Think, Teach, Act for an Inclusive and Sustainable World!

During this historical moment of transition to a more sustainable world, HEC Paris has a responsibility to help business stakeholders transform the challenges around this transition into opportunities – opportunities to maximize both economic and social value, notably by being more innovative and impactful. It is time to revisit existing organizational theories and rethink the way we teach business in terms of social utility.

HEC Paris began to explore questions around social utility with the introduction of its first Master’s programs in CSR in 2000. Then, in 2008, Professor Rodolphe Durand founded the Society & Organizations Institute (S&O Institute). The S&O Institute focuses on the relationship between organizations (mainly firms) and society – a relationship that will become only more important as the global shift towards sustainability gains momentum. Hence the strategic importance of the S&O Institute to HEC Paris. Its 3 pillars of research, education, and action give rise to our Institute's motto: Think, Teach, Act for an inclusive and sustainable world! This special issue reflects the S&O Institute’s triple orientation by exploring specific examples of our activities. 

We start at the beginning with our commitment to train change-makers and leaders in responsible, sustainable management and thereby facilitate their leadership of business and society’s global transformation. To achieve this goal, we develop innovative teaching methods across several programs at HEC Paris. For example, the Master’s in Sustainability and Social Innovation is one of our Institute’s flagship programs, designed in particular for young strategists and social entrepreneurs / intrapreneurs. 

Next, we focus on one of the S&O Institute’s strongest pillars: our research. Since the creation of the Institute, its founder Rodolphe Durand has gathered numerous researchers from different disciplines to create a vibrant place for shared reflection. They are proudly contributing to the development of an international research community focused on contemporary challenges. In this special issue, we focus on 3 of the research topics recently undertaken at the Center. Rodolphe Durand explores why and how firms respond to demands for social responsibility. Arnaud Van Waeyenberge and David Restrepo-Amariles, both researchers and lawyers, show that CSR increasingly operates as a genuine normative system and can even stand in for the law. Last but not least, Olivier Chatain and PhD student Elena Plakenskova demonstrate how NGOs and commercial firms can benefit from better partnerships.

We then present the S&O Institute’s annual on-campus conference, which invites academics, students, managers and practitioners, and government representatives to reflect together on solutions for a more sustainable, inclusive economy. This year, the event, entitled “Alliances for Cities in Transition” focused on multi-actor initiatives for building tomorrow’s more sustainable, inclusive, and resilient cities. 

We are also very happy to present our new initiative undertaken in partnership with 5 large corporations who all share the same objective: to put social utility at the heart of their corporate strategy. Called the Movement for Social * Business Impact, it aims to facilitate a more inclusive economy in which companies maximize both their social impact and their performance.

In “Measuring the Impact of Business on Well-being,” Rodolphe Durand concludes the issue by explaining our work in collaboration with the OECD to define new performance indicators in order to shape a new form of capitalism.Finally, I invite each of you — students, alumni, managers, citizens, leaders, politicians, journalists, and influencers — to contribute to the current transition towards a more inclusive, sustainable economy, where economic impact and social impact go together. Given the salience and urgency of today’s challenge, we need a global mobilization, where everyone stands up to become actors with purpose. 

Are you up to the challenge?

Non-Governmental Organisations (NGOs) regularly receive support from commercial firms. For an NGO, this support helps them deliver on their goals, such as providing jobs, increasing wages, improving product quality or regeneration of the environment. But what’s in it for the firms? Olivier Chatain and Elena Plaksenkova set out to uncover how these partnerships form and what determines their success or failure.

NGOs and the Coffee Industry

Chatain begins by talking about the coffee industry: “NGOs aim to enable more farmers to sell their coffee on the international market and to help them apply more environmentally friendly processes. With a better product, farmers become more commercially viable for firms, providing them with another source of product. This makes it a win-win for the NGO, the firm and the supplier.” In these cases, however, the NGO’s aims often come into conflict with those of firms. “In the case of fair trade, the NGO is trying to reduce the bargaining power of the firm, as they take too much value from the suppliers,” Chatain explains. “The idea is to make the process fairer where more profits are shared. This goes against the profit-driven aims of firms.”

NGOs and firms can work together to find a common ground to conduct business so that it benefits all", Olivier Chatain.

Trade-offs for NGOs

“We see that an NGO has to make trade-offs when allying with firms,” Chatain says. “The NGO will work hard to help improve product quality and get the best price for suppliers. However, they often work with firms that have a higher bargaining power. The deal will be less profitable for suppliers, but at least there will be a deal.” He explains that, although tradition dictates that NGOs prefer to work with firms with a lower bargaining power, this too can backfire for NGOs. Such firms are more likely to pull out of deals if they cannot make enough profit, leaving suppliers with nothing. 

