was launched by five MBAs at the Haas School of Business at the University of California at Berkeley. 

 

With Haas’ endorsement, the students solicited contributions to raise $10,000 in prize money, spreading the word mainly by e-mailing other B-schools. In the first year, they received 66 entries. In the second year, the Goldman Sachs Foundation provided a $1.5 million endowment to fund $25,000 cash prizes and Columbia University joined Haas as co-sponsor.

 

According to Jerome S. Engel, director of Haas’ Lester Center of Entrepreneurship and Innovation, a key component of the Social Venture Competition is a requirement that entrants come up with a way to measure the “social return” of their plan. Not easy. There is no accepted way to calculate the diminished risk of law suits or the benefit of enhanced public acceptance, Engel acknowledges. “But the idea is to foster thinking about this,” he says. To that end, the competition gives a special award to “the most original or appropriate measurement of social return.” 

 

In 2001, the Yale School of Management created the Partnership on Nonprofit Ventures to help provide business planning skills to nonprofit organizations that want to supplement their donation income by creating profit-making sidelines. That Partnership, which has received $3 million from The Pew Charitable Trusts and $1.5 million from the Goldman Sachs Foundation, last year launched a business plan competition open only to nonprofits. The four grand prize winners receive $100,000 in seed capital and hundreds of hours of business consulting, but even nonprofits that don’t win a prize get feedback on their ventures from Yale MBAs and faculty.

 

Acrylic Prescription Eyeglasses

Here are some more examples backing up the assessment of Wharton’s Kleindorfer that the movement “is picking up steam.”
 

— M.I.T. offers an elective called “Design that Matters” that challenges business and engineering students to identify and solve problems facing customers likely to be low-income – such as the populations of third-world nations or people with disabilities. 

 

First launched in 2000, the course has led to four patent applications, a technology licensing agreement and a promising business start-up. A portable machine that makes acrylic prescription eyeglass lenses at very low cost “created from materials found around the house” by student Saul Griffith won the 2001 Collegiate Inventors Competition. A team headed by Griffith’s friend, Harvard grad Neil Houghton, won the 2001 Harvard Business School business plan competition with a plan to market glasses made by Griffith’s invention in third-world nations.

 

— Columbia, in addition to co-sponsoring the Social Venture competition, offers an array of elective courses at the business school such as “corporate social  responsibility,” “international development” and “emerging markets and social entrepreneurship.” The school has started a “Managers in International Development Initiative” which links MBAs to business ventures in developing countries.

 

— The University of Maryland’s Dingman Center for Entrepreneurship at the Robert H. Smith School of Business is playing a major role in making some $20 million in venture capital available later this year to small businesses in low-income areas of Maryland, Virginia and Washington, D.C.

 

Dingman sponsors a “New Markets Venture Capital Fund” which benefits from money recently appropriated by Congress for the U.S. Small Business Administration to spur investment in communities where venture capital firms have rarely ventured in the past. The SBA provided $10 million with the understanding that Dingman would raise an equal amount from private investors. 

 

“The Fund itself is not part of the University. It’s a separate entity with its own professional managers,” explains Smith school spokesman Jeff Heebner. “But businesses that receive Fund money will have access to advice from Smith professors and MBA students. “

 

Just how many B-schools are now involved in similar programs should be known in October when a new report from the Aspen Institute and World Resources Institute is scheduled to be published. 

 

An Aspen-WRI report, entitled “Beyond Grey Pinstripes,” published in 2001, stated that only 122 of the 463 schools worldwide to which it sent its questionnaire bothered to reply. But it noted that 82 of those 122 reported offering social entrepreneurship-related courses and 22 of those 82 went much further.

 

Pinstripes named five B-schools that it said have programs “at the cutting edge of social impact management:” Kenan-Flagler at the University of North Carolina at Chapel Hill, Harvard, Loyola Marymount, Michigan and Schulich at York University in Canada. 

