Is there a carbon tax on top talent?

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Sustainability is a major selling point for new recruits. 

This article first appeared on the Yale Global Network for Advanced Management.

In previous decades, there was a belief that capitalism and environmental sustainability were mutually exclusive. But green business enterprises are booming globally.

Recent research from Yale University, the Global Network for Advanced Management and the World Business Council for Sustainable Development (WBCSD) shows that a new generation of talent is insisting on a more environmentally conscious approach to business.

The Yale study,(link is external) presented Dec. 8 to world leaders at COP21, surveyed more than 3,700 students at 29 top business schools across the world, and has revealed a consensus that business needs to adapt not only because the planet needs a more green approach to business, but also because future leaders want to work for more environmentally friendly enterprises. So much so that the issue could become the new frontier for talent attraction and retention.

Eighty-four percent of students surveyed said they would choose to work for a company with good environmental practices, while 44 percent would accept a lower salary in order to work for such a company. Nearly a fifth said they would not accept a job at a company with poor environmental practices no matter what the salary was.

Most important, nearly 80 percent of respondents said businesses should be leading efforts to address global warming. Not just contributing, leading.

Problematically, however, some 79 percent said that regardless of their strong feelings on the matter, they felt they were "only moderately to not at all" knowledgeable on how to make businesses more environmentally sustainable.

This speaks to a key gap in business education — and imagination. If we are to attend to sustainability and produce a new generation of business leaders who address these needs, environmental sustainability should be a critical area of focus of business schools and a large part of this is giving students the aspiration to dream big.

Innovation — both in terms of new technology but also in terms of finding better ways to use existing technology to deliver goods and services sustainably where they are needed most — will play a key role in digging humanity out of its current crisis so it stands to reason that we need to be grooming innovative leaders for the future.

Plenty of business schools are leading the way in this regard. Just a short cab ride away from where world leaders were negotiating in Paris is HEC — a business school that has "sustainability and society" as one of three pillars of its leadership training programs.

Closer to my home, Lagos Business School runs the First Bank Sustainability Center that seeks to empower individuals and business to implement sustainable solutions to Africa's needs for reliable energy, a resilient environment, as well as robust human and economic development, while the Univeristy of Cape Town Graduate School of Business opened the Bertha Center for Social Innovation and Entrepreneurship in 2011 with an explicit mandate to channel innovation in the service of social and environmental challenges.

Business too has a role to play by creating the conditions where bright young graduates eager to change the world for the better can innovate and help create the changes the world so badly needs.

There is no doubt that business is moving faster on this issue than ever before. Green enterprises are booming globally. According to Steven Cohen of Columbia University’s Earth Institute, the global market volume for "environmental technologies" will reach a projected $2,740 billion by 2020.

The latest McKinsey report on sustainability(link is external) reports that since 2010, there has been a definite rise in the perceived need for sustainable environmental practices amongst respondents in industries such as energy, transportation and extractive industries, most likely because their long-term survival would depend on it. 

Significantly, the share of respondents saying their companies’ top reasons for addressing sustainability include improving operational efficiency and lowering costs jumped 14 percentage points since last year, to 33 percent.

This concern for costs replaces corporate reputation as the most frequently chosen reason; at 32 percent, reputation is the second most cited reason, followed by alignment with the company’s business goals, mission, or values (31 percent) and new growth opportunities (27 percent), which climbed 10 percentage points since last year.

To this, the Yale study suggests, business should add the ability to recruit top talent as among their top reasons for acting on sustainability. The war for talent is heating up around the world, and if some of the best and the brightest emerging business leaders are expressing a desire for more ethical and sustainable employment opportunities, then employers who want to win that war surely would benefit by providing a home for them.

Environmental sustainability is a moral imperative, but it is also becoming a business imperative. A recent longitudinal study(link is external) from Harvard and London Business School, which compared 90 American companies that took sustainability seriously with 90 that did not, showed that over 18 years, the 90 committed to sustainability delivered annual financial returns 4.8 percent higher than those that did not.

A focus on sustainability worked for these companies in the longer term, in part because they were able to attract better human capital, establish more reliable supply chains and avoid conflicts and costly controversies with nearby communities — an issue that is particularly pertinent in emerging markets. This in turn allowed them to engage in more product and process innovations in order to be competitive.

The lesson is clear: If corporates are to be successful in the long-term, they need to create a business environment that is attractive to the top recruits in their field. Stuart DeCew, program director at the Yale Center for Business and the Environment, in a recent Financial Times article(link is external) put it well when he said that there is a new carbon tax on talent and business needs to take heed.