Video 2: Short-Termism and its Long-term Consequences

Understand that firms must make choices that prioritize short term benefits over long term
or vice versa. A trade off exists. Studies have proven managers focus on short term gains,
hence, harming long term performance of the company. This behavior is carefully studied
under the realm of behavioral economics.
Letter by CEO of BlackRock (skip it)
States that the global landscape is fragile due to which focus on short term objectives is
more likely. Market uncertainty is increasing due to which investor confidence is decreasing.
The various factors impacting global markets have led to social and economic problems.
Thus, reliance on companies instead of government, to solve issues, has increased.
Every company must have a clear purpose. Attainment of purpose is directly aligned with
the goal for profits since that is how stakeholders’ interests are cared for. Since people are
pushing companies into social and legal issues, leaders have responsibility to act considering
their commitment to countries, regions and social groups. Retirement is one example,
establishing a smooth retirement plan may not only improve workforce efficiency but also
aid economic security.
According to a research 63% of millennials said companies’ purpose is improving society
rather than making profits. Judging on the recent walk outs, it is evident that both
shareholders and employees have a say in company’s purpose nowadays.
Since BlackRock’s job is to guide companies in relating their purpose with sustainability,
focus on long term is very important according to them.

Video 3: Short-Termism and its Long-term Consequences:

Introduction to the Fishbank Simulation

The CEO (Larry Fink) asks other CEOs to not pay out so much money as dividends. According
to him, reinvesting money for innovation is more important. Hence, he is promoting the
concept of sustainability and long term benefits rather than short term. Secondly, short
term and long term goals both must be communicated transparently to the stakeholders
after being discussed and approved by BOD. Third, the right stakeholders and interested in
economic as well as social, environmental and political outcomes of company’s
performance. These factors must be kept in mind if a company wants to remain sustainable.

Video 4: Understanding the Tragedy of the Commons

During the fishing experience, first revenues went up and wealth increased. Then the
opposite happened rapidly after some time. Reasons:
This is because of 2 reasons:
1- Everyone had the same actions initially which led to exploitation of the same
resource.
2- Anticipation of anything unfavorable happening because limits have been reached
may cause the prices to spiral down.
TRAGEDY OF COMMONS:
Fear makes an investor ruin his own resources which are performing well initially
because of his and other investors’ wellbeing.
Essentially the fact that a business focusing on the immediate profit realization ends up
actually hurting its own capacity to produce, both economic and non-economic value for the
long term.

Video 5: A New, Research-based, Approach to the Development of a

Sustainability Mindset

Sustainability is a matter of common good (both yourself and society). One needs to
reidentify himself for which meditation is crucial. This is the reason it strengthens the feeling
for sustainability. Two techniques:
1- Exercises by neuroscientists to lengthen time horizon
2- Meditation
The experiment discussed is neurocognitive training and meditation, a combination
of both. Three groups tested. Third group was control group. All groups went
through the same MRI, training etc.

Those who meditated delayed immediate rewards, developed self-transcendence and

ethical dimensions. Inferior frontal gyrus in brain responsible for controlling temptation for
short rewards, observed a physical change and was more active.
While neurocognitively trained people experienced no difference in their preferences.

MACRO ECONOMIC CHALLENGES:

Video 6: The Sustainable Development Goals and their Relevance for

Business 

Need for global sustainability standards arise from 2 factors:

1- Global challenges- migration, climate change
2- Government standards:
These standards are multi stakeholder and cant coerce the laws upon the people.
Sustainable Development Goals (2015) is built according to the millennium
development goals. 17 standards on poverty etc. companies have signed it and
become important actors. Huge enterprises have greater responsibility.
UN Global compact is a milestone in this area. Covers labor rights etc. explains human rights
and what they include- dignity, freedom of speech etc. Business Human rights also laid
down. Companies are supposed to follow these and eradicate discrimination from
workplace for instance. Three pronged approach of respect protect and remedy. Their
voluntary adoption has increased their spread but attracted criticism at same time.

Video 7: Climate Change and its Economic Implications

Average temperature and average precipitation. We have different instruments to measure

climate today. Always been benign and gentle. Climate science has enabled us to identify
different factors affecting it. We are affecting these factors through our actions for instance,
atmosphere is being affected by our usage of fossil fuels which damage the ozone and
increase the temperature of the earth. Environmental implications are accompanied by
economic implications (agricultural productivity e.t.c). Hence, governments are concerned.
Two things to be discussed. First is mitigation which means decreasing the impact on
atmosphere by decreasing emissions from industries e.t.c through innovative technologies.
(renewable and biotechnologies). Second is adaptation. Adapt according to the new
environment (build better infrastructure e.t.c).

