Climate in the Boardroom:
Struggling to Reconcile Business as Usual
& the End of the World as We Know It
Rebecca Henderson
How does one witness to businesspeople about climate change? Climate change is a
problem for the collective and the long term, whereas business often requires a ruth-
less focus on the individual and the quarter. Climate change is an ethical catastro-
phe whose solution almost certainly requires a profoundly moral response, but talk
of morality in the boardroom is often regarded with profound suspicion. Reconcil-
ing these tensions has forced me to navigate between worlds in an ongoing attempt
to persuade businesspeople that solving climate change is both an economic and a
moral necessity, and that the purpose of business is not only to make money but also
to support the institutions that will enable us to build a sustainable world. This has
not always been easy.
F or many years I was the Eastman Kodak Professor at the Sloan School of
Management, MIT’s business school. It was a coincidence, but a deeply
ironic one, since my research explored the drivers of innovation, focusing
particularly on why it was that hugely successful firms like Kodak have so much
difficulty responding to discontinuous change. I spent years working with firms
like Nokia and General Motors–and indeed even with Kodak–trying to persuade
them that embracing change was both central to their survival and an opportunity
for profitable growth, while simultaneously writing academic papers about what
made it so hard for them to take my advice.
I have always been a passionate hiker and an enthusiastic tree hugger, but for
the first fifteen years of my career, it didn’t occur to me to bring my passions or
my politics to work. I was one of the first women tenured in my department, et
I learned early and often that achieving professional success was about mastering
the numbers and playing the game. I had a bachelor’s degree in engineering from
MIT and a doctorate in economics from Harvard. I didn’t “do” enthusiasm–or
ethics or emotion–at work. I did expertize.
Then a movie changed my life. Dans 2006 I saw Al Gore’s An Inconvenient Truth.
Gore’s message fell on prepared soil–my brother, a freelance environmentalist,
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© 2020 by Rebecca Henderson https://doi.org/10.1162/DAED_a_01821
had been sending me climate change related material for some time–but the film
shocked me out of my comfortable assumption that someone else would take care
of things. I sent an email to everyone on my contact list telling them that they had
to see it and began teaching a course on sustainable business.
In the beginning, I thought of climate change as just another innovation prob-
lem: a “Kodak moment” for the planet. It was obviously necessary to decarbon-
ize the global economy, and it was clear that many of the firms who pioneered the
transition would do very well. While I was convinced that we would never tack-
le climate change successfully without appropriately designed and implemented
politique publique, I believed–and continue to believe–that persuading firms to em-
brace the reality of climate change and to invest in building carbon-free solutions
not only helps drive the kind of innovation we need to decarbonize the world, mais
also greatly increases the odds of getting appropriate policy enacted.
I started working with Enel, an Italian power company that at the time was
building roughly one renewable power plant a week. I became a consultant to
Unilever, one of the world’s largest consumer goods companies, where Paul
Polman, the new CEO, had just announced plans to halve the company’s envi-
ronmental footprint while doubling its revenues. I worked with Walmart, OMS
the year before the release of An Inconvenient Truth had promised to transition to
100 percent sustainable energy, to write a case about decarbonizing their sup-
ply chain. I partnered with the CEO of one of the United States’ largest electrical
utility companies to try to persuade his senior team that the world was about to
change forever.
It was fascinating. It is now close to conventional wisdom that there is money
to be made in addressing climate change, but at the time, it was a new and sur-
prising idea. I learned two things. The first was that there was money lying on the
sol. Most firms had never paid serious attention to energy costs or greenhouse
gas emissions, since energy was almost free (for the average firm, energy makes
up only about 3 percent of their operating costs) and emitting greenhouse gas-
es was not only entirely legal but also completely ubiquitous. It turned out that
when firms started paying attention, there were all kinds of ways to reduce emis-
sions and to make money while doing so. Walmart, Par exemple, reengineered its
trucking fleet to be more efficient and saved more than a billion dollars a year.
Unilever’s efforts to become more sustainable led it to become one of the most
desirable employers in the world, and its “purpose driven” or socially orientated
brands–such as Dove, Life Buoy, and Vaseline–started to grow much faster than
its more conventionally managed brands.
The second was that the firms pursuing this kind of strategy almost nev-
er claimed that they were doing so because climate change posed a catastroph-
ic risk to the future of civilization and reducing emissions was simply the right
thing to do. Plutôt, they stressed–and stressed again–that their investments
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149 (4) Fall 2020Rebecca Henderson
were all about growing the bottom line. They talked about the need to respond to
risk and to shifts in consumer preferences, and about the potential for technolog-
ical breakthroughs. They showed financial projections and reassured their inves-
tors that they were simply looking to make money. Every successful manager had
learned the lesson that I learned to get tenure: don’t “do” enthusiasm–or ethics
or emotion–at work. Do expertize.
