B-lieving in B Corps

Corporate Citizenship

It’s often difficult to distinguish a genuine commitment from a business to become more responsible and sustainable from those who are merely greenwashing. B Corp certification is one way for companies to genuinely set themselves apart.

B Corporations are businesses that meet the highest standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose, and are part of the global movement calling for “business to be a force for good”. In a recent full-page ad published in the New York Times, the CEOs of some B Corporations called on major US companies to join them in the commitment to focus on social and environmental value, and change their legal status to B Corp. But how feasible is it really for multinationals to focus on creating wider societal value whilst meeting shareholder demands to maximise profits?

B Corp founder Jay Coen Gilbert explains: “B Corps redefine what it means to be successful in business. B Corps still like to make money, but that’s not the reason for their existence. They exist to make a difference. The money they earn helps make this possible.” Critics however still argue that certifications like B Corp are merely smokescreens; LEED certification (which provides independent verification of a building or neighbourhood’s green credentials) can draw the attention away from a company’s highly polluting factories elsewhere, without obligating the company to implement further changes.

So while it is true that the B Corp community is growing in numbers – as today, more than 3,000 companies in 150 industries and 64 countries are registered – the majority of these to date are small businesses that operate on a defined local scale. As yet, none of these certified companies are part of the Fortune 500 club, nor do they include entire multinational holdings (though some multinationals such as Unilever, Danone and Procter & Gamble have been able to certify some subsidiaries). This is not a coincidence, as enterprises that operate on a large scale are confronted by significant barriers to become certified B Corps, as they are required to reallocate resources and organisational structures to meet standards that are much easier for smaller players.

To become part of the B Corp family takes commitment, with companies needing to obtain at least 80 out of the 200 available points on their assessment and be re-evaluated every three years. Companies need to remain actively committed to membership as they can also lose their B Corp status, which was the case for Etsy, which had to give up on its B-Status in order to maintain its corporate structure and continue expanding its market scope.

One multinational demonstrating the feasibility of adapting a traditional model to a socially responsible one is Danone, where 20 of its subsidiaries are already B Corp certified, including Danone North America, which is currently the world´s largest B Corp – with more than 6,000 employees and a dozen manufacturing facilities. Danone aims to be the first multinational with worldwide B Corp certifications – one subsidiary at a time.

However, even if American giants (who generally tend to jump on the sustainability bandwagon later than their European peers) haven’t yet managed to achieve the B Corp status, there are signs that many of today´s private sector leaders are looking to transform the purpose of their business into a model that has a positive reach beyond the pursuit of profits.

The Business Roundtable that took place in August this year, reflects this spirit, as it released its “Statement on the Purpose of a Corporation” signed by 181 CEOs from companies such as Abbott, Amazon, Apple, the Coca-Cola Company and General Electric, that expressed their commitment to lead their companies in benefit for all stakeholders. Important side note: however the statement did not mention any commitment to address climate change, a subject which is rather prominent within the B Corp collective.

While it remains to be seen to what extent these companies will really change their business models there is a growing movement towards diversifying from the sole focus on short-term financial results, recognising the competitive advantage and attractiveness to talent that comes with B Corp status.

B Corps are steadily illuminating a path to success. As they undergo the independent certification, their shareholders and other stakeholders can be assured that they meet the highest standards in terms of positive impact on workers, customers, community and environment. The current wave of ESG investment in the financial market – which represents more than USD $22 trillion of global assets, over 25% of the total – means that investors will be more likely to turn towards organisations that are regarded as leaders in terms of positive impact to their stakeholders. This has pushed some B Corps, such as Laureate and Silver Chef, to become publicly traded companies. Moreover, one of the leading organisations of the B-Movement, Patagonia, has addressed this growing trend by collaborating with Yale University and Caprock to release “An Investor’s Guide to B Corps”, with the purpose of shifting investors’ attention to these new “role-model” enterprises.

Leave a Reply

Your email address will not be published. Required fields are marked *