Exclusive: INSEAD’s Dean Talks New Online Degree, New MBA Curriculum & What Comes After Covid

We sat across from each other nearly four years ago, and you talked a great deal about business as a force for good. A lot has happened in three years, but INSEAD continues to be a pioneer of that philosophy. What’s your view of how the last three years have gone, apart from the onslaught of Covid?

Ilian Mihov: Covid definitely accelerated this, but I think that it would have happened even without it. Because the round table was, before Covid, the statement from the round table, which already signaled some intentions.

I think that the climate change became more visible with the fires everywhere, especially California. But they were also in China, there were floods, there were all kinds of extreme weather events, that many people realized things are changing.

I think that today fortunately, there is much more, a real desire to change things. Unfortunately, it is not so easy. There are a lot of things that still need to be built. In my view, what we did in 2018, we created the Hoffmann Global Institute for Business and Society. The idea of that Institute is to promote business as a force for good, and to ensure that we have the materials, we have the research, and so on.

The Institute has done a lot of work, and it was obviously disrupted by, by the pandemic. But we have basically four pillars in this Institute. What we do in the school is very much around these four pillars, and what the Institute for Business and Society does.

The first one is research. In the last three years, there an acceleration of research in these areas. But I’m not sure that we are getting close to an acceptable model or framework of thinking how to manage companies in an environment that takes sustainability seriously.

I often say that we are lacking a framework that is comparable to the current frameworks that we use. In finance, we have this belief that shareholder value maximization is the only thing that you need to do as a CEO. But it’s a social norm. People have to understand that this is not a physical law. This is not something given from above. It’s basically something that we have decided that it is important. We’ve put it in law, so now the legal framework supports this norm.

But the shareholder value maximization is obviously a beautiful theory. It’s very coherent in the academic sense. But it’s based one assumption, that the only thing that matters is financial capital. Then you maximize the returns to financial capital, the shareholders, or the owners, that’s very easy.

The moment we build a framework where natural capital matters, social capital matters, human capital matters, all of a sudden the role of the CEO might be slightly different.

Unfortunately, we don’t have a widely accepted framework. There are a lot of different theories, ideas. People talk about stakeholder capitalism, and so on. But in terms of building a coherent framework out of this, we are not there yet.

I recently talked, it was in May last year, talked to an alumnus with a CEO of a fairly large corporation in the United States. He’s very concerned about social issues, about climate change, unemployment. Donates a lot of money to poverty relief, and so on. He cares about these things, the environment.

But during the conversation, I asked him how is the company doing, what they are doing, and so on. He said, “In this environment, it’s impossible to manage your company anymore.” Because all these investors are breathing down your neck saying, “ESG this, ESG that, what are you doing here?” Everything is about ESG.

He cares about of these things, but he cannot spend time really managing the company just answering these kind of things. Then I was thinking, why is this happening? This guy really cares about the environment and everybody, and he’s complaining at the same time. He’s frustrated.

Then I realized that it’s actually a failure of business schools. It’s our failure that in strategy, we have bunch of frameworks, five C’s, whatever. We build in a competitive strategy, or we build the Blue Ocean strategy, and all these things. We have frameworks of thinking about strategy. In marketing we have frameworks, whether the four P’s, or whatever it is. We have frameworks. In economics, we have frameworks and so on.

But we don’t have a framework that we can build around these topics of sustainability or ESG, that somebody asks this guy, and then he says, “Okay, let me refresh what I learned, what is the framework used,” and quickly run a brainstorming session and build the proper response, proper strategy, to this. That’s where I think that we are still not there. A lot of research needs be done.

I think in the last three years or so, we have seen a big change in the teaching front. The second pillar is teaching, pedagogical materials. We have tons of cases that people have written from all kinds of business schools on these topics.

Some of them are really insightful and very useful. Because from a case, you can learn how to implement these things. The case does not necessarily give you a framework yet, but it gives you some ideas, “This company did it this way. Would it work in your company? We don’t know, but at least you have some ideas.”