Commercial firms: not always winners

“Our model showed that firms are often disappointed with the outcomes of NGO partnerships,” Chatain says. “NGO’s will make just enough effort to get commitment from the firm, and that is it. This means the firm won’t necessarily make much profit. It takes a well-organized NGO and a powerful firm to create a true win-win partnership.” Successful partnerships are brought about when firms join forces with NGOs that offer more. Such partnerships come about as a result of research and negotiation from both sides. This implies that firms are more likely to get what they want from a partnership if they clearly assess the NGO’s capabilities and recognize that they may need to help the NGO grow their capabilities. In this way, the NGO will be able to do more than just offer the bare minimum. Overall, the model showed that the most powerful firms, with highest bargaining power, often match with the most efficient NGOs. This means that high profile NGOs are more likely to work with large powerful firms.

NGOs are important for the future

“This study can help both NGOs and firms be more realistic about what they can expect from their partnerships,” Chatain concludes. “NGOs may, sometimes counterintuitively, have to ally with firms that have higher bargaining power and need to be more aware of the implications when entering such partnerships. They also need to provide economic incentives for both firms and suppliers. Firms should be realistic and understand that a very busy NGO might be overstretched and, while desperate to strike a partnership, may not be able to deliver as much value as the firm expects.” He goes on to add: “To some extent NGOs are starting to take over government functions in some areas of the globe. They are becoming strategic, wielding carrots and sticks in their relationships with for-profit firms. At the same time, NGOs remain independent from government as they strike up complex relationships with suppliers and commercial firms. We need to understand more about how the goals of all players can be better aligned.”

Climate change is not just a concern for tree-hugging environmentalists; it affects the price and availability of raw materials. For example, “a drought in New Zealand will affect a cow's diet in the meadow, which may impact milk quality, thus causing a shortage on the market of high-quality milk, which in turn will have an impact on global pricing,” says Carolin Schmidt, a global buyer of dairy ingredients for Danone. Her ambition when she started at Danone was to join the milk team, because it is at the very core of the business and at the same time faces significant sustainability issues, such as climate change, greenhouse gas emissions, and fair work for farmers. Carolin Schmidt is also a graduate of HEC's MSc in Sustainability and Social Innovation (SASI), and her pragmatic mindset – keen to address sustainability issues, but from the business side – is very typical of the kind of students attracted to the program: strategists and entrepreneurs, with a cause. The ambition of HEC's one-year SASI program is to train future change-makers and leaders to acquire a global vision of sustainable management in order to lead the transformation of corporate strategies and build a resilient economy through innovative models. 

“Entrepreneurs with a cause”

But why offer a degree specifically geared towards sustainability? Jeremy Ghez, the program's academic director, believes that students could potentially have found an interest in classic strategy or entrepreneurship master's, but that such degrees alone would not have been enough. “There is a population dissatisfied with the current consensus and looking to dream more, they're willing to shake the coconut tree,” he says. But he adds that those who will “really make an impact” are the students he calls “realistic idealists”: “When you are a dreamer but do not overlook market forces, you have a strategic edge over your competitors.” And “impact” is indeed the key word here, the one that systematically turns up in interviews with applicants, points out Lise Penillard, SASI's executive director: “They are passionate about having an impact on the environment or on social issues.” Besides that passion, what the directors look out for during the selection process is an ability for complex, critical, independent thinking, as well as the potential to be an empathic leader, who inspires and empowers. “We also look at what they have achieved,” says Lise Penillard, citing the example of a young Indian engineer who cycled 7,500 km across his country on an electric bicycle and interacted with 10,000 people throughout the journey to raise awareness about renewable energy before starting the master's. Some 300 people apply for the course; 54 were selected this year, representing 27 different nationalities from the five continents, and a diversity of backgrounds, from business and engineering to social sciences. 

“Real-life” projects and personal development

Like many of HEC's master's degrees, SASI is taught (almost) exclusively in English. Core courses  include Strategy and Sustainable Development, Sustainable Operations & Supply Chains, Responsible Investing, Sustainable Cities; electives include Geopolitics of Resources, Impact Entrepreneurship, NGO Management... The program fits in well with HEC's Society and Organization (SnO) Center, whose members research and teach about contemporary social and environmental issues.

