In the evolving 21st century economy, entrepreneurs and family enterprises are a powerful force for good as we transition to more responsible and sustainable business models. INSEAD equips the next generation to lead in a world where sustainability is good business for new ventures and family firms alike.
Entrepreneurs and family business are engines of global economic growth. Both also offer excellent opportunities to innovate new approaches and accelerate the sustainability transformation. New businesses can bring solutions to market. Family business can implement innovation across generations. Understanding how to tap this potential is a crucial aspect of the INSEAD experience.
Since launching in 2018, the Hoffmann Global Institute for Business and Society has collaborated with Entrepreneurship and Family Enterprise academic area professors to integrate sustainability into new and traditional business models.
This is the latest edition of Lessons in Sustainability, a series of stories and interviews that explore sustainability in each of the nine INSEAD academic areas.
Leveraging Business in the Solution Space
The INSEAD Entrepreneurship and Family Enterprise academic area fosters a community where curious minds across discipline exchange ideas with practitioners to solve important challenges. For entrepreneurs and companies striving to build new business today, sustainability and social issues are in focus.
When the pandemic struck, we saw firsthand the power of start-ups to deliver solutions to social challenges. So many start-ups launched that the Start-ups Against Corona platform was created to match corporations and governments with these new businesses. Faced with the challenge of a global health crisis, these agile enterprises provided direct support to governments with innovative and fast solutions and helped corporate leaders overcome difficult problems. A force for good indeed.
Family business also plays an important role in overcoming global challenges. Right now, consumers are looking to business to lead on social issues. According to EY, family business accounts for more than $8 trillion in global economic activity each year. With these businesses active in the sustainability space, a significant percentage of the world’s economy is committed to new ways of doing business.
Insights from the Interview
To learn more about this powerful potential, the Hoffmann Institute interviewed Professor Xiaowei Rose Luo, Chair of the area and Academic Director of the top-ranked Tsinghua-INSEAD EMBA programme. The interview discussed how Entrepreneurship and Family Enterprise integrates sustainability into area academics and Professor Luo’s perspective on entrepreneurs and family business as agents of change.
Why is it important for future business leaders to learn about sustainable development practices?
Professor Luo: Businesses are embedded in society, and we live in a society that has become increasingly polarized and fragmented. Without thinking carefully through sustainable development practices, businesses face major risks in growth and even survival. For example, if business profit goals conflict with government objectives, policy change can threaten the firm’s survival. If worker or community interests are damaged by a business, workers or the community can sabotage the business.
Firms can also cause major damage to the environment. Not only will this hurt human existence in the long run, firms can also face real hurdles attracting talent. The younger generation has become much more conscious of environmental sustainability and activists increasingly use online media to disrupt operations.
What does sustainability mean to you in the context of business education?
Professor Luo: Traditionally, we use this word to mean financial sustainability. In the context of entrepreneurship, it is important to create a business that generates enough revenues to cover costs and grow. More recently, this word has come to mean social and environmental sustainability as well as financial sustainability. Entrepreneurship education includes both starting a new business or start-up and building new business inside established corporations.
In both scenarios, I urge entrepreneurs to think about the impact of their business model on society and the environment. In addition, I encourage more attention on social entrepreneurship, which is defined as building business with social mission. These businesses treats social impact as their primary goal.
How do you teach sustainability in your academic area and what are the main topics?
Professor Luo: We have offered MBA electives on social entrepreneurship and how to build environmentally sustainable ventures. We also recruited a visiting professor with expertise on social entrepreneurship to strengthen our offering on social entrepreneurship especially in executive education. I also encourage our faculty to incorporate sustainability as a theme or a context in business cases and simulations.
For example, in our area’s MBA capstone course, we designed exercises and role plays that urge students to think about the impact of their business decisions. This includes impacts to stakeholders such as the government and the community as well as the environmental impact of business models and decisions. One simulation exercise shows students that it is important for a firm to act preventatively, even if the government has not yet regulated an environmental hazard.
Sustainability in the Academic Area
Following the interview and hearing how sustainability is integrated across curriculum, the Hoffmann Institute engaged with Entrepreneurship and Family Enterprise area professors to understand how they bring sustainability into electives, executive education and engagement.
Electives that include sustainability allow students to learn how to point new ventures and legacy business at social change. The Private Equity and Venture Capital elective invites guest speakers to explore the opportunity for PE investors to drive sustainability issues in their portfolio companies. This ties directly to operational value creation, a topic that is not new to private equity and late-stage venture capitalism, and a topic that is evolving right now. The Entrepreneurship in Action elective is based on a business growth simulation where competing teams launch a green version of an existing product. Another elective invites renewable energy experts to speak to the students on this growing market.
Sustainability also features in executive education programmes. Many clients now place high priority on sustainability and customized programmes are designed to talk about sustainability initiatives and strategies for innovation, change and motivation. These topics are often in focus for entrepreneurs and leaders of family business. Courses focused on corporate venturing are looking at issues common to ClimateTech start-ups and responsible AI, which is poised to become a pain point for our corporate clients due to the rapidly changing regulatory environment around AI. Executives can even choose a course that uses the Entrepreneurship in Action business simulation to understand retooling existing products for the green trend seen on supermarket shelves.
Sustainability in academics is evident in the cases written by Entrepreneurship and Family Enterprise area professors, in their research and their engagement beyond the classroom. Professor Philip Anderson authored a custom case for an Executive Education client about a new business helping vehicle fleets achieve zero carbon. Professor Claudia Zeisberger has written several cases related to sustainable business models. The Private Equity Real Estate Investors – Overcoming the Challenges of Sustainability and ESG case follows a female protagonist and outlines progress by one of the larger real estate funds in Asia and the UK. She also recently completed two cases for KKR and CHI Overhead Doors, one on sharing profits fairly through broad equity ownership and another on raising company performance while improving social equity. These cases discuss the social impact of equity ownership, inclusion through employee engagement and incentive structures anchored on broad-based equity distributions. This invites deeper conversation on wealth inequality, social justice and the power of equity ownership.
In his research, Professor Bala Vissa examines the people side of entrepreneurship, particularly in emerging economies contexts. Part of this research looks at post-exit social impact activities of successful commercial entrepreneurs – business founders who use their time, energy, passion, capital, expertise and connections for social impact after leaving their firm. Based on this academic research, Professor Vissa designed and led the Pioneering Post-exit Entrepreneurs' Retreat (PEER) held in October 2022 to engage entrepreneurs directly. The next PEER workshop is scheduled for Summer 2023 in Europe, with a focus on sustainability. This builds on years of conference engagement by academic area professors. With many INSEAD alumni leading start-up ventures and family businesses, engaging this group can spur innovation and accelerate transformation of business models.
The Path Forward
New business realities are reflected in newly launched businesses and evolving family business approaches. Entrepreneurs are leveraging venture capital to bring sustainability solutions to market on pressing challenges. Family businesses are powerful players that often influence markets with consumer loyalty and brand recognition. Embracing sustainability is key for these businesses to survive and thrive moving forward.
The INSEAD Entrepreneurship and Family Enterprise area can help transform new and existing ventures into champions of prosperity and positive social impact. Business education must prepare leaders to take on the global challenges. Whether through new ventures or by reworking businesses passed down over generations, business can seize new opportunities by capitalizing on the shift to sustainability.
The Hoffmann Global Institute for Business and Society Lessons in Sustainability series highlights lessons learned from integrating sustainability into all nine INSEAD academic areas. Stay tuned for more Lessons in Sustainability in coming weeks.