 

Kenan-Flagler and Michigan were also accorded “cutting edge” status for “environmental management” along with three others: Yale, George Washington, and the University of Jyvaskyla in Finland.

 

Not Getting Arrested Isn’t Enough

Thirteen schools, including Wharton, were cited for “showing significant activities.” Wharton achieved that ranking in both social impact and environmental categories, picking up points for establishing the Zicklin Center for Business Ethics Research in 1997 and because “Ethics and Responsibility” and “The Governmental and Legal Environment of Business” are required MBA courses. (No school was deemed “significant” if topics such as ethics and public policy were offered only as electives.) 

 

The group of Wharton MBAs who founded a Social Impact Management Initiative (SIM) last October says “showing significant activities” is not enough. The group has, as one of its goals, moving Wharton to Pinstripes’ “cutting edge.”

 

“SIM is an umbrella organization designed to bring all the socially-motivated organizations at Wharton (which includes Net Impact) together to improve our strength and visibility through numbers,” explains David Levin, a 2004 Wharton MBA candidate. “Increased visibility is important to open people’s minds. Business school students can be pulled to the only business opportunities they know. The challenge is to show people that there are other possibilities.”

 

Levin believes his fellow students will welcome these other possibilities. “Students are interested in doing good for society, not just doing good for themselves,” he says. “Just making money is not enough to be happy.” Wharton students, Levin believes, have an awareness of ethical issues and a conviction that business must contribute something more than merely not getting arrested for ignoring laws.

 

SIM supporters (including Kleindorfer who serves as one of SIM’s faculty advisors) have to date:

  • hosted a social entrepreneurship conference at which topics such as “Do sustainability strategies increase shareholder value?” were discussed (see related story);
  • formally listed goals for their organization, such as creating new courses in social entrepreneurship;
  • produced a “benchmarking study” that compares social entrepreneurship activities at 10 competing B-schools;
  • developed a SIM collaboration between graduate and undergraduate students;
  • funded two MBA students to work part-time to advance the SIM initiative; and,
  • posted on the SIM website the names and descriptions of courses that might be of interest to a would-be social entrepreneur. (The list not only includes courses offered by Wharton but also by other schools at the University.)

 

According to Levin, SIM is current exploring the creation of a Global Consulting Practicum class that would allow teams of MBAs to consult NGOs on development projects and multinationals on corporate responsibility initiatives in foreign countries. “The teams would then codify the knowledge gained about applying business skills to social problems and make it widely available through Knowledge at Wharton,” he says. 

 

North Carolina’s Kenan-Flagler school, a star in the Pinstripes report, has already wholeheartedly embraced most of the goals SIM has set for Wharton. In doing so, says Stuart Hart, co-director of the Kenan-Flagler Center for Sustainable Enterprise, it has created a specialty niche for itself that has paid off by “attracting students who might otherwise go to Wharton or Harvard.”

 

Hart adds: “Where we have our strongest suit is in the second year of the MBA where we offer a concentration in sustainable enterprise, extensive electives, practicum projects and global immersions. A third of our first-year MBA students said the reason they chose Kenan-Flagler was our sustainable enterprise offerings.”

 

Its specialty niche does not mean Kenan-Flagler ignores traditional B-school courses, Hart said. “These are the MBAs who, just as the grads of other business schools, will take jobs in marketing, in finance, in consulting, in the usual range of MBA careers. But we bring to the table additional competencies that broaden the bandwidth of what they can do. “

 

Students, especially international students, he says, “believe that over the next decade, the world will come to demand knowledge of the ‘triple bottom line’ – environmental and social as well as economic. The existing market for multi-nationals is pretty well tapped out.  Future growth will depend on those four billion people at the bottom of the pyramid whose needs are now badly met, under-met, or completely unmet.” 

 

Hart thinks the reason the majority of business schools have moved so slowly in adding courses in social entrepreneurship is not lack of student interest. “Thousands of students who are motivated to learn about sustainable enterprise can’t find the courses they seek,” he says. “The limiting factor is faculty who cannot see these concerns as becoming important business issues.”