The GSB and Sustainability: April 26, 2021

This letter from the dean was published in Stanford Business magazine in April 2021.

Sustainability and climate change are becoming topics that no business leader can ignore. With the potential for significant policy shifts, the rise of ESG investing, employee and public activism, and accelerated innovation, sustainability is becoming a core business issue.

At the GSB, sustainability is entering into many areas of management that we teach and study: from accounting to finance to operations to marketing. We recognize that the students we are educating today will grapple with both the immediate challenges of climate change and the long-term challenges of ensuring a sustainable planet.

The 2016 Paris Agreement aims to limit global warming to 1.5 degrees Celsius relative to pre-industrial levels. To do this, the world will need to achieve net-zero greenhouse gas emissions by around 2050.

Economics Nobel Laureate William Nordhaus describes reaching this goal as a “global public good.” As such, it is classically a problem for governments to address by establishing policies, such as carbon pricing, that give the private sector an incentive to limit emissions and invest in sustainable technologies. These policies have been politically contentious.

In the absence of government action, stakeholders — including consumers, employees, and activists — are pushing businesses to act unilaterally. Asset managers like BlackRock are directing portfolio companies to focus on climate change. The shift in investor sentiment also is reflected in the stunning rise of environmental, social, and governance (ESG) investing.

Whether in response to these pressures or in anticipation of a changing economic and political environment — or both — many companies are pledging to move to net-zero emissions. Airlines, consumer product companies, and tech companies have pledged to reach net-zero carbon emissions in the next 10 to 30 years. Even traditional energy companies are moving. Last year, Bernard Looney, MS ’95, began his tenure as CEO of BP with a net-zero commitment.

In many cases, the path to implementation on these commitments is unclear. At a minimum, many gaps need to be filled to reach a low-carbon economy. We need innovations in energy, improvements in measurement, new financial instruments, changes in regulation, and substantial changes in business practices and operations. Stanford GSB has an important role to play in helping the world move in this direction.

Many of our faculty have long-standing commitments in their research and teaching. Erica Plambeck has worked extensively on sustainable supply chains and environmental innovation and responsibility. Stefan Reichelstein is a leading expert on measuring the cost-effectiveness of renewable energy, and more broadly on energy transition; he and lecturer Donald Wood teach the GSB elective Clean Energy Opportunities. Multiple GSB faculty are affiliated with the Stanford Woods Institute for the Environment, and an increasing number of faculty are working on sustainability-related topics and thinking about future teaching opportunities.

We recognize that the students we are educating today will grapple with both the immediate challenges of climate change and the long-term challenges of ensuring a sustainable planet.

Student interest is also on the rise. The E-IPER Joint Master of Science degree in Environment and Resources is one of the GSB’s most popular joint degrees, attracting more than 60 of our current MBA students. This year, students held the third annual GSB Climate Summit, with nearly 700 participants. And the Stanford GSB Impact Fund has a student team sourcing environment and energy investments.

As we build the GSB’s strength in sustainability, we are looking to collaborate across the university. Stanford has announced plans to create a new school focused on sustainability and climate, and we believe this will create new opportunities to work together on teaching, research, and programs. The GSB’s participation will be important in enabling Stanford to bring together the technical, scientific, business, and policy issues involved in sustainability.

We are inspired by the many GSB alumni who are working on sustainability and climate change, including those profiled in this edition of the magazine. We look forward to engaging you in our growing efforts, and in those of the university.