But after hours and out of sight, nearly everyone I spoke to was at least as pas-
sionate about solving climate change as I was. In the corridor after the meeting, ou
over a beer at the end of the day, they talked about their responsibility to their chil-
dren and the strength and courage it would require to remake the economy. In pri-
vate, they used terms like “existential risk” and “moral imperative” and harangued
their colleagues about their firm’s responsibility to the world. But they hardly ever
spoke this way in public. One CEO I knew had turned around his entire firm by
building a common sense of shared mission to the community and the need to con-
tribute to the public good. There wasn’t a single word about it in his annual report.
To be a businessperson is, by definition, to climb into a box whose walls are
defined by the bottom line. Only those who can reliably deliver profits are likely
to survive in today’s ruthlessly competitive world. In the words of an Italian divi-
sional manager whom I pressed on this point some years ago: “You don’t under-
stand. I wake up with my number. I go to sleep with my number. I take my number
on vacation.” Every successful manager learns to make their number–whether
it’s the quarterly revenue goal or the product-level profit target–lest they face a
career-ending reckoning. Yet we must tackle climate change if the economy–not
to mention our planet and our society–are to thrive. We must think about the
long term and the collective good. We must talk about what is right.
For the last ten years, I have devoted my career to trying to reconcile these
perspectives: to acknowledging the very real pressures that businesspeople
are under while simultaneously attempting to persuade them to bring their
profoundly moral convictions about the need to act against climate change into
the mainstream of their professional lives.
I tell them that it is not a question of focusing on either profits or the com-
mon good. I try to persuade them that the purpose of business is not only to build
thriving and prosperous enterprises, but also to help build a successful, inclusive
society on a healthy planet. I argue–often, and in public–that in addition to the
strong economic case for tackling climate change, there is a strong moral case:
that the commitments to prosperity and freedom that are the deepest normative
commitments of free-market capitalism require that business leaders bring their
passionate concern for the future of the world into the heart of their work. Talking
about the bottom line should not preclude having a conversation about ethics.
Plutôt, it should require it.
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Dédale, le Journal de l'Académie américaine des arts & SciencesClimate in the Boardroom
It is easy to assume that running a business is a mechanical affair: that firms
simply weigh up the costs and benefits of any particular course of action and de-
cide to pursue the most profitable option. But in reality, any important decision is
fraught with uncertainty, and managers make choices all the time as to where to
focus their attention, how strongly to weigh different pieces of information, et
what to expect from the future. This is particularly the case when firms are consid-
ering tackling climate change.
Prendre, for example, the current turmoil in the automotive industry. Sales of
electric vehicles are currently only a small fraction of total automobile sales, mais
they are growing very fast. Every major automobile company believes that even-
tually the entire automobile fleet will be electric. The question is only (!) how and
quand. No one yet knows quite what consumers will want from electric vehicles.
Will they demand fully autonomous vehicles owned and controlled by others, donc
they can simply summon a car to their door when they need it? Will car users wel-
come “cars” that are actually moving gyms or offices? Or will they want exactly
what they have now, just with an electric powertrain? No one knows when the
technologies necessary to realize any of these visions will fully mature, how long it
will take to decarbonize the power grid, or when storage and charging technology
will be sufficiently far advanced that using an electric vehicle will be merely clean-
er and quieter than using a conventional car. It is one thing to agree that there is
a long-term opportunity in electric vehicles, but in the face of this kind of uncer-
tainty, it’s quite a different proposition to decide to invest billions of dollars today
in order to take advantage of it.
It is in these moments of uncertainty that I have found the opportunity for
witnessing. I have spent much of the last ten years alerting managers (and MBA
students) to the opportunities that are out there, to supporting them in thinking
carefully about how the future might be different, and to trying to persuade them
that when there is real uncertainty, it is not only appropriate but absolutely neces-
sary that they bring their sense of what is “right” to bear.
A few years ago, Par exemple, I was invited by the CEO of a major power company
–I’ll call him Jim–to lead a day-long retreat for his senior team. He had made no
secret of his beliefs, writing and talking so passionately about the need to address
climate change that his team had begun to suspect that he was more interested in
his legacy than in the health of the business. He asked me to help him persuade the
group that it made sense to invest in renewable energy. Donc, I became an interpret-
er. I doubled down on the business case for the investment–which was strong but
implied taking on a fair degree of organizational and strategic risk–and I stressed
the number of other firms that were finding profitable ways to embrace renew-
ables. But I also encouraged Jim to talk about the moral case for making the in-
vestments, and the way that doing so was in line with the deepest values of the or-
ganization. Once it was clear that Jim’s vision was compatible with the language
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149 (4) Fall 2020Rebecca Henderson
of business, the team became quite enthusiastic about the idea and they became
something of a leader in the space.
F or thirty years, my scholarly research has explored the strategic and organi-
zational factors that make it possible for some firms to embrace the future
while others falter and die. I have learned that, as one might expect, build-
ing the economic case for change is critical. So is managing the organizational dy-
namics of running the old business while building the new. But again and again,
it seemed to me, the firms that were able to change found the courage, the mutual
trust, and the sheer persistence required to do so in their embrace of a shared pur-
pose that was about more than making money.