For example, Rodolphe Durand, the academic director of the SnO Center, teaches the “Have a cause, Make an Impact” course, and some of the SASI students' projects feed research at SnO. The program is also an opportunity for students to work on “real-life” consulting projects for companies or NGOs, or to develop their own start-up. “It was an intense program packed with seminars and project work and you learn to become somehow a specialized generalist for sustainability,” recalls Carolin Schmidt, who says practicing quickly processing a lot of information still serves her every day in her job. A special feature of the program is its emphasis on personal development: “In change-maker seminars, students learn to better know themselves and clarify their goals”, explains Lise Penillard. Every year, they also undertake field trips to developing countries to meet with business leaders and NGOs. “The idea is to challenge in the field what you learn in a French business school,” says the executive director. Previous destinations include Botswana – an African success story – and Cuba, she says was “a paradigm change”, with its closed, state-dominated economy.

Changing business from within

Another way in which the program departs from a perhaps more classic “entrepreneur” perspective is in its “intrapreneurship” track. While business school graduates are often expected to go on to create their own business, the idea here is to go back to big corporations and change things from within. “Do you need to start a revolution to make an impact?” asks Jeremy Ghez. “No, you can also piggyback on the existing and incrementally change things from within.” The intrapreneurship track does include a course called “critics of CSR” [corporate social responsibility], which encourages students to think critically about the potential “dark side of CSR and sustainability strategies”, or social- and green-washing, says Lise Penillard. But she believes that the corporate world is ready to truly embrace sustainability, to anticipate changes rather than be passively subjected to them. “Over the years sustainability has become integrated into corporate strategy and discussed in executive committees,” she says. Some major firms sponsor a number of certificates, for example Danone, Renault and Schneider Electric sponsor the Social Business certificate and Societe Generale and Deloitte the Energy & Finance Certificate. Of course, the close interaction with the corporate world builds bridges that help graduates find jobs: the program has a 93% employment rate within 3 months of graduation, and an average starting salary of €49K.

Corporate social responsibility has enjoyed great success over the past few years, and has led to widespread, active and inventive set of regulatory devices: codes of conduct, ethical standards, whistleblowing policies, control procedures inspired by compliance, provisions for monitoring, evaluating, and obtaining approval from external rating agencies, and more recently, performance indicators and smart mechanisms known as SMARTLaw. For a long time, lawyers dismissed these standards and devices, which they did not consider part of the law. Since they were not passed down from official law-making bodies they were not seen as holding a legal pedigree  and could not therefore be considered as law. However, the tide now seems to be turning. 

CSR standards gradually seen as binding by judges and legislators  

In recent years, several highly-publicized legal cases have been more favorable to CSR standards. One example was the "Kasky v. Nike" case in which California Supreme Court justices, using a California state law provision about honest practices in commercial matters, ruled that Nike could be sued for false advertising because the company had not complied with clauses set forth by its code of conduct. Similarly, European legislation has adopted a more accommodating attitude to CSR, stating  that a company's failure to comply with commitments established by its code of conduct constitutes a misleading commercial practice. Finally, national authorities are no longer reluctant to introduce obligations for publishing non-financial reports or to incorporate CSR in public procurement regulations.  

A complete normative system 

Although there has been a gradual shift towards considering CSR standards in a legal context, it has remained far too fragmented and limited to very specific situations. This phenomenon should be looked at from a global (rather than national) perspective using a pragmatic approach, by considering the effects of regulation (rather than the sources). Seen from this perspective, CSR represents a genuine normative system which can complement, or even take the place of traditional legal standards, since they often play the same functionally equivalent role. The complete normative system established by CSR includes not only standards, but implementation devices and sanctions as well. 

Who sets CSR standards? 

CSR standards are set by a wide range of players from diverse sectors. Corporations are evidently among those who create or promote these CSR tools, but other participants include States (examples include the Apparel Industry Partnership Agreement in the USA or the SCS 9000T in China), regional organizations such as the European Union (the code of conduct for nanotechnologies, for example), international organizations such as the United Nations (with the Global Compact, for example), NGOs (such as the Equator Principle Association or ISO 26000), and industry associations (code of conduct of the International Federation of Toy Industries). These various groups set standards for fields as diverse as environmental protection, internet or nanotechnology regulation, the extractive industry and energy sector, the forestry and textile industries, or even armed conflict. 

How are they implemented?

