Right now, ESG — environmental, social, and governance training — is the biggest thing in graduate business education, which makes it one of the biggest things in the corporate world. But not everyone is on board with wedding financial returns and social good.
In the United States, right-wing backlash against ESG (and its cousins sustainability and corporate social responsibility) has been growing for well over a year. Through 2022 and into the new year, 17 states with Republican legislatures have introduced dozens of bills that punish companies that adopt ESG-friendly policies. Increasingly, high-profile conservatives in the U.S. — such as likely presidential candidate Ron DeSantis, governor of Florida — are using ESG as a cudgel to bash their political rivals, lumping it in with all things “woke.”
That hasn’t stopped one of the world’s top consulting firms from embracing ESG. In fact, Bain & Company is doubling down on it, expanding an initiative to provide ESG training to its consultants by partnering with top business schools around the globe. Among the 12 world-class B-schools that are working with Bain’s Further Academy is MIT Sloan School of Management in Boston, HEC Paris, ESMT Berlin, SDA Bocconi in Italy, and IE Business School in Spain.
SLOAN DEAN: ESG ‘WILL HELP CURRENT & FUTURE LEADERS’
Further is designed to rapidly train Bain’s consultants in ESG principles with the help of top schools. Calling it “The largest move of its kind within the consulting sector,” Bain’s goal with Further is to give every consultant in its 65 offices in 40 countries access to 40 hours of training, delivered primarily in live sessions with some hybrid elements, with the partner B-schools developing regionally tailored curricula.
That’s 15,000 consultants, about 20% of whom had completed the training by early December 2022. By 2023, the firm wants the number to be 100%.
“MIT Sloan is engaging faculty from across MIT in this unique collaboration to develop Bain and Company’s ESG capabilities broadly,” says MIT Sloan Dean David Schmittlein, whose school began working with Bain’s Further Academy in January. “Leveraging MIT’s breadth of relevant expertise and track record of partnering on innovative learning programs with the world’s greatest companies, we will help current and future leaders across Bain strengthen their ability to work with their clients to implement strategies that maximize ESG performance systematically and sustainably.”
Modules in Bain’s Further Academy include climate change, the energy transition, sustainable development, business transformation, circularity and value chains, sustainable and equitable food systems, social justice, and diversity, equity and inclusion. The upskilling for individual consultants, the firm says, can be accomplished in a matter of months.
U.S. CONSERVATIVES: ESG A ‘FALSE PROMISE’
In Bain’s description, made in an announcement late last year, it is putting “climate science, sustainability, and the wider ESG agenda at the heart of its consulting offer.” And that’s where U.S. conservatives take issue.
According to the Rubin Report, which styles itself “the authority on politically conservative investing,” ESG is a “false promise” that “hurts local businesses, doesn’t give good returns, isn’t transparent, and undermines democracy.” Republicans introducing anti-ESG bills in state legislatures — some 44 had been introduced through the start of 2023, with more surely on the way — say that CEOs are being forced by ESG considerations to make decisions that go against what they think is best. According to Rubin, conservatives “say the label started because blue-zone states like California and New York followed ESG guidelines when investing most of their pension funds” — and “maybe it’s time for red-zone states to fight back, say Republicans.”
The backlash may be having an impact. Investment consulting firm Callan reported late last year that in its annual survey on ESG incorporation, it found the first decline in adoption of ESG principles since 2019.
‘HUMANITY IS LOOKING AT CHALLENGES’
Unmoved by politics, Bain is forging ahead. The firm, which has been carbon neutral since 2011 and committed since April 2022 to science-based emissions reduction targets, is already actively developing the next phase of its ESG upskilling drive to ensure continuing training across teams and regions. That, says Francois Faelli, global managing partner of Bain’s ESG efforts, includes new joiners in the future.
“A foundational knowledge of climate science and social value is vital to understanding almost any modern business challenge,” says Faelli, who holds a master’s in business and economics from Solvay Business School in Brussels, Belgium, where he has been a professor of strategy since 2013. “As purpose becomes more important as a driver of strategy, bridging the gap between academic institutions and business through initiatives like this is crucial. With the implementation of this program across all areas of our business, consultants will be empowered to work alongside clients to co-create the future and generate lasting impact.”
Faelli, who has extensive experience leading major transformation programs, especially across M&A and organization, joined Bain in late 2021. He says reaching net zero on a global scale “requires a tremendous investment in ESG skills,” adding in a conversation with Poets&Quants that opposition in some corners of the world only serve to underline the need for the program. “I can’t agree with a statement that would say that ESG is the wrong thing to study or to look at, because humanity is looking at challenges,” he says. “The data from anywhere in the world on people that are younger than 30, shows a massive, unbiased concern about what the future looks like. So I do these programs, not for the 55-year-old partner, but for the 25-year-old analyst.
