UCLA Anderson MBA students and alumni will travel in the fall of 2024 to Belgium and the Netherlands for the school’s first global immersion course focused exclusively on sustainability. Leading them will be Professor Henry Friedman, who teaches courses on financial accounting and topics related to sustainability and ESG (environmental, social and governance factors).
Since 2008, Anderson has offered 89 different courses with an international immersion component, with some 3,300 students and alumni participating. All told, they’ve traveled to more than 30 countries with 25 faculty members. The 4-unit electives, organized by the school’s Center for Global Management, are open to students in all Anderson’s MBA programs, as well as to alumni on a space-available basis. Following on-campus lectures and case discussions over the summer, during the first week of September, Friedman’s class — titled Profit, Purpose and Policy: Lessons from Sustainable Business in the European Union — will visit Brussels, Rotterdam and Amsterdam.
Friedman says the course’s focus on sustainability will help students grow as transformative leaders as they learn about how environmental and social factors affect the risks and opportunities companies face, as well as what kind of impact companies make on the planet and people.
Friedman is often asked why an accounting professor is concerned about teaching sustainability. “If you want to manage something, you need to measure it,” he says. “If you want to figure out if you’re making progress toward goals, you need metrics. This is as true for sustainability-related performance as it is for financial performance. Accounting professionals have been thinking about measuring and reporting financial performance for centuries.”
The EU has recently enacted several regulations to encourage corporate social responsibility and sustainable practices, from the Non-Financial Reporting Directive of 2014 to the European Green Deal of 2020 and beyond. Profit, Purpose and Policy will examine the intersection of government regulations and corporations’ responses to the EU’s regulatory environment — a potential preview of regulations companies in the U.S. will face. Students will visit organizations in Brussels, Rotterdam and Amsterdam that Friedman expects will provide useful examples of how European companies meet regulatory standards and adapt their business practices to addressing the climate crisis and other sustainability-related risks and opportunities.
“If you want to figure out if you’re making progress toward goals, you need metrics. This is as true for sustainability-related performance as it is for financial performance.”
“Over the last 10 to 20 years, Europe — particularly at the multinational EU level — has been doing more than the U.S. at a federal level to enact sustainability-related policies,” says Friedman. “These are requirements for companies — what do they have to say about what they’re doing in terms of sustainability, how are their actions affecting people, planet, nature, climate? An EU-wide emissions trading system has been around for quite a while. We’ve got one in California, we’ve got one in a consortium of northeastern states, but it’s not something that exists at a coordinated national level.”
On the basis that “good climate policy can promote growth,” the Inflation Reduction Act of 2022 proposes massive investment in reducing carbon pollution as well as expanding business and the U.S. economy. “What we’ve seen happening in Europe over the last 20 years is happening faster now in the U.S.,” says Friedman. Increasingly, he notes, U.S. companies feel pressure from investors — if not also the government — to disclose their corporate performance from the factory floor to the board room, and all along the supply chain.
Anderson’s Center for Impact launched the Open for Good platform to offer a comprehensive assessment of corporate transparency across ESG categories. Based on the most commonly disclosed corporate sustainability metrics among S&P 500 firms, researchers at the Center for Impact reported that current voluntary sustainability disclosures frequently fall short. Evidence suggests that firms will need to undertake significant efforts to comply with forthcoming regulatory changes in the IRA’s “pro-growth climate policy,” especially in greenhouse gas emissions reporting.
Europe is about to adopt new standards that Friedman believes California and the rest of the nation can learn from. So Friedman’s class will travel to Brussels, the de facto capital of European government, where students will visit the European Commission and meet with regulators and standard setters in large organizations who interface with Europe’s main institutions and regulatory bodies. In Rotterdam, a global shipping and infrastructure hub, the class will tour Europe’s largest seaport. In the economic center of Amsterdam, sessions will address successful climate change adaptation policies, infrastructure, mobility transition, real estate and ESG investing.
“What we’ve seen happening in Europe over the last 20 years is happening faster now in the U.S.”
Friedman also expects class participants to learn about challenges European firms and regulators are facing, and what the U.S. can learn from Europeans’ experience.
For example, how do rising sea levels affect business and commerce? “Much of the Netherlands sits at or below sea level,” says Friedman. “The country has mastered water management for generations. New York, for example, might learn from the Netherlands. However, too little water can also be a problem: recent drought has affected transportation and shipping.” Carbon emissions and water quality become concerns, too, says Friedman. “Much of Europe is facing agricultural backlash to climate policies. It becomes a tradeoff between agricultural productivity and negative climate impacts.”
Friedman believes “real progress requires actions that can be measured well.” In his research he uses theoretical models and archival data to study a variety of topics related to corporate governance and capital markets. He was on leave from Anderson for a year as a visiting economist in the U.S. Securities and Exchange Commission’s Division of Economic and Risk Analysis, and previously taught at MIT and Wharton.
Friedman and Anderson colleague Associate Professor Valentin Haddad co-taught an elective focused on environmental, social and governance issues relevant to corporate managers and investors. They asked MBA students to consider many aspects of sustainable business, including data quality, investment choice and the regulatory and social landscape.
“Although sustainability reporting is traditionally voluntary,” says Friedman, “much is quickly moving to being mandatory and regulated. Some standards and standard setters come from the financial reporting area because they’re used to thinking about how stakeholders, such as investors, make investing decisions based on firms’ performance.” Indeed, the International Financial Reporting Standards Foundation develops standards for both financial and sustainability reporting via the International Accounting Standards Board and International Sustainability Standards Board.
Friedman expects Profit, Purpose and Policy to provide an excellent hands-on learning experience to a mix of students, whether they’re focusing their careers on sustainability or are just curious about how it relates to operations and corporate management. “The topic could be relevant to any function the students are working in — even as a general manager or entrepreneur,” says Friedman. “The opportunity to learn about it in a global context, involving a trip to phenomenal cities, and the ability to meet with multinational companies, is appealing.” Although Friedman is new to leading global immersions, in 2022 he served as secondary faculty for Professor Stuart Gabriel’s course, Startup Nation: Entrepreneurship, Innovation and Sustainability, which featured visits to several companies developing novel ways to address sustainability challenges in Israel.
Students and alumni rate Anderson’s global immersion courses and international exchanges consistently high among their most rewarding business school experiences. The courses expose students to a country’s economy and political environment but also to aspects of local culture and key historical events that inform how to conduct business outside the United States. “Both from a professional and a personal standpoint, I think this course presents the opportunity to provide those insights,” says Friedman. “There’s a high bar and I hope to hit it.”
