Egor Vikhrev

B Corps: a way to keep companies honest or a clever marketing trick?

With the current waves of social upheaval, more companies are feeling the pressing call to include public transparency, moral fortitude, and environmental accountability into the fabric of their business practices. The hope is that enforcing better standards of ethical and effective leadership directly into the structure of the organization will help usher the next wave of conscious capitalism.

The B Corp certification was created in the midst of this paradigm shift. It was an attempt to systematically recognize and uphold organizations that were concerned about doing better by their employees, shareholders, the public, the consumers, and the environment alike.

B Lab, the nonprofit that created and currently governs the B Corporation certification, believes that society’s most pressing problems should not only be solved by government and non-profit organizations, but also by using business as a catalyst for a more “inclusive, equitable, and regenerative economic system for all people on the planet.”

The 1st generation of B Corps were certified in 2007. Back then, a mere 82 companies had this elusive “stamp of good”. Today, more than 1,700 companies in 50 countries boast the B Corp label.

The three pillars of B Corp companies are verified performance, public transparency, and legal accountability. Combined, these pillars can be referred to as “triple bottom line thinking.” This philosophy further purports that businesses and corporations must equally incorporate tenets of social change, environmental impact, and profit into their current business model in a concerted effort to build a re-imagined society.

But to maintain the B Corp certification, companies must demonstrate that they are upholding these standards beyond mere words, and definitely beyond the illusory tactics of greenwashing that many larger companies are currently hiding behind.

According to this model, profit and growth are seen as a means to a greater end. The B Corp website asserts that “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. B Corps are accelerating a global culture shift to redefine success in business and build a more inclusive and sustainable economy.”

How well does this “stamp of approval” reflect how these companies run in real life?

not exactly the same as benefit corporations

It should be noted here that B Corp certified companies are not necessarily the same as benefit corporations, though both types of companies espouse similar philosophies. The difference between the two is a technical one: A benefit corporation is a new type of legal entity that is designed to produce a public benefit, in addition to driving shareholder value. In other words, the benefit corporation is a legally defined entity, much like a company can officially have a 501c(3) status.

The Benefit Corporation model actually derived from the B Corp movement. Many business owners felt that the B Corp certification could not adequately provide the legal protection of a government-recognized status. This idea was further compounded when Senator Elizabeth Warren introduced the Accountable Capitalism Act, a piece of legislation with bi-partisan support that requires “all corporations with more than $1 billion in revenue to become federally chartered and adopt a new model of corporate governance based on the benefit corporation model already in use in 34 states.”

The mission of benefit corporations are threefold:

  • Governance: Directors must consider the interests of non-shareholders that are affected by the company’s conduct (e.g. employees, local community)
  • Transparency: The company has an obligation to report to shareholders on its overall social and environmental performance; and
  • Accountability: Shareholders can bring lawsuits to enforce the company’s public benefit mission. The Delaware Public Benefit Corporation is a live example of how the benefit corporation standard is integrated directly into the state’s corporate code.

In contrast, a B Corporation company is one that has been certified and registered by the 501(c)3 organization, B lab, and does not have a legally defined business structure. In order to maintain B Corp status, the company must pay fees and undergo the annual recertification process. The actual procedure can be found here.

So what exactly are the benefits to being B Corp certified? There are 3 main pros:

  • It solidifies the company’s public identity as a corporation that has both shareholder and stakeholder success
  • It gives the company a clear direction and thorough standards to maintain quality control
  • It helps the company stand out in the midst of a greenwash epidemic occurring across the nation, especially amongst the largest companies. It also directs consumers right to the front door of these companies by helping them cut through the marketing hype of “sustainability” and “social equity” to find businesses that are truly socially and environmentally responsible. If, that is, they believe the B Corp status actually stands for a higher standard of good.

examing actual companies

Greyston Bakery

  • Supports anti-recidivism through workforce development and mentorship programs
  • Upholds equitable hiring practices

Patagonia Works

  • Maintains high Internal Standards
    • Maintains stringent quality control procedures over their entire supply chain
    • Advocates for just working conditions
  • Maintains high Environmental Standards in their manufacturing practices

Cascade Engineering

  • High Internal Standards
    • Partners with local government to help employees move from welfare to a career
  • High Environmental Standards
    • Diverts 100% of its waste from landfills

Natura Cosmeticos SA

  • High Environmental Standards
    • produces carbon neutral products
    • advocates for the sustainability of the Amazon Forest
  • High Public Transparency about employment

Animikii

  • High social standards
    • Indigenous owned and operated
    • Partners with leading orgs to create better social and economic outcomes for Indigenous communities

Now, to bring the measures of good to current relevance, the B Lab has provided guiding resources in the form of reports and best practices to help companies navigate the current pandemic, as well as for future times of crisis. What the B Lab seemingly recognizes is that our current times call for models of resilience and direct action.

