- Research by Corvinus University of Budapest shows that by acting to protect themselves from climate risks, wealthy individuals leave wider society vulnerable
- The study revealed how “rich” participants chose to invest in private climate solutions that suited personal needs, whereas “poor” participants invested greater funds into public solutions. Public solutions created greater environmental impact
- The findings illustrate that the most effective way to combat climate change is through unity
By, Rachel Varnham
Sustainability, being eco-friendly, and striving to combat the climate crisis are all hot topics for organisations at the moment (maybe even hotter than the planet is becoming!), as both consumer preferences and newly instated policy demand more responsible, responsive practices. Many of us are doing our part… or at least, we’re trying to.
From investing in reusable shopping bags and metal straws to upcycling clothes and committing to shopping more locally, there has been a rise in people trying to hold the planet and Mother Nature’s best interests at heart.
Research by Professor Frank Goedertier from Vlerick Business School, Professor Bert Weijters from Ghent University, and Joeri Van den Berg from Human8 revealed that that consumers are increasingly more inclined to consider a company’s ethical practices and values before deciding whether to purchasing their products.
Going further, research led by UCD Michael Smurfit Graduate Business School finds that customers may even pay more for eco-friendly products, even in instances where the product quality has fallen below expectations.
Further surveys from McKinsey and PwC confirm this consumer behaviour, finding that customers are happy to pay more for products in sustainable packaging, or those that have been sustainably produced or sourced.
Further investigations reveal Gen Z in particular to be making a name for themselves as the generation most likely to go out of their way to support sustainable brands or purchase products that are deemed as being sustainable, even paying more for products that have an eco-friendly make-up.
It is perhaps bizarre then that, for some organisations, the impetus to invest more in green practices is less apparent. Leading banks specifically, according to an article in the Financial Times, are dropping their climate goals, as the costs of going green outweigh the benefits.
Thankfully, there are some fighting the good fight. From legacy companies like Boots, which has committed to recycling schemes encouraging customers to bring in empty products to be recycled in exchange for Boots points, to newer environmentally driven companies like Wild, which produce refillable products such as deodorant, soaps, and lip balms to combat waste in degradable packaging, and prioritise using sustainable and safe ingredients.
Both initiatives are providing value to people and planet, but could these organisations be accomplishing more? Individually, perhaps not, but there is a strength to be found in collective action.
Can the rich provide the means to tackle climate change?
Research from Corvinus University of Budapest explores the motivations and impacts of investing in climate-related action, revealing that whilst wealthy individuals are inclined to invest into climate solutions, their chosen means of doing so provide little wider benefit.
The study recorded how a preference to invest in personal private solutions to limit their climate impact, which cost them less, were also less effective overall compared to public initiatives that cost more, but they do better.
Whilst they protected themselves, such actions did little to support wider climate goals or action. As a result, poorer individuals became more vulnerable as wealth inequality increased.
Furthermore, those individuals were more inclined to invest more in collective climate action which may have come at greater personal cost but provided the potential for better societal outcome.
To understand how wealth can impact upon decision-making when it comes to climate action, the study divided 7,500 participants across 34 countries into four groups. There were two ‘rich’ groups which received 120 ‘monetary units’ and two ‘poor’ groups which received 80.
In some groups, participants earned their money at the beginning of the experiment, while in other groups a lottery determined how much each participant received. Across ten rounds, participants could invest up to 20 units in a private climate solution (costing 60 units total to implement) or a public solution (costing 160 units total) per round.
The results revealed that the “rich” participants chose the private solution (62.1%), almost twice as often as the “poorer” participants (32%), regardless of whether “wealth” originated from luck or merit.
Across all 34 countries, wealth inequality within groups increased and poor participants were left unprotected, as total funds to achieve public solutions were not reached.
Was money the sole cause of such decision-making? Whilst it certainly plays a factor, Hubert János Kiss, Associate Professor from Corvinus University, note that what drove the majority of decision making was social structure and values. “Private solution adoption was higher in countries with cultures that emphasise hierarchy and mastery and lower in countries emphasising harmony,” he shares.
“Hierarchy and mastery values justify inequalities and self-assertion, and therefore private solutions, while harmony values emphasise cooperation and interdependence, encouraging public solutions,” he clarifies.
