Business is rarely a byword for sustainability. Sometimes a founders’ own ethics build a corporate culture of greater environmental care. Now, the B Corps system of earning accreditation – although far from perfect – may offer a glimpse of an alternative future in which people and the environment are higher priorities. Capitalism and the corporate structures it has created do not reward sustainability, and companies are constituted using principles of profit and shareholders first. Various attempts have been made to mitigate the effects of this. A recent initiative from the US-based Business Roundtable offers companies the chance voluntarily to change their purpose and drop the ‘shareholder first’ approach. There’s straightforward regulation to protect people and the environment, and systems such as ISO standards have aimed to raise standards. But none have emerged as successful in fundamentally changing the way a company does business and generating a new industry standard. Supporters of B Corps hope to change that.
To cut through a lot of “greenwashing” – the process by which firms promise vague and impressive aims without any monitoring of real achievements – in 2006, a US not-for-profit called B Lab set up an accreditation scheme to check that, among other things, companies’ energy use, recycling and supply chains were sustainable and transparent. The process is rigorous and can take up to two years.
Applicants first fill out a free online B Impact Assessment, (BIA) which evaluates how a company interacts with its workers, customers, community, and environment. B Lab then verifies each score to determine if an applicant company meets the 80-point bar for certification. Documentation must then be submitted to validate responses before signing the declaration and paying the annual sliding scale fee – from $1,000 upwards depending on turnover. To maintain certification, B Corps must update their BIA and verify their updated score every three years.
To date, they have raised $32m in “philanthropic capital” and signed up 2,750 firms worldwide. This is not a huge number – there are an estimated 200m firms worldwide – but it is influential in shifting business values, challenging cultures of growth without responsibility, building an alternative corporate model and inspiring others – such as recent startup Provenance, which enables consumers to check a product’s ethical credentials. British restaurateur, food campaigner and public figure, Jamie Oliver, announced plans in August 2019 to turn his business into a B Corps, joining 217 other such companies in the UK, up from just 6 in 2014.
There have been ethical businesses for some time across a range of sectors, from retail and wholesale, to banking and funeral care. Many of these were formed at the community level as co-operatives, social enterprises or community benefit societies, sometimes with a religious or political driver behind them. Many are also not-for-profit. B Corps deal with firms that operate as for-profits, but do not follow any particular religious or political ideology. Their process is easily replicable in other countries, making it a useful mechanism for shifting “business as usual”. B Labs already have local partners on the ground expanding their network in Latin America, Africa, Europe, East Asia and Australasia.
Society’s most challenging problems cannot be solved by government and nonprofits alone. Business is a major generator of economic wealth and employment and many corporations operate globally in a way that government cannot. Between 95% and 70% of work in countries around the world is provided by the private sector. The idea is that by harnessing the power of business, B Corps can use profits and growth as a means to a greater end: a positive impact for their employees, communities, and the environment. B Corps provide a model which – although relatively limited in size today – has the potential to revolutionise business if industry responds to its younger consumers and the realities of climate change.
The values and aspirations of the B Corp community are embedded in their “Declaration of Interdependence”:
Certified 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. They aim to accelerate a global culture shift to redefine success in business and build a more inclusive and sustainable economy. Their ultimate vision is that one day there will be no B Economy—just a global economy that aligns its activities toward achieving our common purpose of a shared and durable prosperity for all.
In a time of political gridlock and division in many countries, the B Corp is an idea that has successfully generated incredible bipartisan support. In the US, legislation to create “benefit corporations”—a new corporate structure based on the B Corp idea—has been passed in “red” (Republican) states like Louisiana and South Carolina, “blue” (Democrat) states like California and New York, swing states like Colorado and Pennsylvania, and even in Delaware, the home of corporate law, where more than 63 percent of the Fortune 500 are incorporated. It is not hard to see why this idea receives strong bipartisan support. B Corps are pro-business, pro-environment, pro-market, and pro-community.
In 2006, understanding of the effect humanity was having upon the planet was becoming mainstream, although there were still hotspots of dissent and climate change deniers could still be heard in the media. The Kyoto Protocol had been signed by 37 leading nations in 1997 to reduce greenhouse gas emissions, but the climate change deniers upped the ante in 1998, thanks to funding from ExxonMobil, with a petition rubbishing the science. Then US President Bush withdrew the US from the treaty and when it came into effect in 2005 with 141 countries on board, both the US and Russia were absent.
In many ways the opposition of the US galvanised many people into action, including the B Corps founders. 2007 saw Al Gore’s film The Inconvenient Truth riding high and both he and the Intergovernmental Panel on Climate Change shared the Nobel Peace Prize. However, a consistent campaign over the next few years saw belief in human-caused climate change plummet in the US, down to as low as 19% among Republicans in 2011.
The response from business during this period was patchy, although some firms used the issue to stand out from the crowd – such as the Swedish firms Skanska and Ikea, General Electric, IBM, the US carpet maker Interface, carmakers Toyota and Honda, Nike (after being publicly rebuked for its standards), and even the large retailer Walmart. Most large firms set up Corporate Social Responsibility departments in the early 2000s to oversee a range of issues to do with stakeholder engagement, community development and sustainability. However, these parts of the business were often underfunded, staffed by younger, less experienced people and treated as an optional extra rather than a core part of the company.
With no legal requirement for reporting against sustainability, businesses with strong green credentials languished for many years in special sections of the stock market, in niche funds and in a handful of countries. However, their numbers have grown steadily and today more than 90% of CEOs state that sustainability is important to their company’s success. However, B Corps take social responsibility to a much higher level and crucially expose supplier chains to the same scrutiny. This is what makes it a game-changer, able to cascade down and out into other markets. Instead of avoiding extra scrutiny, they welcomed the arrival of the Sustainable Development Goals in 2015 and see them as part of the same process, with similar aims and objectives.
We could be at the early stages of one of the most important trends of our lifetime: the growing global movement of people using business as a force for sustainability.
This is particularly important in the context of how Millennials’ judge business and make purchasing decisions accordingly. A 2019 Deloitte survey of 13,400 millennials across 42 countries and territories and more than 3,000 Gen Zs across 10 countries revealed consistent views that businesses focus solely on their own agendas rather than considering the consequences for society. Of those surveyed, 55% said business has a positive impact on society, down from 61% in 2018. More millennials than ever—49%—would, if they had a choice, quit their current jobs in the next two years.
Millennials and Gen Zs, in general, will patronize and support companies that align with their values. Younger generations are putting their money where their mouths are when it comes to supporting businesses that make a positive impact on society. Many say they will not hesitate to lessen or end a consumer relationship when they disagree with a company’s business practices, values or political leanings. Surveys show that 88 percent of business school students think that learning about social and environmental issues in business is a priority, and 67 percent want to incorporate environmental sustainability into their future jobs. A 2017 Unilever study revealed a third of consumers were now buying from brands based on their social and environmental impact.
Investors are increasingly considering environmental, social, and governance (ESG) factors in their investment criteria. The sector reached $8.72 trillion of professionally managed assets in the US in 2016, or one-fifth of all investment under professional management. But it is not just a specialized sector. This past May, financial advisory firms BlackRock, Vanguard, and State Street cast votes in opposition to ExxonMobil management and called for the company to disclose its climate change impacts. According to research compiled by B Lab, 120 venture capital firms have invested more than $2 billion in Certified B Corporations and benefit corporations. Union Square Ventures, a venture capital firm that invested in Kickstarter, says B Corps are appealing because the companies that produce the most stakeholder value over the next decade will also produce the best financial returns.