Mechanisms have also been established to ensure the implementation of these standards. These mechanisms may be developed by public authorities and can take a variety of forms ranging from requirements for obtaining public contracts to substantial reductions of criminal fines if the accused organization can prove that it possesses and effectively implements a code of conduct (US Sentencing Guidelines). These mechanisms can also be implemented by private actors, as is the case for the SA 8000 Standard or the Chevron Operational Excellence Management System, often in the form of an approval, label or certification. Another recent, noteworthy development is the establishment of performance indicators by third parties such as CSRHub or the Corporate Human Rights Benchmark. These indicators, which are based on international CSR standards, make it possible to compare corporate performance in legal areas of great importance such as working conditions, environmental impact, or non-discrimination policies. 

How are they enforced?

Though enforcement mechanisms can be legal (e.g. judicial claim), there is a growing trend toward new processes focusing on transparency and reputation, which include peer reviews, reporting, and ranking systems. Misconduct could, for example, lead to a company's removal from certain lists (SRI, FTSE4Good, etc.), a blaming, shaming and boycotting response, or a multinational group at the head of the network's refusal to subcontract to a company. Moreover, the development of mechanisms known as SMARTLaw is now gradually changing CSR from a self-regulating system of voluntary compliance to a genuine global legal system, with electronic, automatic, dematerialized means of implementation and sanctioning mechanisms. The Kimberly Process - an initiative striving to eliminate "conflict diamonds" from the international market - has thus obtained support from the United Nations, civil society, and other economic players in order to implement a certification system for diamonds using blockchain technology. The goal is to prevent the flaws of the former traceability process, which was deemed ineffective and too dependent on the will of the various parties involved.  

All this confirms that CSR is part of a global trend driven by private and public actors, which strives to lead companies to adopt binding rules and standards in areas such as human rights, anti-corruption, and environmental protection. Therefore, it is of vital importance that managers and directors of national and transnational corporations include legal experts and in-house counsels in the design and implementation of their CSR policies.

1- In the 2005/29/EC Directive of the European Parliament and of the Council dating from May 11 2005 concerning unfair business-to-consumer commercial practices in the internal market.

“The scientists are adamant: we only have a 5% chance of reaching our goal of limiting global temperature increase to 1.5°C before 2100!” There is no denying the sense of urgency in the message Rob Hopkins, repeated again and again during his 12 hours of exchange with HEC students, staff members and guests from civil society and local government. The writer based his assertions on a chilling July report published by Nature Climate Change. The article’s five authors develop a joint Bayesian hierarchical model for GDP and carbon intensity, and conclude that trends in gas emissions, population growth and the economy mean there is a 99% likelihood the planet will go over the 2% threshold established in the COP21 Paris climate agreement. “Given this prognosis, we cannot wait around for business policies, measuring systems and political decisions to be implemented before acting ourselves,” insisted the founder of the Transition Network on his return to Jouy-en-Josas. “Time is running out.

”Over the course of an unusually warm autumnal day on October 19, this message was echoed by Julien Dossier, who has been teaching the Sustainable Cities course at HEC since 2010. The founder of Quattrolibbri insisted the hands-on involvement on October 19 indicated a “massive scale-up” from last year’s S&O conference. That 2016 Finance For Good Conference had explored the role of the financial sector in the current energy transition and the challenges of aligning financial incentives with inclusive growth. “This year, you could feel a heightened sense of concern about practical alliances, which were echoed by summits and debates elsewhere,” explained Dossier. “It underlines how attempts at building alliances is the most urgent issue we have to work on today. You know, our timetable is getting tighter and tighter.” 

HEC Paris, a School for Transition

Indeed, a few days later, leaders of some of the world’s largest cities met in Paris in a C40 Together4Climate summit to discuss ways to rebuild healthier metropolises worldwide, starting with the air. “We represent 650 million citizens,” had declared the network’s president and Paris Mayor Anne Hidalgo. “We need to forge alliances,” she pursued, echoing the title of the HEC conference, as the Mayor reached out to the private sector and civil society.

“Paris has launched a carbon-neutrality policy. That’s not to be under-estimated as an initiative!” exclaimed Dossier, who is involved in a drive for Paris to enjoy carbon neutrality by 2050. “The magnitude of change required is prodigious. But Paris needs help. As a community of researchers, students, professors and alumni, HEC Paris could become a school of management of this transition, a beacon and reference for the rest of the world.”

Can Les Mureaux Inspire the Rest of France?