The importance of community and working together
Despite varying societal set-ups however, there were some common hurdles when it came to wealth protection, and successful environmental action. From each country, the level of wealth inequality in groups increased, and the ‘poor’ participants went unprotected as the overall goal for public solution funds were not reached.
But encouragingly, a solid societal structure and a community focus provided the best chances of success. The researchers found that if participants had contributed to the public solutions in earlier rounds at the start, there would have been an increased chance in fully funding public solutions by the end.
The researchers also identified that those who were more eager to contribute to public solutions while they saw others contributing to it as well, were more likely to fund the public solution.
The research also found that individuals who saw other individuals investing in public solutions, were more likely to fund the public solutions alongside them, even if they hadn’t before. This goes to show the power of a good role model and working together to achieve a common good.
In the real world, Professor Kiss shares, the most effective route forward on environmental action is unity. Businesses, corporations, and policymakers need to support and help their countries to meet their sustainability goals, and work together to make a difference, rather than attempting to tackle these issues alone.
What value does being sustainable bring to business?
Aside from the somewhat obvious fact that we are in a climate crisis, and now is the time to make change, there are a plethora of reasons that businesses need to become more sustainable.
Satisfying increasingly eco-conscious customers and meeting industry targets is certainly part of the argument. But there is a growing body of research that identifies the ways that businesses can build profit out of their eco activities.
For organisations that need an incentive to do the right thing, research from Vlerick Business School found that when a medium-sized enterprise invests in sustainable practices, the overall resilience increases. As smaller businesses can make up a significant portion of a country’s economy (for example, almost half of the American workforce, representing 43.5% of U.S GDP according to the study), such actions are seemingly vital for growth and survival.
And, whilst smaller companies may believe that investing in ESG practices is riskier, Professors David Veredas and Dimitrios Kolokas from the Centre for Sustainable Finance at Vlerick Business School proved that when SMEs are more credit-worthy, they invest in sustainability more.
Additionally, pursuing green innovative strategies boosts a company’s competitiveness, enhancing their ability to transition into new markets, and greater success in launching new market products, finds research conducted by Dr Bettina Becker at?Durham University Business School.
Business schools are making strides in sustainability
Thankfully, the future holds promise, as business schools are training future leaders to face the reality of sustainability, and tackle it together.
Professor Esha Mendiratta from Vlerick Business School explains that “At Vlerick, our programmes are designed with a bias for action, while remaining grounded in solid evidence’. The business school embeds crucial practical skills through student projects, simulations, and case studies, making collaboration second nature.
Such approached fit well with an increasingly environmentally conscious generation of learners. At Nova School of Business and Economics, Masters in Management student Jayant Chaurasi found his perspective on sustainability altered by the programme, and has left him eager to act after graduation.
“Students need to build a few key skills to make a difference,” he says. “A decision made in one part of a business can unexpectedly affect people, the planet, and profits.” His point is key and further proves that the study conducted by Corvinus University Budapest highlights a core issue that urgently needs a solution.
As long as large corporations and businesses continue to hold their own best interest at heart, and focus more on the financial side of things, the damaging humanity does to the planet will not be reversed.
Less talking, more action
Gen Z can teach us something valuable in all this. Not only do they want community, which Corvinus University of Budapest highlighted is crucial when it comes to tackling climate issues, but they are the generation taking strides in sustainability, and going out of their way to purchase sustainable products, and support sustainable organisations.
Although business schools are already preparing our future leaders to create a more sustainable future, there are so many organisations still needing to make the change. One thing the experts make clear is that not only do we need to work together to effectively combat the climate crisis, we need to do it soon.
Rachel Varnham
Rachel has an Undergraduate Degree in Sociology and a Master’s Degree in Creative Writing. She enjoys writing about academic research, specifically focusing on sustainability, environmentalism, and gender equality.
About BlueSky Thinking
Business school thinking rarely escapes the campus. BlueSky Thinking changes that. We explore the research, ideas and expertise of the world’s leading faculty, management thinkers and practitioners – enabling their expertise to meet real-world ambition, alongside the rankings, study options and career insight that help ambitious applicants make smarter decisions.
Interested in this topic? You might also like this…