The Evolution of Sustainability and Organizational Management

The Evolution of Sustainability and Organizational Management

I worked in and around the Federal Environmental Protection Agency from 1977 through the 1980s and was able to practice my two main intellectual interests: 1. Environmental Policy and 2. Organizational Management. These are two of the areas I focused on during my graduate studies. For a long time, I thought of them as relatively separate areas. In 1988, I wrote a management book called The effective public manager and later I wrote a book on environmental regulation called Understanding environmental policy. But then I started to think about how issues such as energy efficiency, waste management, environmental responsibility and risk became major concerns for managers of organizations and major elements of the structure costs of private, public and not-for-profit organizations. It seemed that my two areas of interest were merged. Organizational management was changing in response to our more populated, polluted and developed planet.

The changing nature of organizations and management has led us to build a new Master in Management program that we have called Sustainability Management. With colleagues at the Earth Institute, I developed this program in 2008 and 2009 and in partnership with the School of Continuing Education (now the School of Professional Studies), we launched Columbia’s MS in Sustainability Management in 2010. The curriculum of the program required management, finance, financial management, economics, statistics and the regulatory environment of organizations – in my opinion, key elements for any management degree. But it also needed three courses on the “physical dimensions of sustainability”: the use of energy, materials, the built environment, waste management and an organization’s environmental impact. At this moment, sustainability focused on these physical problems – a new element of management education. In the book sustainability managementthat I wrote at that time, sustainability was about how environmental issues must now be factored into routine organizational management.

In the thirteen years since we welcomed our first sustainability management students to Columbia, the field has changed. The course I am teaching this semester to 95 students has evolved. Now I teach one of the three sections of this course, to many more students than we taught in 2010, but the curriculum itself has changed with the field. What I used to call “sustainability management” I now call “environmental sustainability” – a subdomain sustainability management. We now see the field as equally concerned with organizational sustainability and community sustainability. These additional and broader concerns require that we focus on diversity, equity, inclusion and access, as well as organizational transparency and governance, and finally, the impact of the organization on its host community and society.

Well-managed organizations at 21st century require sustainable management. In America, more than 80% of our GDP is in the service economy, and when we manufacture food, clothing, shelter, and any other good in America, much of that manufacturing requires automation and d other forms of advanced technology. Modern agriculture uses satellite data, automation and artificial intelligence to optimize the use of water, fertilizers and pesticides. Advanced engineering, logistics, targeted marketing and new communication channels require constant organizational learning and the continuous development and modification of organizational routines and practices. We live in a brain-based economy. Organizations must compete for the best minds if they want to succeed in the competitive marketplace.

If the organization’s culture is sexist, racist, xenophobic, homophobic, or biased in any way other than appropriate for the job, it artificially limits the universe of talent it can recruit. In my opinion, this is an inadequate form of management. If its board meets in secret and does not disclose who makes decisions and why they were made, then its governance risks making myopic and poorly audited decisions, which is also an indication of inadequate management. If the organization does not consider its impact on the local community, its ability to expand may be compromised, as Amazon discovered when it unsuccessfully tried to locate its second headquarters in Long Island City. This lack of political sensitivity is also a sign of inadequate management. And finally, if an organization does not understand and seek to reduce its impact on the planet, it may find itself regulated and headed for crisis, bankruptcy or non-existence.

What we called sustainability management in 2010 is just one piece of the more complex field of management in 2022. Although I have never taught in a business school, I teach in the management program from a school of public policy, and I wonder how any type of organizational management can be taught today without paying particular attention to sustainability management. The Securities and Exchange Commission points this out with its proposed climate disclosure rules. According to the Deloitte website:

“On March 21, 2022, the SEC issued a proposed rule that would improve and standardize the climate-related information provided by public companies. As SEC Chairman Gary Gensler noted in his statement about the proposed rule, “Today, investors representing literally tens of trillions of dollars are supporting climate-related disclosures because they recognize that climate-related risks can pose significant financial risks to businesses, and investors need reliable information on climate risks to make informed investment decisions”. Under the proposed rule, a registrant would be required to provide GHG emissions disclosures (with certification for scope 1 and scope 2 disclosures), certain financial statement disclosures, and qualitative and on governance in its registration statements and annual reports (for example, Form 10-K).”

While the specific proposal will be amended in response to thousands of comments, and Congressional ideologues will challenge the SEC in the media and others will challenge the rules in court, the driving force behind the rules is investors, and it is therefore likely that the rule will survive. Brian Croce, writing on the industry website Pensions and investments observed that:

“The SEC disclosed the watershed proposal, which has broad support from institutional investors and asset managers, in March…Some business stakeholders and Republicans in Washington said the proposal exceeded the authority of the SEC…In the Overall, asset managers backed the proposal in comment letters, but many suggested changes in a final rule. The largest fund manager, BlackRock Inc.with $8.48 trillion in assets under management, said in his comment letter that he supports the SEC’s goal of having public companies provide investors with “more comparable and consistent climate-related information,” but also expressed concerns about parts of the proposal, including the statement scope 3 emissions.

At a minimum, the new SEC rule will help ensure environmental sustainability with a role similar to that played by accounting and financial management in management education. CEOs must be able to read and understand a financial statement. Soon they will also have to include an environmental impact statement. The challenge in management education is that carbon disclosure requires faculty and students to understand the measurement of greenhouse gases. Understanding environmental impacts will require an even greater understanding of the science of ecology and the environment. If all competent management becomes sustainability management, management education that omits environmental concerns and other sustainability issues will be inadequate. The evolving field of sustainability metrics in the 2020s will resemble the development of generally accepted accounting practices beginning in the 1930s and continuing to the present day. Sustainability presents a challenge for management education that resembles the sustainability challenges faced by modern practicing managers.

As labor law evolves and environmental disclosure also becomes part of the regulatory environment, the demands on management increase. Modern managers must navigate highly regulated and complex organizational terrain. Imagine the wrongful termination lawsuits a manager would have to face if they adhered to Donald Trump’s management practices in The Apprentice. The apprentice victim of “you’re fired” in one episode, will be accompanied by his labor lawyer in the next episode. Environmental, social and governance issues are now part of organizational management. The domain of management must fully absorb and integrate the domain of sustainability management.

Aubrey L. Morgan