The first of these resources shows how B Corps can better support stakeholders through the JEDI (justice, equity, diversity, and inclusion) philosophy. It features real-time examples of how companies are navigating the current pandemic.

The second resource is a downloadable report called The Future of Work is Now. This report highlights articles from the B Lab’s own publication on Medium.com called B the Change, which aims to address the most pressing social problems like the ongoing fight against systemic racism.

The report also provides real-world programs and applied knowledge from B Corps that demonstrate how incorporating stakeholder engagement can redefine and reshape capitalism for the better. It spotlights issues like worker-owned cooperatives, financial wellness programs for employees, or ways to instill better hiring practices that provide opportunities for refugees or formerly incarcerated people.

Beyond these platitudes, however, to truly know the actual outcomes of B Corporations, there needs to be a way to ensure full transparency of a company’s actual business practices and consequences of their products or services. To begin, let’s look at some of the practical advantages vs. disadvantages.

Practical Advantages

Similar to other business associations, certified B Corporations and their employees have access to a number of discounts from outside entities and fellow members. First, B Corps have access to academic contributions of loan forgiveness.

A second incentive is that B Corps can use their seal of certification as a branding tool. The B Corp label itself is a quick, effective visual cue that softens the first cognitive barrier of consumer approval.

Third, B Corps don’t have the same legal liability as a benefit corporation but enjoy much of the same reputation as an environmentally-conscious and socially-aware business.

Due to these tangible incentives, one can argue that altruism is not always the main motive behind companies seeking or maintaining B Corp status. On the same token, others can reason that as long as the business is actually producing quality service or products that, in the end, is making the world a better place, then why bother arguing about the original motive?

Furthermore, there are also practical disadvantages that could potentially counteract ulterior incentives for “doing good”. 

Practical Disadvantages

The first practical disadvantage is related to the last advantage mentioned earlier. Although the B Lab certification has no legal liability, because it lacks an official legal status, it may not appear as legitimate as a government-regulated benefit corporation.

Another disadvantage is that in order to obtain and maintain a B Corporation certification, the B Lab charges annual administrative and legal fees depending on the revenue generated by the respective companies.

Lastly, because B Corps are merely certified and not a legal entity, they don’t enjoy the same corporate tax benefits as other business structures with a recognized legal status.

Are these practical disadvantages proof enough that companies that seek B Corp certification truly wield the right perspective and intent? Common sense would suggest that there is no human way to measure the true intention of a single company, but is there a way to measure the overall impact of an organization?


critiques

Anand Giridharadas, former columnist for NYT, thinks that the B Corp movement, though a noble attempt, does not do justice to its platitudes, and is trapped in a narrative he calls “Marketworld”, which is essentially the idea that the answer to the world’s problems can be fixed through and by the market, by the “personnel of capitalism”.

Giridharadas asserts that capitalism itself, or perhaps the way it has largely devolved into what it is today, is at least one of the primary causes of the problems that B Corps are trying to solve in the first place.

Joseph Stiglitz, a Nobel Prize economist, is another proponent of this perspective. He states, “Like the dieter who would rather do anything to lose weight than actually eat less, this business elite would save the world through social-impact investing, entrepreneurship, sustainable capitalism, philanthro-capitalism, artificial intelligence, market-driven solutions. They would fund a million of these buzzwordy programs rather than fundamentally question the rules of the game— or even alter their own behavior to reduce the harm of the existing distorted, inefficient and unfair rules.” He firmly believes that business cannot use top-down, market-based solutions for deeper societal issues.

Jay Gilbert, the co-founder of B Lab, retorts with a formidable rebuttal. He purports that the quality control of B Corp certified businesses are mediated through a principle of continuous improvement, which forces the companies to constantly test their core assumptions to ensure they’re “challenging existing power structures to fundamentally question the rules of the game and alter behavior.

He goes on to state that the B corp idea is constantly evolving to support better best practices. Gilbert believes that better corporate governance alongside public relation is a necessary facet to public welfare.

One of the ways this is achieved is through the Declaration of Interdependence, where NPO, NGO, public and private companies come together to solve the world’s most challenging problems. B corps address the primary flaw in traditional corporations that essentially places the shareholders front and center. Instead, B Corps vow to give equal stock to stakeholders, shareholders, employees, and consumers.

Leave a Comment

Connect