“What’s also exciting right now is that we see increasing client demand for this Academy. So clients have heard about this, and they’re asking in various forms to tag along. Sometimes they say, ‘Oh, you have this contract with university. Can you pass along the details?’ And we do.”
THE POETS&QUANTS INTERVIEW WITH BAIN’S FRANCOIS FAELLI
P&Q: Let’s start with the evolution of the program. We seem to be at a good spot where we can make an assessment of how the Further Academy is doing. So let’s start there. How are things going?
Francois Faelli: Things are going well. We are launched almost globally now. It takes a while to mobilize an organization of 15,000 people across the globe. We made a couple of choices that I think are the right ones, but it took probably a little more time instead if we went for local universities, because ESG agenda has, as you may agree with, a global nature.
There also is some local culture. You might even call it political context, and we thought it was important to anchor the Further Academies in the various parts of the world. And so we contracted local universities. It started, because I’m there, in Belgium. We piloted the idea in the summer of 2021. And we graduated in January. Then we extended in neighboring countries in Europe. And what took a little more time was to strike a deal for the U.S. because of just the mass of people we have to train there. I think we need 1,000 people to train there. We struck a deal with MIT in September. That’s where we announced. And we started with MIT in January.
You say, how is it going? I think the general feedback is enthusiastic. What do people tell us? They told us that they didn’t get the background from university. That it’s being fixed right now in most universities in the world, but even the 25-year-old, but certainly the 30-, 35-, 40-, 45-year-old, didn’t get the background on climate, on social justice, at university. Some of the so-called Capitalism 2.0 theories that were developed post-’60s or ’70s, they gradually included sustainable developments in them.
So some elements of gratefulness. Of course, it also triggered some creativity of work at the client side. That includes in what we describe as full potential, which are essentially growth plans or growth improvement or profit improvement plan, elements of externalities. And the general feedback is enthusiastic.
What’s also exciting right now is that we see increasing client demand for this Academy. So clients have heard about this, and so they’re asking in various forms to tag along. Sometimes it just say, “Oh, you have this contract with university. Can you pass along the details?” And we do. Sometimes it’s something more bespoke where they would ask Bain and the university to tailor something for them. That was not the primary purpose to be completely, maybe overly, transparent. The primary purpose was next scaling of Bainies.
Just to get an idea of the scale, what’s the number of Bain employees who are already signed up for this?
I think, if we have 15,000 people, I think, at least a third. I think 20% already did it (through December). The target is that by the end of ’23, most folks would get it.
Have you had more interest from other business schools? Have you had more schools that want to get involved?
Absolutely. You may imagine that in each local market where we announced one partnership with one school, there were other schools. Or it could be schools, or it’s also often individual professors that reach out and say, “Well, I would like to join the party.” Or even very friendly, “Why didn’t you select us?” Or something like that.
We see this in an agile way. This is the Sprint 1. The Sprint 1, we selected partners. We are loyal people. We believe in loyalty in many aspects, so we will go this first Sprint with the partners. The main Sprint 1 is under a basic skillset, so a 360 degree, 30, 40 or 50 contact hours of everything you wanted to know about ESG.
What we are developing in parallel is we have also advanced programs or more specific programs because Bain has industry practices. I’m part of the consumer one, so we do food and beverage. When you are in food, you have considerations around regenerative agriculture, for example, that are too specialized for people who do telecom or technology. And so we do this second layer, which we call applied or advanced. Schools with a very, very good reputation in a particular field. So to give you a specific example: For Europe, we went to Wageningen for agriculture because they are the best-renown school for agriculture in Europe.
Practically speaking, what can someone who’s signed up for this expect? If I’m signed up for this, and I’m going to attend classes at MIT, what are they looking like?
So if you signed up for it, you basically will be exposed to the equivalent of 30 hours, which is a course at university. I teach strategy on the side, so that’s what I do as a side job at Bain. 30 hours, 30 contact hours is a course. Now, depending on the market, you have variations, so some of it is everybody in the same class physically. Sometimes it’s everybody in the same class virtually, and some have chosen for a minority of these hours to be offline. So hours I follow when I have time.
This part of maneuver we left by local office, because we are a decentralized partnership. I don’t know the shape of your organization, but in my organization there is a limit to what you can do, command and control. You need to inspire.
