Social impact and B corp

Watch: Business is about purpose: R. Edward Freeman at TEDxCharlottesville 2013

Key points:

• Business is about more than just profit.
• There are three flaws in the story that business is just about profit:
  • Money in the purpose – profit is a necessity, but it is not the primary objective. Entrepreneurs do not start businesses just to make money – they start businesses because they are on fire about an idea or an issue.
  • Business and Ethics contradiction – there is a mismatch between the story that is told about the purpose of business being to make profit and what we know it takes to run a successful business, and how we understand ethic – ethics is about how we interact with each other and is therefore at the center of business.
  • People are not simple beings of pure economic self-interest – human beings have more complicated motivations than just ‘carrot and stick’ – we don’t leave our values at the door when we arrive at work.
• Business is about working together to create value together – for stakeholders, not just shareholders.
• Business is about purpose – get the purpose right and the profits follow
• Creativity is the only infinite resource we have – when the tradeoffs we are presented with are unacceptable – it sparks creativity and previously inconceivable solutions are often achieved.   
• What we need to do …
  • Put ethics and values at the same level on the agenda as making profit
  • See conflict, challenge and critique as important and constructive – push back is key to reinforcing and living values 
  • Raise the bar and expect more from our companies and co-workers.

Definitions

What’s the difference between a Certified B Corp and a benefit corporation?

Benefit corporations and Certified B Corporations are often confused. The B Corp Certification is a third-party certification administered by the non-profit B Lab, based in part on a company’s verified performance on the B Impact Assessment. The benefit corporation is a legal structure for a business, like an LLC or a corporation. Benefit corporations are legally empowered to pursue positive stakeholder impact alongside profit. Some companies are both Certified B Corporations and benefit corporations, and the benefit corporation structure fulfills the legal accountability requirement of B Corp Certification.⁴

Listen: Reasons to be Cheerful podcast Episode 166. TO B(CORP) OR NOT TO B: a different way of doing business

Key Points:

20:08 – 34:11. UK perspective:

• The B Corp movement is trying to change the economic system from within to empower people to use business as a force for good.
• B Corp certified businesses meet the highest standard of verified social and environment performance with public transparency and legal accountability to be able to deliver profit, and a higher purpose.
• B Corps are based on the principle that companies have a duty not only to their shareholder but to employees, communities and the environment – they hold themselves accountable to the triple bottom line model.
• A perceived lack of humanity, ethics and accountability in how big businesses are run has led to a lack of trust and growing inequality – B Corps aim to restore that trust by reintroducing the ‘people’ element and carrying the ethics and values that people live in their daily lives through into the businesses they run.
• It can take companies 12-18 months to achieve B Corp certification – working with B Lab to refine their policies, commitments and actions, and update their articles of association to state that their aim is to optimise stakeholder returns  – as against purely shareholder returns – making them accountable for and responsible to the wider stakeholder communities within which they exist – campaigners are advocating that this responsibility should be written into law rather than being voluntary as it currently is.
• The B Corp declaration of interdependence recognises that healthy economies require healthy people and healthy environments, all of which are interdependent.

34:11 – 43:58. US perspective:

• Shareholder primacy is the idea that the sole purpose of companies is to raise share prices – to make as much money for shareholders as possible.
• There are a number or perceived issues with this approach:
  • In the US, share ownership is concentrated in a small group of already privileged people, thus contributing to widening the socio-economic gap.
  • Concentrating on giving back to shareholders means there are less resources to be dedicated to the workforce in the form of benefits etc.
  • Contributions to climate change can potentially be seen as justified if the end result is financially beneficial to the shareholder .
• Delaware corporate law, which is dominant in the US, states that in certain situations shareholder value must be the primary responsibility of the Board of Directors – this can lead to problematic behaviour from companies that is currently allowable in law and directing capital away from R&D and employee benefits.
• A stakeholder approach seeks to rebalance power within corporations, and between corporations and broader society.
  • This approach calls for a re-assessment of what it means for a company to be publicly chartered – in return for public permission to operate, corporations should serve the public interest.