“B Corp certification is to sustainable business what LEED certification is to green building or Fair Trade certification is to coffee. B Corps are certified by the nonprofit B Lab to meet rigorous standards of social and environmental performance, accountability, and transparency.Today, there is a growing community of more than 600 Certified B Corps from 15 countries and 60 industries working together toward 1 unifying goal: to redefine success in business.” – B Lab
In an effort to harness the strength of business to enact social change, one nonprofit organization pledges to expand its vision worldwide.
B Lab, the nonprofit American organization that certifies B Corporations, promised to certify 100 businesses outside of the United States in 2013. B Corporations are for-profit organizations that wish to “redefine success in business” by “not just being the best in the world, but being the best for the world.”
Certified B Corporations are held to a higher social standard than regular companies. They undergo a rigorous examination of their treatment of employees, their surrounding community, and the environment, and must voluntarily demonstrate a commitment to corporate social responsibility and the triple bottom line. B Lab and the B Corporation community have worked to pass legislation in 11 American states to grant these “benefit corporations” certain legal rights “to pursue a higher purpose than profit,” according the the B Corporation website.
Generally, for-profit businesses are legally obligated to serve the best interests of their shareholders, even if those interests work against the company’s social or environmental mission. With the certification of B Corporations and the approbation of benefit corporation legislation, B Lab hopes to change that.
Certified B Corporations are held to a higher social standard than regular companies.
On its website, B Lab recognizes the importance and necessity of government and non-profit organizations, but also acknowledges that ”business, the most powerful man-made force on the planet,” is the aspect of society most adept at overcoming the world’s greatest social and environmental obstacles. B Lab asks B Corporations to detach themselves from the mindset that profit is the greatest (or only) measure of organizational success.
On September 25th at the Clinton Global Initiative (CGI) Annual Meeting, B Lab announced its commitment to certify 100 non-U.S. companies next year. B Lab also announced its first international partnership with Latin America’s Sistema B to jump-start its global expansion. Less than a week after the CGI annual meeting, the Projection Room, a consultancy company in Melbourne, became the second certified B Corporation in Australia.
The expansion of B Corporation certification and benefit corporation legislation is important in order to allow companies with a goal apart from profitability to be able to maintain that agenda. Without such legislation, companies’ bylaws require them to serve the needs of their shareholders, meaning to increase revenue, even if doing so compromises some or all of the company’s social stance.
The assumption in modern business is that every effort made by a company is intended to increase the revenue of that company. Any societal benefit or “greater good” that is achieved in addition to the augmentation of profits is merely considered a bonus point. Companies may certainly contribute to the public good, but only when doing so benefits them as an enterprise. As Aneel Karnani, a writer for The Wall Street Journal articulated it; “in most cases, doing what’s best for society means sacrificing profits.”
For example, an attempt to reduce pollution caused by a company may cut into profits. Or, if companies increased the wages of their cheap laborers, their profits would diminish as well. It stands to reason, then, that corporate social responsibility is not especially important to for-profit organizations.
The Patagonia leadership was committed to running a profitable business, but never at the cost of its employees’ livelihood or the environment
This may be true for most companies. In general, corporations will take into account the benefit of society only when it is accompanied by a profitable advantage as well. The world has seen several examples of this mutual public-good/corporate-profits benefit: the food industry appealing to the new trend of health-conscious consumers by putting out lower calorie, lower fat, lower carbohydrate options, or the car industry responding to rising fuel prices by creating fuel-efficient vehicles. In both of these cases, the market, not the corporation’s social consciousness, is the driving force.
This is not to say, however, that the switch to healthier foods or more efficient cars is not a social achievement: no-doubt it is part of a long-term strategy for profits, but the result has been that people are eating healthier and consuming less fuel.
If the nature of business and of capitalism is such that companies will be socially responsible only when the company stands to gain something as well, this assumes that a CEO or a board of trustees is never motivated to do something for the good of society without regard to its own benefit, and that profitability is its primary goal. Yet, as more and more for-profit organizations demonstrate a desire to create an impact that goes beyond increasing profits, this assumption is seeming increasingly antiquated.
It has been famously put to the test by ‘Ben & Jerry’s‘, who developed and grew their ice cream business by using Fair Trade ingredients, green packaging, and dairy products from local farmers who did not treat their cows with growth hormones. On top of that, they elected to donate 7.5% of their revenue to charity.
Meanwhile, critics would argue that the company’s stock fell from $34 to $17 in just six years (1993-1999) as ‘Ben & Jerry’s’ held strong its commitment to its social agenda. Profit was not ‘Ben & Jerry’s’ main aim, and the company consistently demonstrated a genuine dedication to the triple bottom line. By 2000, though, ‘Ben & Jerry’s’ was reluctantly acquired by multinational corporation ‘Unilever‘. Ben & Jerry’s founders feared that such an acquisition would compromise the company’s social agenda. However, because companies are legally obligated to serve their shareholders’ interests above all, ‘Ben & Jerry’s’ was forced to accept ‘Unilever’s’ offer of $43.60 per share or else risk lawsuits from shareholders.
In 2009 however, stars seemed to align when ‘Unilever’, at the instigation of CEO Paul Polman, stopped issuing quarterly reports as part of the company’s ‘sustainable living plan’ on the grounds that short term updates prejudice against the needs of long-term thinking. As a UK-based company Unilever can do this, whilst for now quarterly reporting is mandated in the US.
Ben & Jerry’s is not alone. Yvon Chouinard, founder of outdoor apparel company ‘Patagonia‘, also wanted his business to be guided by a social and environmental goal. Rick Ridgeway, Patagonia’s vice-president of environmental initiatives, said the company’s mission was to
“make the best product, but do it with no unnecessary harm and use business to implement solutions to the environmental crisis.”
For example, Chouinard insisted on using only organic cotton after witnessing the environmental effects traditional cotton farming has on the land. Additionally, he gave employees the freedom to wear whatever they wanted, even allowing them to work barefoot, and made their schedules flexible so that they could “surf the waves when they were good, or ski the powder after a big storm, or stay home and take care of a sick child.” The Patagonia leadership was committed to running a profitable business, but never at the cost of its employees’ livelihood or the environment. In January of 2012, Patagonia became California’s first legal benefit corporation, thereby incorporating its social values into its legal structure.
Until recently, companies like Ben & Jerry’s and Patagonia legally could not place their social mission above or even on level with their profitability. Now, B Lab is working to strengthen socially conscious organizations.
The current corporate legal structure assumes that companies are singularly focused on increasing revenue. For many companies, this is a rational and valid assumption. But for companies like Ben & Jerry’s, Patagonia, and other current or future certified B Corporations, the good of society is another main focuses. Certified B Corporations and benefit corporation legislation is necessary to ensure that these socially-motivated companies have the legal protection to be able to advance that cause.