B Corp Revolution
Can “Capitalism Lite” save us?
More and more businesses are becoming B Corps – effectively altering their corporate DNA to legally mandate a triple bottom line of people, profit and planet. Is “Capitalism Lite” the new way of doing business?
The annual study Edelman Earned Brand tells how brands can “earn, strengthen and protect their relationships with consumers.” Around 40,000 respondents in Brazil, China, France, Germany, India, Japan, the U.K. and the U.S. take part and in 2018, one opinion stood out. The report found that 64 percent of consumers now self-identify as “Belief-Driven Buyers” – a 13-point increase from 2017 – and concluded: “These consumers said that they use brands to demonstrate their personal values. They will choose, switch, avoid or boycott a brand based on where it stands on the political or social issues they care about.”
Another Edelman study focused on employers, and in 2019 it noted a similar shift when it comes to what people demand of the companies they work for. These studies are only two examples that demonstrate how values change in society and about how companies should – or must – take into account other factors than the bottom line to remain relevant.
A growing group of companies - the B Corporations - endeavor to do just that.
Founders with a mission
The three founders of the nonprofit organization B Lab had anticipated this trend towards valuesdriven business long ago.
“B Lab was founded in 2006 by 3 friends, Bart Houlahan, Jay Coen Gilbert, and Andrew Kassoy in an effort to create the market infrastructure to make it easier for mission-driven businesses to protect and improve their positive impact over time,” explains Hannah Munger, Head of PR & Communications at B Lab.
After certifying the first nineteen B Corps in 2007, B Lab’s founders realized that they needed a legal framework and credible standards in a marketplace where everyone claimed that they were a “good” company.
Seeing this as the natural next step, in 2010 B Lab began lobbying US states to pass “benefit corporation” legislation. Benefit corporations expand the obligations of boards, requiring them to consider environmental and social factors, as well as the financial interests of shareholders. This gives directors and officers the legal protection to pursue a mission and consider the impact their business has on society and the environment.
Coming of age
Meanwhile in corporate America, business leaders had begun slowly waking up to the fact that shareholder profit isn’t everything. Last summer The Business Roundtable, an association of CEOs of America’s leading companies, declared that business was “responsible for providing economic benefits to all, not just its investors.”
After the official announcement from the Business Roundtable, thirty American B Corporations including Cotopaxi, Klean Kanteen and Patagonia, seized the occasion to challenge the Business Roundtable. A full-page ad was released in the New York Times at the end of August 2019, with the headline Get To Work:
“We are businesses that meet the highest standards of social and environmental performance. Business Roundtable, we’d like
to help you get there, too, to meet your newly announced stakeholder values. Let’s get to work—together.”
An international movement
Today, a company can register as a benefit corporation in 34 states and Washington, DC. Italy was the first country outside the US to adopt this policy, and Colombia and the province of British Colombia in Canada have since followed. In Europe, there are now about 600 B Corporations in 20 countries, with a steady growth. Nathan Gilbert, B Lab Europe Executive Director explains:
“The movement really picked up the last couple of years as there are more leaders and influential companies paving the way. The certification applies easily to European constraints which makes it globally relevant.”
Many of the European countries already have laws and regulations addressing companies that want to integrate stakeholder consideration into their governance structure. However, these national systems are not always a perfect match with the legal requirements in the B Corp certification process, which have some concerned about its overall exportability.
For instance, in 2019 France enacted Loi Pacte, which puts forward the special legal status of a Société à Mission. (“mission-driven company”). B Lab France subequently issued a few recommendations to explain that “the system created by the Loi Pacte was too permissive and could lead to mission-washing. Elizabeth Soubelet, board member of B Lab France, comments:
“We think it is important to strengthen this new legal status to make it more credible.”
While national legal structures may pose challenges, Hannah Munger believes that the B Corp certification process as a whole remains credible even in international contexts:
“The process to achieve B Corp certification is rigorous and holistic. Certified B Corporations must achieve a minimum verified score on the B Impact Assessment (or BIA)—an assessment of a company’s impact on its workers, customers, community, and environment—make their score public on our website, and recertify every three years. Certified B Corporations also amend their legal governing documents to require their board of directors to balance profit and purpose.”
Join the community
From just 82 B Corps in 2007 to over 3,000 today, B Corps are booming.
“People want to buy from, work for, and do business with companies they believe in and with whom they share values – like B Corps.”
There are three layers in the B Corp movement explains Elizabeth Soubelet from B Lab France. Firstly, the B Impact Assessment (BIA), an online, open source tool, which helps businesses assess where they are and think about how to renew their business model. The second layer involves the certification for companies who really want to challenge themselves.
“The last layer is a tight knit community which grows together and cooperates as often as possible.”