The S&O conference centered on local communities and their quest to mobilize all actors for to a zero carbon-imprint, sustainable and resilient habitat. Much of the day was devoted to practical roadmaps for small communities like Les Mureaux and Jouy-en-Josas, or smart cities like Fort d’Issy, and larger conurbations such as Versailles and Luxembourg. “What’s going on in Les Mureaux is simply brilliant,” said Rob Hopkins, fresh from an evening of debate, exchange and music in the Paris suburb. “In the past, this community had a sense that France had turned its back on it [[Ed., after rioting in the 2000s and the scaling down of a local Renault factory from 30,000 to 3,000 employees]. And now they’re transforming the place into a tourist destination, tapping into the cosmopolitan nature of the population! Locals aim to make it a culinary center, create France’s best urban farming project; invent the coolest local currency; and offer the best music around. If it works, Les Mureaux’ ecosystem can become a model to inspire the rest of France.”

An actor of Les Mureaux’ development is Jean de Wailly (H96). The Global account executive at Sodexo Benefits and Rewards Services has spent the past year working with local associations and leaders to build a territorial pole for economic cooperation (PTCE). “There are over 100 nationalities represented in this community of 30,000 people. Their diversity used to be labeled “difficult”. Then it became “a challenge”. But nowadays, it’s “an opportunity” and we aim to capitalize on it, using the rich network of local associations and supportive local business outlets. Sodexo, in association with S&O’s Action Tank, is backing the PTCE because it federates a lot of creative energies into one geographical location.”

Earlier in the day, Jean de Wailly participated in an informal workshop involving HEC researchers, Les Mureaux activists and Rob Hopkins. Together, they explored the benefits and challenges of further federating the population by establishing its own local currency. “Why should it matter?” asked HEC Assistant Professor Eric Mengus rhetorically. For the past year, Mengus has been working on this question as part of HEC’s Movement for Social Business Impact. “Because,” he answered, “it impacts on local issues like amenities, health and education. Local currencies could be a potential tool to alleviate local public good accumulation problems in poorer neighborhoods. But it is important to clarify the conditions of their implementation and the channels through which they lead to real effects on local economic and social outcomes.”

Historically, currency has been at the heart of the burgeoning migrant community in Les Mureaux. Much of the revenue returns to the community’s workers’ homeland, principally in West and North Africa. For the past year, Senegalese student Abdoulaye Bocar Lom has combined his Master’s studies at University Paris VII with fieldwork in the community and volunteering for the PTCE. “I’m inspired by what’s going on at Les Mureaux,” he confides, “and I hope to replicate much of what I see in my hometown of Thilogne, in northeast Senegal.” The international dimension of Les Mureaux gives further resonance to its experimentation on sustainable development, a further motivating factor for both HEC and Sodexo.

“Fulfilling” Roadmaps to the Cities of the Future

The S&O conference also featured the lively involvement of HEC students in debates on smart cities like Fort d’Issy and Luxembourg, as well as a workshop to design roadmaps for 2°C cities. In the latter, SASI student Sommia acknowledged the diversity of factors involved in creating sustainable communities: “I thought it only boiled down to urban planning,” the Canadian from Calgary said, “but I can see there are important components that inter-act.” He pointed to the elaborate network diagram designed by Julien Dossier, called “the post carbon fresco”. “That’s a great tool to guide your trail of thoughts, giving both the areas to focus, for example energy, and the wider picture. I contributed a few ideas including volunteer gardening services to bring HEC students and Jouy residents together. It gives us an opportunity to work with our hands and is also a humbling experience.

” Another student insisted on the “laboratory” for participative democracy that Les Mureaux is becoming. “The entire population is taking public decisions on all the key issues factoring into their daily lives,” he said. Such day-to-day democracy, he added, is essential in guaranteeing the development of such a culturally diverse community.

“What impresses me most at this workshop is the richness of the visions shared by this younger generation,” said Nathalie d’Estienne d’Orves-Cossé, director of major infrastructure projects in the Versailles municipality. She contemplated the vast network diagrams covered in Post-it suggestions from the participants, “They have a very different appreciation of the hierarchy when building the city of tomorrow.” 

For the deputy Mayor of neighboring Jouy-en-Josas, François Brégout, meanwhile, it is vital to gradually draw his fellow-citizens into new alliances for sustainable development, capitalizing on a step-by-step approach. “It’s not been easy. Sure, they are attracted to projects for better nutrition, for example. But they are not aware that there are also questions of ethics, transport, education and good governance, behind what they eat. With HEC-Jouy proposals around permaculture, for example, we can unite our visions and energy around far more ambitious joint projects.

HEC Paris is playing a very active and supportive role by using its connections to bring all the actors together.

"No Longer Drumming Alone in the Desert"

“I’m encouraged by what I’ve seen grow here,” underlined Rob Hopkins. “HEC Paris is playing a very active and supportive role by using its connections to bring all the actors together. The S&O’s approach is two-fold: it encourages a bottom-up community paradigm, focusing students’ attention on off-campus activities and real-life projects, in Les Mureaux for example. At the same time, it harnesses companies like Sodexo, and local dignitaries to support these projects.”

