If you’re reading this blog, you are probably aware of B Corps. The idea takes a bit of explaining. B Corps are businesses that are certified by a nonprofit organization called B Lab to meet what its backers call “rigorous standards of social and environmental performance, accountability, and transparency.” These businesses win certification much in the way that buildings are certified to have meet LEED environmental standards by the nonprofit U.S. Green Building Council; they have to complete an assessment of their performance, provide documentation and be open a review from B Lab, as the group explains here.
But the term B Corps is also used to describe “benefit corporations,” a corporate legal structure that has been set up by legislation that has now been passed by 20 states, including, most recently, Delaware. Benefit corporations need not be certified by B Lab, although many are.
It’s unavoidably confusing, but my beef with B Corps is simple.
The voluntary certification system makes sense to me, for reasons that I explain in the story–it’s a way to signal employees, customers and investors that a B Corps aims to do better than conventional companies. Most B Corps are small and privately held. Among the best known are Patagonia and Ben & Jerry’s, which is a unit of a conventional C Corps, Unilever.
The legal “benefit corporation” purportedly gives companies more freedom to serve society as a whole than conventional corporations have. I’m skeptical about this claim, to say the least, and I worry that it could be counterproductive–because it implies that conventional companies, which make up the bulk of the global economy, need to pursue profits, at the expense of broader social and environmental goals. This seems wrong on the face of it. After all, if Ben & Jerry’s can be certified as a “good” B Corps, doesn’t that mean that its parent company, Unilever, can be “good” too?
My worry is that the implicit argument — that most of the world’s companies don’t have the freedom to do the right thing for society — undermines faith in capitalism (which is fragile, at best, for good reason) and that it discourage reformers inside and outside of big companies who are pushing corporate America to do business better. It’s a bit smug to suggest that traditional companies can’t do as much good for the world as B Corps can.
Here’s how my story begins:
To the supporters of B Corps – benefit corporations that say they aim to serve workers, communities and the environment, as well as their owners – 1 August 2013 was an historic day. In what B Corps described as “a seismic shift in corporate law,” the state of Delaware, where one million businesses are legally registered, enacted legislation that will “redefine success in business” by giving the owners and managers of legally recognised B Corps protection as they pursue “a higher purpose than profit.”
The B Corps movement has much to be proud of: it has built a brand that stands for good business, attracted hundreds of committed followers and sparked debate about the role of business in society. But claims – sometimes made explicitly, sometimes implicitly – that B Corps have more freedom to take an expansive view of their social and environmental responsibilities is not only mistaken, but potentially damaging to the cause of sustainable business.
After all, if conventional companies have no choice but to focus narrowly on maximising short-term profits, at the expense of workers, communities and the planet, then we’re in a heap of trouble and unlikely to get out, because 99% of US businesses today are conventional C Corps, and most are likely to remain so.
You can read the rest here.