A lot of courses were introduced. At INSEAD as well, we have now 19 elective courses that are related to issues of ESG and sustainability. In every single core course, we cover some of these topics. Again, there is still a lot that needs to be done.

Last week I formed a curriculum review committee, because we last changed our curriculum in 2017. What I have seen is that even though we teach sustainability and ESG throughout all of the core courses and their electives, I feel we need to build a better, and more coherent, understanding of these topics.

I’ve asked this committee to look at what to do, to introduce a core course, or to change the current syllabi. But my guess is what we need to do is to create a capstone, a core course at the end, required course at the end of the MBA, where now you look at the accounting issues from sustainability point of view. You look at the finance from sustainable finance point of view. You look at operations, at strategy.

I realize that because it’s here and there and so on, somehow it does not necessarily create a systematic perspective on this topic. There is still something to be done. I hope that this will be the outcome. Students demand this very clearly. They want to learn more about it.

Then the third pillar is outreach. I realize that people are doing a lot in different schools, but we need to connect. The last two years were not very helpful for outreach because we could not organize in-person meetings. We’ve done tons of webinars and so on, but it’s not the same.

As you probably know, we created the Business Schools for Climate Leadership Initiative with seven other European schools. I’ll try to convince some other deans to join here from the U.S. as well so that it becomes a global initiative.

We think that while we compete, in terms of program, students, whatever it is on this topic, we have to cooperate, because I think that everybody’s winning if we transmit this knowledge. That’s the outreach. Hopefully soon we will start organizing more live events. Our next Alumni Forum is in New York, in fact. It’s on the 31st of March and 1st of April. It is about responsible leadership, and what it means.

The fourth pillar, which actually excites me more than anything else, is walk the talk. It’s not sufficient to go in the classroom and tell executives, “You should do this.” Actually, we should do that as well.

We have implemented a lot of initiatives, too, like removing plastics from our campus.

You talk the talk, you have to walk the walk.

Now, this week or next week, we’ll announce the pledge to reduce carbon emissions by 67% by 2035 in scope one and two, which is consistent with the 1.5-degree pathway by 2050 to become carbon neutral.

We actually took a lot of time to figure out exactly how we’re going to do. Because there was a lot of criticism. Some people wanted me to announce it before COP26 in Glasgow, but I wanted to make sure that I know how much it will cost and what are the things that we’ll do in order to achieve this carbon reduction.

Now, when we make the announcement, it’ll be very clear how we’ll reduce. Actually, we plan to build a geothermal power station in Fontainebleau, in on our first campus in France. This technology is well developed. It’s a good place to build this. There are a bunch of steps, so we know we’ll get there. Every year, we’ll be accountable of whether we are going through this.

The reason we wanted to do it this way is because there’s so much criticism of the Glasgow pledges. People saying, “I’ll do this.”

It’s not strong enough.

But also it’s not clear whether they know how to achieve it. It’s one thing to say, “I can commit to anything by 2050,” because you will not be there.

But to commit every year that this is the pathway, this is what we’re doing, is important. Overall, I think that there has been very good progress in a lot of business schools. We just published our new sustainability report. You’ll see in the last year, we have published 50 research papers and 15 cases.

Again, the main objective, and that’s what we talked about three years ago, the main objective of business as a force for good is to change the mindset of our students. Are we there already? Probably not. Not only the mindset, but to give them the tools in order to deal with these issues.

The reason that we need to give them the tools is not because … again, Financial Times looks at this in their ranking, it’s the fashionable thing to do. It is because, like this CEO of this multi-billion dollar company who was struggling to figure out what to do.

I think that a lot of our alumni are facing the same problems. To give a proper MBA degree today means to give them answers, and frameworks of dealing with these issues. Otherwise, it doesn’t work.

When will your curriculum committee make a report? What’s the timeline?

I hope the decision will be made by the end of this academic year. I will give them a couple of months to work (we just formed it), then come back and say, “This is what we propose.” If we agree, and we need to go through a faculty vote on this, if the faculty support this, then the class that will start in September will get this capstone course.