This enthusiasm was shared by LREM Deputy and former HEC student Amélie de Montchalin. She shared her father’s experiences as a local farmer: her family happens to be the owners of a neighboring Saclay plateau farm which came to terms with the arrival of the business school and its sprawling campus in the early sixties. During the keynote exchange closing the daylong conference, the politician issued a clarion call to students, urging them to learn to love complexity and feel safe to innovate.

For Julien Dossier, the day brought a positive energy he hopes will grow. “It’s been very uplifting for people like us who have spent years on this work. I no longer feel like I’m drumming alone in a desert, there’s a collective effort and consciousness which is growing.

“But,” he cautioned, “HEC must look beyond the students from SASI, specialized Master’s classes or the S&O, all actively engaged in this field. In this transition we also need experts in law, marketing, finance, human resources, and so on. They are all present at this school. My message to them is: ‘Let’s all work together, join forces with our alumni network, to leave the business-as-usual mode.’ This transition needs a proper management story! It’s about time we heeded the emergency and roll up our sleeves to design, implement and scale up climate compatible solutions.”

The Movement prolongs and reinforces what was initiated by the Social Business/Enterprise and Poverty Chair. This was founded by Danone, Schneider Electric and Renault back in 2009 and is currently presided by Professor Yunus and Martin Hirsch, former French High Commissioner for Active Solidarity against Poverty. Last year, three new firms joined the Movement: Sodexo, Veolia and Total. “The Chair has been teaching how business can alleviate poverty,” Danone CEO Emmanuel Faber told the packed audience at the November 2016 launch. “This new Movement gives new impetus for academics to rethink their theories for practitioners to find evidence of the impact of their actions. It allows teachers to spread the right questions. Together with researchers, they are re-writing all source codes of the economy. Its purpose? To answer one central question: profit or social justice?”

The Movement is driven by three levers, THINK (S&O’s research), TEACH (HEC’s pedagogy) and ACT (the Action Tank). 

Think: contributing to a “European way of thinking” 

The “Think” pillar the MS*BI is built on centers on the academic investigations led by HEC’s SnO Center. “Our research involves rethinking the horizons and roles of organizations,” explains SnO founder and Academic Director Rodolphe Durand. “New inclusive business models place the person at the center of their strategy and contribute to the creation of new entrepreneurial activities.”

“New inclusive business models place the person at the center of their strategy and contribute to the creation of new entrepreneurial activities", Rodolphe Durand.
 

From its inception, the Executive Director of SnO, Benedicte Faivre-Tavignot, has been overseeing the Movement’s development, as it aims to contribute to a “European way of thinking” on the role of business in society. The MB*SI is involving some of France’s leading industrialists in a new vision where economic, political and social logics merge. “Now it is a time to scale up these projects,” continues Faivre-Tavignot. “Our research tries to answer one central question: can firms with pro-active Corporate Social Responsibility (CSR) / Social Innovation programs improve their economic performance in the long-term, making them more competitive? We are encouraging our researchers to seek out the positive impact of combining the two. We also analyze the subsequent qualitative improvements on social and environmental sectors of society.”

Teach: training a new generation of leaders

Already, there are encouraging signs that the five research projects SnO has launched are bearing fruit. And they are being complimented by a growing engagement by the HEC student body, an integral part of the Movement’s objectives under the “Teach” umbrella. “Our objective here is to train a new generation of managers and leaders,” underlines Faivre-Tavignot, “making them more aware of today’s challenges, driving them to become game-changers. To achieve this, we try to integrate a societal perspective in core courses and programs and we develop innovative teaching methods such as experiential learning.”

Act: experimenting new business models

Jacques Berger’s Action Tank experiments with new social business models allying the public and private sectors with civil society actors. “Our activities are threefold,” explained the Tank’s director, “we design programs with social impact, we help companies to identify the social parts of their programs and we encourage these firms to work collectively.” Since its inception in 2010, the Action Tank is built on two central principles: global access to essential goods and services; and the universal right to jobs or economic initiatives. In the context of the MS*BI, this non-profit association is starting the internationalization of its activities, in order to spread its “experimentations” in seven fields of action including mobility, health, housing, baby food, into arenas on the African continent. It also helps countries like India, Brazil and Germany to create their own action tank.

New inclusive business models place the person at the center of their strategy and contribute to the creation of new entrepreneurial activities.”, Bénédicte Faivre-Tavignot.