In some conservative corners in the U.S., there is some pushback to the whole idea of ESG and to the dedication of resources to ESG. And it seems to be growing. But there are those who say that ESG isn’t transparent enough, and then it hurts local businesses, that it doesn’t give good returns. What’s your response to that? Do you think that that’s a threat to this kind of program?
First of all, I think it increases the need for these type of programs. I can’t agree with a statement that would say that ESG is the wrong thing to study or to look at, because humanity is looking at challenges. The data from anywhere in the world on people that are younger than 30, shows a massive, unbiased concern about what the future looks like. So I do these programs, not for the 55-year-old partner, but for the 25-year-old analyst.
That being said, I have subscription to U.S. newspapers that I think some would be qualified covering the spectrum, if you want. I think there is some merit into being fearful of going extreme into only thinking of future generations and forgetting that you need to feed families today. It’s very interesting. Forget ESG as the acronym, but ‘sustainable development” — that was coined in ’87. From the beginning, the notion of sustainability development points to balance between caring for future generations — “becoming good ancestors” is a sentence I like — and caring for the current folks and the current generations. And sometimes I find that some of what I read on ESG is too, I would call extreme, in what the current generations should do in order to save the future. I don’t think we’ll get anywhere socially and politically if we go too extreme, if what we ask people to stop or to change.
Why am I saying is, fundamentally, the science of sustainable development is very subtle in getting this equilibrium right.
You’re talking about more of a middle road, not going to the extremes on either side.
I think at Bain, we’ve looked at how we would position ourself as advisors. The phrase we use is “visionary pragmatists.” Visionary, because you need some elements of a vision on how you will change. You know that the way humanity, especially the developed Western market, run, seems to be unsustainable. And it’s not only on carbon and climate, it’s on all what they call planetary boundaries.
The water, the sun. The roadmap is you need to do that with businesses, with people in power, with communities, not against them.
Does it concern you when you see in the United States, there are some 17 states run by Republican governors where they’ve introduced bills to punish companies that adopt ESG policies? Is there anything like that going on in Europe? How concerned does that make you?
I can’t comment for about 12 reasons on U.S. politics. I think we started the Bain Academy on ESG for people to have the dialogue. I think the dialogue is, it’s right to have a dialogue at the moment. Any type of policies that would go at the extreme of being too prescriptive or forbidding anything is a concern.
There are concerns about it everywhere in the world. I have not heard about the 17 states. The policy we have at Bain anyway as advisors to private businesses is to make our people skilled enough to have the debate, company by company. I don’t think I comment on what a governor should do on ESG in the U.S. states.
I can’t speak for the entire Europe, but I see equal heterogeneity in Europe now. Why? A couple of elements. One is Europe, it’s extremely heterogeneous in terms of political parties and majorities, etc. Very similar to what you would see in the States. The second one, Europe, way more than the U.S., has very heterogeneous energy supply setups: France, relying on nuclear; Austria, relying entirely on the key hydroelectricity; Germany being in a bit of a crossroads because of a former reliance on gas from Russia. So you have a very heterogeneous map in Europe that I think looks closer to the U.S. than people in America think.
I think a lot of people would like to hear your general thoughts on what it means that a company like Bain would do a program like this. You’ve been in this position now for more than a year. What are your thoughts on the future? Are you optimistic?
What I’m going to say is not something only I say. The first phase, I was maybe in this position because I had done over 10 years of work in the food and consumer industry and grew increasingly concerned about the externalities of the food system. There are two elements of where we stand. I think the first element is to become realistic. And our first duty is to include, forget the term ESG that has some positive or negative connotations. You need to include a notion of these planetary boundaries of these environmental and social issues in the way you develop plans for companies. The companies need to change the way they act to take care of a broader community because that’s what we expect. So I think realism is the first thing we need to do. And as you become realistic, you have some elements of concern.
If you open any book on climate change, rising inequalities, the very likely billion people who will migrate because of climate crisis in the next 30 years — you get a little concerned. So realistic concern, and then optimistic. And I may finish with that. I know people write about greenwashing. I know people talk about greenwashing, and I have yet to meet a CEO that with me is not candid. All of the CEOs I meet are 45 to 65. Americans, they have children, grandchildren, employees, communities that ask them to do more. And that makes me very optimistic.
I want to say one more thing. Just being optimistic doesn’t work with me. I hear too many things. This is the only time where I get a little annoyed, is when I hear that the only solution will be new technologies — that we will be saved by progress. This is something that is being said for the last 20 years. I think it will not just be that — we will not have magical technology coming soon enough to do everything. I think we need to be realistic. We need to be concerned and more knowledgeable. I think there is a knowledge gap that I want to fight. And then there is a dose of optimism coming on top. But it’s not just going to be optimism.
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