Video 8: Industrial Ecology – Fabio Iraldo

Green management is finding out business opportunities in environmental problems.

Circular economy is an avenue which offers lots of green management opportunities.
Michael porter said if every bit of resource used doesn’t go into the final product, it is
inefficiency on part of the company. Green management is based upon this concept. Not
utilizing all resources used leads to wastage and increases pollution.
Linear model used previously ‘take, make, dispose’. Throw away everything that you don’t
need. Now circular model has gained popularity, use excess material in some other job
instead of throwing it. reusing used product of waste into production process again makes
up a cyclical process.
Piaggi used a very difficult to recycle plastic in its vespa. Carlsberg group used very light
plastic for its beer. H&M offered discount on its product in exchange of used clothes. History
shows many companies have used circular economy but due to legislation barriers and its
costly nature, it is difficult to implement.

Video 9: Poverty and Income Inequalities – Eliana La Ferrara, Maurizio

Zollo

Global trends, particularly social aspects of sustainability discussed in this reading. Inequality
is an important subject in this discussion. Two types: relative and absolute. Relative is the
ratio between income of a lower-middle class to upper-middle class. This ratio might have
remained same through the years but the gap in $ amount of people’s incomes of different
classes has increased tremendously. Which type of inequality to consider depends upon
whether we want to valuate absolute standards of living or relative as in social cohesion
blah blah. Inequality between countries increased at an alarming rate after 1960s but after
2000, it has been decreasing mainly due to china’s higher income.
Within country inequality observes a different trend. It has been increasing in developing
countries due to the fall of communism. Some countries like France and Norway have
managed to keep it under check but it is a concerning matter for those countries’ policy
makers where its increasing rapidly.
Laferrara states that the countries that grow and decrease inequality simultaneously reduce
their poverty levels at the same time by 1.3%. while those that grow while observing an
increase in inequality observe only .4% decrease in poverty. High level of poverty in a place
means growth contributes less to poverty reduction because of the distribution mechanism
that prevails. Poor countries face difficulties in implementing fiscal policies for this purpose,
also, lack of education doesn’t facilitate profitable capital accumulation. This establishes the
link between social mobility and education.
In countries like US, absolute income mobility has decreased. This is the fraction of earning
of the children who earn more than their parents. Its due to more children being enrolled in
colleges due to general growth and development. But ivy league colleges observe a stable
influx of students. So students from low income households aren’t really given a chance
which would in turn change the inequality picture. In developing countries, shift from
farming to non-farming sectors is seen as progress, and this is brought about as a result of
private institutions admitting such pupils.
In Latin America, resources are being invested to impart education to decrease inequality.
But the quality of education is so low that it doesn’t create any difference. The wealthy
people attend better schools, so no use of the current policies. Counteracting policies are
required. Through labor training and proper education, upward social mobility should be
encouraged. Policy makers in developing countries should focus on educating not only
employees of big companies but also suppliers e.t.c which is bound to improve their
entrepreneurial abilities.

Video 10: Gender Equality and Sustainability – Paola Profeta

There is a link between diversity and sustainability. Gender is the leading subject when it
comes to diversity. Even today, labor market and political participation sees a disbalance in
gender. The World Economic Forum says only 58% of the opportunities are fair to both
genders. Gender equality is related to Per capita GDP (however, no causal relationship has
been established). The differences between men and women’s working style are an
important factor to consider here. Women like less risky jobs which pay more usually. They
also dedicate more time to household etc. hence, less women in the workplace. Firm choice
to hire men because of fear of women leaving the jobs is also a reason for unequal
opportunities. Institutes promote female employment by passing policies for maternal leave
etc.
Maternity is an important factor that reduces female participation but it doesn’t explain the
subject properly since in some countries where female employment is very high, the fertility
rate is also high. Secondly gender gap and unemployment, while related, don’t refer to the
same thing. Less employment opportunities don’t explain why women cant climb up the
ladder of hierarchy as easily as men. Need gender quota to solve this problem. But a false
myth against this says this violates meritocracy. Women are more concerned about
environmental issues than men, so gender equality is bound to increase sustainability.