Breaking the silos

One of the six company backers of MS*BI, Schneider Electric, has gained widespread credibility for its willingness to promote Corporate Social Responsibility. But does CSR disclosures influence the probability of inclusion in a major sustainability stock index? This is at the heart of the research project conducted for the Movement by HEC Associate Professor Luc Paugam. “Like all major firms, Schneider does its utmost to portray itself as CSR credible to its stakeholders,” explains Paugam. “One way of gaining credibility is to be recognized by external rating agencies.  I have been studying a major rating organization, the Dow Jones Sustainability Index, DJSI, to see if the firm, by using disclosure practices can influence the likelihood of being recognized as this leader in CSR.” 

But, beyond his results, he is enjoying rarified exchanges with colleagues in departments that rarely cross paths. “The researchers in the Movement have monthly meetings to share results, and the cross-disciplinary approach is one of the more exciting aspects of this project,” Paugam underlines. “It’s been refreshing to break out of our respective silos in this important movement.”

These transgressions are very much one of MS*BI’s aims. “Researchers must reach out to each other and open up to international networks.” emphasizes Bénédicte Faivre-Tavignot. “HEC’s role is to create links between the major business actors, local activists, researchers and academics who can transmit the Movement’s philosophy to the up-and-coming generations of entrepreneurs. This, we hope will transform the mindset amongst entrepreneurs and managers and impact the business community.”

The next major stop for the Movement is at the Global Social Business Summit in November in Paris. That is followed in March 2018 with a meeting between all the six major corporate players and the Movement’s donors aimed at sharing their findings.

Organizations face increasing pressures related to their social practices and environmental policies. But what makes some firms respond appropriately to these pressures and others less so?

There is benefit in action, and sometimes, in inaction

Putting themselves in decision makers shoes, Rudolphe Durand and his co-authors identified two main factors that influence how an organization will respond to issues:

Factor 1 - Benefit perceived in tackling the issue

Factor 2 - Consequences of ignoring the issue and failing to act 

Both factors vary with the importance, or salience, of an issue. 

Let’s take two firms: A and B. Firm A doesn’t consider the environmental ‘clean-up’ of a production process as salient: it’s seen as a misuse of resources, with no costs associated with inaction. On the other hand, Firm B’s directors see issue saliency and a net benefit in the clean-up. Firms A and B thus respond differently to the same issue. In terms of degrees of When the cost of engaging resources becomes excessive. Durand notes, however, that when it comes to degrees of salience, there is a point at which the cost of engaging resources becomes too excessive for any firm to act, and thus they do so either symbolically or not at all. 

We wanted to understand what makes some firms respond appropriately to these normative pressures and others less so.

Conform or comply

Durand and co-authors modelled a virtual space corresponding to how organizations respond depending on issue salience. By positioning a firm somewhere in the space, you can predict how likely that firm will be to respond to a demand based on how its decision makers weigh up issue salience with the costs and benefits of action. In some cases, the “net benefit of action” leads to substantial conformity and a firm actively sets a trend, engaging resources to protect the environment or improve social and economic aspects. For example, in 2013, Starbucks CEO Howard Schultz, publicly supported same-sex marriage before it was legalized in the US in 2016. Here, Starbucks embraced diversity, reinforcing the company’s open and liberal brand.

In cases where action is not seen to be beneficial, a firm may still engage resources to substantively comply with existing norms and laws. For example, climate change is associated with an increase in the frequency and intensity of natural disasters and insurance firms take this into account when calculating risks. However, many firms will simply comply with regulations and won’t go beyond the basic requirements to incorporate climate change risk, because, in this case, costs mount quickly.

The tightrope of inaction

If the costs of engaging resources outweigh the benefits, a firm may symbolically comply or fail to comply. In 2016, Apple refused to cooperate with the US government and did not unlock the iPhone of a shooter involved in the San Bernardino attack. Here, inaction represented a social gain for Apple at a relatively low cost - if the code-cracking system had ended up in the wrong hands it could have put Apple’s customers at risk.

However, Durand notes that inaction can also be detrimental to business. “It took time for Google to take action against its employees who declared that male programmers are superior to female programmers,” he says. “Consumers objected and responded by shaming the company. Before the scandal, Google was inactive, ignoring its social responsibility towards gender diversity without seeing any ill effects. But the incident heightened consumer awareness, increasing its salience for Google decision makers”. 

