It Pays Off To Be Kind: The Case for B Corps

“The business of business is business.” This notorious phrase refers to Milton Friedman’s famously provocative article published in 1970 that discussed the ‘social responsibility of business’ a responsibility that he believed was solely to increase profits. Friedman and like-minded economists agree that the most legitimate and concrete goal of a conventional corporation is to maximize shareholder interest; any activity undertaken without such end in mind is misguided. Yet, driven in part by the ongoing transfer of wealth to millennials, not only is the correctness of the profit motive being called into question but so is that of modern capitalism itself; a Harvard University study in 2016 found that fifty one percent of 18-29 year olds did not support the system. Why would the majority of millennials feel opposed to an economic structure that has generated some of the highest levels of human prosperity ever accomplished?

In reality, it is highly unlikely that the respondents reject the entirety of the system. Rather, millennials are perhaps conveying their disapproval of the way in which capitalism has been practiced for the last century. B Corp certification, which aims to make corporations in our capitalist society more transparent and accountable, may be the answer to millennials’ concerns.

B Corps, or benefit corporations, are for-profit companies committed to harnessing the power of business to address social and environmental problems. Based in Wayne, Pennsylvania, B Lab is responsible for the creation of this B Corp certification, evaluating the degree to which companies applying for the certification meet stringent standards of ‘business for good’. Every year, B Corps’ performances are evaluated in terms of a B Impact Assessment, which thoroughly analyzes companies’ impact on their workers, customers, community, and the environment. A minimum verified score is required in order to maintain one’s certification, and the published B Impact Report must be readily accessible on bcorporation.net. B Corps are even required to amend their legal governing documents to contain this commitment to ‘balancing profit and purpose.’ Thus, for brands looking to merely act the part of socially and environmentally conscious in order to capitalize on consumer interests, the certification process is likely too time-consuming and taxing.

While the road to certification is by no means effortless, there are countless incentives aside from the desire to join out of pure compassion which motivate companies to aspire to achieve B Corp standards. In a study led by the Intelligence Group, sixty-four percent of millennials stated that ‘making the world a better place’ was a priority, and eighty-eight percent desired ‘work-life integration.’ These demands are reasonable. Why should we disregard values and quality of life upon entering the workplace? People increasingly want to work for, buy from, and invest in companies whose goals transcend beyond purely financial gain. In fact, Nielsen reports that the top five reasons consumers are willing to pay more for a product include brand trust, a health and wellness focus, fresh, natural, or organic ingredients, environmental friendliness, and associated social value. (B Corp’s analysis reports that sixty-six percent of consumers are willing to spend more for goods and services which contain these qualities). With millennials now wielding over $200 billion in annual buying power, and thus making up the largest current retail demographic, there is much economic merit to addressing and responding to their demands. Companies catering toward these millennial interests have the opportunity to maximize their profits in a way like never before.

"A continual increase in the number of corporations with B Corp certification is imperative to maintaining our current generation’s faith in capitalism"

In addition to millennial support, B Corp certification allows companies to become a member of a mutually beneficial network in which they have the opportunity to partner with like-minded brands. B Corps often state that they prefer to do business with others in the B Corp network, as the certification further emphasizes and insinuates the ‘trustworthiness’ of a potential partner. Forty-eight percent of B Corps have found that prospective employees are attracted to their businesses specifically because they know that the company is a B Corp. In fact, over ninety percent of millennial business students would sacrifice some pay to work for a company which shares their values. Therefore, the beliefs and goals associated with the certification not only provide a framework which an individual company must follow, but they also help make it apparent to others that, by maintaining these commitments, a certain positive impact is guaranteed as a result of their partnership.

Although receiving B Corp certification does not automatically translate to guaranteed unwavering economic success, the level of commitment which B Corps must uphold can be incredibly powerful.  According to Jay Coen Gilbert, a founder of B Lab, “at the end of the day, the only legitimate purpose of a [conventional] corporation is to maximize shareholder interest. That has a chilling effect on corporate behavior. Managers and directors of conventional companies who fail to maximize profits risk being sued by shareholders. What B Corps does is open up a whole new avenue of possibilities […] it makes it clear that we as entrepreneurs and investors are free to build businesses with a higher purposes.” Though Gilbert’s statement holds some truth, there have also been many responses that argue that fiduciary responsibility isn’t necessarily legally binding. Firstly, serving shareholders’ ‘best interests’ is not necessarily the same thing as maximizing profits or shareholder value. Moreover, corporate directors are protected from most interference by the business judgement rule, which states that as long as a board of directors is not tainted by personal conflicts of interest and makes a reasonable effort to stay informed, courts will not question the board’s decisions concerning what is best for the company, even if those decisions result in the reduction of profits or share price.

Nevertheless, a continual increase in the number of corporations with B Corp certification is imperative to maintaining our current generation’s faith in capitalism; it is also undoubtedly a step in the right direction. Notably, millennials are making strides in supporting this movement of conscious capitalism by casting votes with both their dollars and their ballots. In addition to actively choosing to buy from and work for corporations with ethical considerations, young adults are supporting figures such as Bernie Sanders and Elizabeth Warren, who have put the ideas which B Lab stands for in the forefront of their campaigns, advocating for their implementation into law and policy.

With over 2,600 companies certified as B Corps in 60 countries to date, a shift towards a strong culture of accountability is occurring. High-profile, successful companies such as Ben & Jerry’s, Patagonia, Etsy, and Eileen Fisher have all become certified in recent years. In the UK, it has been reported that B Corps are growing 28 times faster than the national economic growth of 0.5 percent. Companies worldwide now have the incredible opportunity to join a movement of responsible business and investing, fair trade, and green building. For those that want to attract and retain millennial talent, distinguish themselves from competitors, track their performance and progress over time and in comparison to other companies, and protect their larger mission, B Corp certification can be a socially credible and financially smart step forward.

Photo: Dollar Head

About the Author

Eleni Papapanou '22 is a Staff Writer for the US Section of the Brown Political Review. Eleni can be reached at eleni_papapanou@brown.edu

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