From pressures to address environmental, social and governance (ESG) issues, to how we deal with climate change, to the rise of what some have called ‘political consumerism’, to the changing nature of globalisation due to new geopolitical tensions, political questions are increasingly integral to continued business success.

ESG modules are insufficient

Yet, layering ESG modules onto business-as-usual curricula, as many schools do, is an insufficient response. ESG is but a part of the political aspects of business, aspects that go much deeper to reach the very way we conceptualise what business is all about.

If students go away believing that it’s ok to keep thinking how we’ve always thought, keep doing what we’ve always done, and that today’s context asks only that businesses are a little bit nicer about it and tick all the boxes around ESG, then these modules could end up doing more harm than good.

In today’s new era, businesses must accept that they are part of our panoply of political institutions and to become increasingly reflexive about their political roles. This requires a deep understanding of the political way of thinking and its incorporation into all aspects of business purpose, strategy and operations. Business school students need to be prepared for this new reality.

Politics drives performance

Let us look at some examples of how political thinking is driving business performance. When former US President, Donald Trump, slapped tariffs on imported steel, Harley-Davidson (Harley), an icon of US manufacturing, decided to shift some of its production out of the US – a business decision. US workers were going to lose their jobs. 

One worker, interviewed by the media during this process, understood that he might lose his job and was asked whether he thought Trump had made the wrong decision in imposing tariffs (the business view). His response surprised the TV interviewer. ‘Yes, I know I might lose my job. But it was still the right decision. We must stop others exploiting America through unfair competition.’ 

His ire, in as much as there was any, was reserved for management rather than Trump. At the time, the Financial Times also interviewed a number of Harley employees and, in June 2018, reported: ‘Many of Harley’s own employees, interviewed this week in the Financial Times, said they supported Mr Trump’s policies.’

Why? Getting back to our previous quote, from the University of Edinburgh’s Christina Boswell, politics is about, ‘tapping deep-rooted values and beliefs, rather than invoking objective self-interest’. Trump tapped those values whereas management might have imagined that the workforce would blame the President for a bad decision while considering their own decisions perfectly ‘rational’. A perfect example of the difference between thinking in narrow financial terms and thinking politically. What seems right from one perspective seems utterly mistaken from another.

In the Harley case, so-called ‘business-focused decisions’ went against the value system of its employees. In other cases, employees’ political views end up driving business decisions. In 2018, Google took itself out of the Maven contract with the US Department of Defense after a staff outcry against the company agreeing to let its AI technology be used for military purposes. Yet more politics. Dropping out of the contract put paid to potential future work that could have earned Google some $10 billion USD over a decade.

Earlier that year, employees at both Microsoft and Salesforce had protested against their companies’ work for US Immigration and Customs Enforcement (ICE) in opposition to President Trump’s policies that separated children from their parents. 

Microsoft CEO, Satya Nadella (an MBA alumnus of the University of Chicago Booth School of Business) issued a memo to employees with an explicitly political title: ‘My views on US immigration policy.’ In it, he denies that Microsoft was working on anything that related to the child separation policy. 

The memo opens with politics: ‘Like many of you, I am appalled at the abhorrent policy of separating immigrant children from their families at the southern border of the US.’ He went on to describe the government policy as ‘cruel and abusive’.

These are examples of a reactive approach to political issues. Managers are forced to address political questions related to their businesses because of employee pressures. Others react to investor pressure. Others still are finding that, in what has been described as a ‘politicised brandscape’, their customers are choosing brands based on the political meaning – is it ‘green’, does the supply chain use forced labour, is the company contributing to social wellbeing?

Some companies and brands have had political thinking embedded within them for some time, maybe it has even been the basis on which they were founded. Patagonia, for example, was founded on the basis of a love of the outdoors and the consequent environmental activism of its founder, Yvon Chouinard. Environmental politics is built into the company’s DNA.

Patagonia runs regular events in its stores, focused on environmental issues, and supports the production of activist films. It focuses obsessively on reducing its environmental footprint from how it manages its supply chains to a focus on the durability of its clothing to reduce over-purchasing and consequent waste and resource use – a stance that is, or at least was, nigh-on heretical in the fashion business. 

It has launched a programme called Worn Wear, encouraging its customers to buy used clothing rather than new and offering to fix worn clothing for nothing to discourage people from buying new. It ran an initiative that connected its customers to environmental groups. Patagonia has even refused to sell its clothing to corporations that do not prioritise the planet.

In 2017, when former President Trump decide to shrink the size of his predecessor President Barack Obama’s national monuments, Patagonia’s website was changed to feature an explicitly political statement upfront which declared ‘The President Stole Your Land’. During the 2020 US election campaign, Patagonia doubled down on its political assault on climate deniers by adding labels to a line of shorts stating, ‘Vote the Assholes Out’. The tagline was not new, but it had particular relevance during the 2020 election. Pictures of the hidden label went viral on social media and the politically labelled shorts sold out in no time.

These are only a few examples. From the geopolitics of operating in China, to the politics of climate change, to diversity, human rights, and many other issues, politics is becoming all pervasive.

How some business schools are adapting

In the era of the new political capitalism, business schools can no longer afford to ignore the intimate interrelationship between business and politics. Their duty is to prepare students for the reality of the world they will be operating in once they leave the sheltered world of academia. And some are stepping up.

Stockholm Business School and Copenhagen Business School offer courses on business and politics. HEC Paris has recently announced a collaboration with Sciences Po to bring expertise on geopolitics to its business teaching. Others are also moving in this direction.

To address the relationship between politics and business, Business schools need to go beyond layering ESG perspectives onto standard business thinking. What is required is a wholesale re-think of how the very concepts of ‘business’ and ‘markets’ are looked at.

Markets, local or global, are political constructs, not economic or commercial constructs. This is because markets as we know them cannot operate without a set of rules that are politically determined and that chime with prevalent social mores. The fiction of the ‘free market’ must be banished from business teaching.

Similarly, the fundamentals of what a business is and what business is for also need to change. The shareholder value model is past its sell-by date. The role of business is, like all other institutions, to participate in the process of creating a better society. What that looks like is politically determined.

Politics, therefore, is not an optional add-on to standard business teaching much like, for some companies, going green is just a thin veneer layered onto business-as-usual. Politics needs to permeate every aspect of business school curricula and give students a true picture of what the 21st century business environment looks like. Hint – it’s deeply political.

This is the second of a two-part series. For a fuller understanding of the roles of ‘politics’ and ‘business’ in our societies, please click here to read the first part of the series.