 “Our model can be used to compare firms or to look at departments within a firm. When comparing the action of two firms, issue salience may differ and, depending on their respective resources, action may be taken. This is also applicable to divisions of a firm, and so we see different policies adopted within a single organization,” says Durand, before concluding: “Overall, the model helps us to realize that firms are not good or bad per se. There are reasons for inaction or symbolic action based on how salient the issue is perceived to be and the estimated gain in solving it.”

All studies show that employment, through existing organizations and entrepreneurship, is crucial for fighting poverty and improving well-being. Having noted this, often economists offer no further recommendations. I believe that as management scholars, we can go further in the questions that we raise, such as: what kind of capitalism should we shape for tomorrow? What kind of organizations do we want to build? For which kind of well-being? The concrete answers to these questions lie partly in the management and governance practices that firms implement – what I term "orgology"¹, or the science of organizations and management  - as well as in national and international public policies. 

Bringing all-encompassing dimensions into business

To shift towards a form of capitalism more conducive to human well-being, i.e. a “well-being capitalism”, companies must first of all better take into account the requirements and expectations of their stakeholders. The latter of course include employees and customers, but also suppliers, the natural environment and civil society. The first step in thinking and shaping the collective well-being of the persons impacted by a company's activity is to integrate into the corporate project more all-encompassing dimensions than those typical of financial capitalism.

In this context, management is no longer a technique geared toward financial optimization; it is a driver that enables the inclusion of sometimes conflicting but often compatible interests. The corporate world cannot become open to more inclusive goals, however, unless its measures of the social and environmental impacts of its activities improve. Indeed, traditional measures of economic and financial profitability are no longer sufficient to measure the impacts of business activities. They need to be broadened to include impacts on specific stakeholders, spanning ecological and social dimensions.

The objective is that stakeholders – and investors in particular – should be able to understand companies' more all-encompassing projects and measure whether acts are in line with the missions stated, the positive externalities generated, and their interests. 

A strong need for indicators of social impacts

Calculating social impact remains in its infancy. Ironically, it is the abundance of criteria and specific methods that is slowing down advances in evaluating the impacts of corporate strategy and actions. In the absence of consistent comparison tools, it is impossible to distinguish companies committed to social goals who accomplish a lot but communicate little from public relations professionals who accomplish little but communicate a lot. What is therefore at stake is the standardization of social impact indicators. It is a crucial step to take by economic actors, be they profit or nonprofit organizations. Also, to ensure that the business sector and policy-makers pursue consistent goals, it is important to harmonize and align their respective metrics and benchmarking systems. 

At HEC Paris's S&O (Society and Organizations) Center, we follow a pragmatic approach to change ways of measuring positive impact in business. We have been working to help some of France's leading multinationals to better evaluate their impact. These are difficult but exciting challenges. This is a time for convergence. Hard data research, exemplary practices coming from firms, and  advanced education programs offered by business schools will allow us to create a common framework to assess well-being. We are hopeful we can build a new narrative for a more responsible capitalism that is evidence-based.

A new vision for a turning-point in capitalism

If we want practices that improve the lives of employees, customers, and citizens to become more widespread and be even more beneficial to society at large, we must think beyond the simple measure of social and environmental impacts. We must ensure that the positive returns generated for human communities translate into economic value, so that companies receive a pay-back too. Their reward cannot be merely symbolic, for instance with rankings that improve their reputation as employers or suppliers: it must bring advantages that can be directly monetized. What remains to be done is to identify such advantages and set them up. They could take the form of facilitated access to credit, lower costs to issue securities, or favorable insurance systems in which advantages are proportionate to the well-being generated by the company and its contribution to the reduction of long-term systemic risks. 

At the S&O Center, we engage in the study of such processes and mechanisms, which form the basis for a new vision for more responsible capitalism. For instance, the “Measuring business impacts on people's well-being” workshops held with the OECD are part of this joint effort to harness public policy to a renewed vision of the impact companies have on our shared heritage, on our Earth, and on human-driven businesses. We hope that capitalism will become more inclusive and responsible, so that historians may perhaps look back on the last years of this decade as a turning-point in the shift towards a new political and economic era. 

The next steps

The OECD Statistics Directorate, together with HEC Paris/S&O Center, has issued a call for papers to develop and support research on “Measuring the Impact of Business on Well-being.” The call for papers focuses on several themes, including: showcasing good examples of existing frameworks; proliferation of common indicators; the use of national official statistics to assess business impact on well-being; and the effects of measurement of on business performance and consumer and investor behavior. Selected papers will be presented at the 6th “OECD World Forum on Statistics, Knowledge and Policy,” which will take place in Korea in November 2018.

¹ Organizations, Strategy and Society : The Orgology of Disoranized Worlds, Routledge, New York, 2015