I once worked with a pharmaceutical company that was exploring pioneering
the use of diagnostic tests in association with their drugs, so that doctors could be
sure a particular patient would respond to a particular drug. The head of market-
ing vigorously objected to the idea, pointing out that it would significantly risk
overall sales. “I know,” the CEO replied, “but would you rather go on selling drugs
that don’t work to sick people?” In reframing the decision as one that was about
both economics and ethics, he was able to take the entire firm through a difficult
and risky transition.
I write papers about this firm and others like them, exploring the role of “rela-
tional contracts”–a particular form of trust–in increasing productivity and cre-
ativity and suggesting that one of the best ways to maximize profits is to care about
more than maximizing profits. I spend more and more time thinking and writing
about ethics. There is a deep contradiction at the heart of the injunction to maxi-
mize shareholder value. For years, business schools told their students that the so-
cial responsibility of management was to maximize profits; that to do anything else
was to betray their responsibility to their investors and to interfere with the opera-
tion of the free market, jeopardizing the prosperity that the market is designed to
produce. If firms have a moral duty to maximize shareholder value, it would seem
that they have a duty to do everything they can to raise profits, y compris, Par exemple,
supporting active climate denial and lobbying hard to forestall climate regulation.
But free markets only maximize prosperity when “externalities” such as cli-
mate change are properly priced. Every coal plant in the world causes much more
damage–measured in terms of the effects of their emissions on both health and
the climate–than the social value they create. If firms can dump greenhouse gas
emissions into the atmosphere for free, there is no guarantee that the operations
of the market will maximize social welfare. De ce point de vue, businesspeople
have a duty to ensure that carbon is properly priced, while doing all they can to
help decarbonize the world’s economy. This implies, Par exemple, that it can’t be
the case that firms have a moral duty to do all they can to flood the political system
with money in the service of delaying carbon regulation.
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Dédale, le Journal de l'Académie américaine des arts & SciencesClimate in the Boardroom
As I’ve grappled with this issue, I have increasingly focused my research on the
troubled intersection between business and politics, trying to understand those
historical moments in which the private sector has played a positive role in build-
ing strong, democratic institutions, while simultaneously working with practi-
tioners to explore what such a movement might look like today.
It has been a wild ride. There were only twenty-eight students in the first meet-
ing of “Reinventing Capitalism,” the class I developed to support MBA students in
thinking about climate change. Last semester, there were nearly three hundred.
Together with a group of passionate and inspiring colleagues–many of whom
have been at this for far longer than I have–I’ve seen both business and business
school education begin to change in profound and hopeful ways. My professional
life is richer and more interesting than it has ever been.
I am still sometimes tempted to downplay the fact that climate change is an
existential crisis, requiring both a radical rethinking of the moral purpose of busi-
ness and the willingness to act on our values in the face of doubt and hostility.
Sometimes when I’m standing on a stage in full regalia (stylish black jacket, color-
ful scarf, the highest heels I can manage) in front of a roomful of powerful people,
I’m tempted to tell them that they should try to solve the world’s problems sim-
ply because it will make them all more money. It has the great virtue of being both
true and what they want to hear. I worry that if I start talking about “values” and
“purpose,” they will write me off as a simpering female who doesn’t understand
the hard realities of life in the business world.
But I know that simply running the numbers will never get us where we need to
go. I know that genuine progress requires a commitment to doing the right thing,
and to squishy concepts like purpose and meaning. Sometimes I envy those who
can ignore what is happening to our only planet, confidently claiming that it’s not
their job to think about it. But alongside the waves of profound despair that vis-
it me regularly, there is a fierce joy in insisting that change is possible. Il y a
many worse ways to spend one’s time than trying to shift the entire ethical fram-
ing of capitalism, particularly if you are one of thousands of people with the same
idea. A CEO with whom I worked recently described to me a conversation he’d
had with two of his largest investors:
I gave them the usual spiel about how our operating margins were up and how the in-
vestments we’d been making for growth were paying off, and they asked me the usu-
al questions. Then I asked them if they thought climate change was real and, if it was,
if the world’s governments were going to fix it. Oui, they said–and no, governments
weren’t going to fix it. There was a pause. I asked them if they had children. They did.
So I said, “If government isn’t going to fix it, who will?” There was another pause.
Then we started a real conversation.
Change is slow–but it is coming.
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149 (4) Fall 2020Rebecca Henderson
about the author
Rebecca Henderson, a Fellow of the American Academy since 2018, is the John
and Natty McArthur University Professor at Harvard University. She is also a
Research Fellow at the National Bureau of Economic Research. She is the author of
Reimagining Capitalism in a World on Fire (2020) and editor of the volumes Leading Sus-
tainable Change: An Organizational Perspective (with Ranjay Gulati and Michael Tush-
man, 2015) and Accelerating Energy Innovation: Insights from Multiple Sectors (with Rich-
ard G. Newell, 2011).
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Dédale, le Journal de l'Académie américaine des arts & SciencesClimate in the Boardroom
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