B Corporations: Prioritizing Stakeholders over Shareholders

It is easy to see the need for B Corporations. We have all heard about industry excesses. CEOs who make more than 300 times their average workers. Politicians bought and sold by the power-elite. The practice of “acceptable risk”  which includes weighing which is cheaper, consumer lawsuits from dangerous products or correcting product defects to  protect the public from harm. Some of our most horrific fairy tales are no match for true stories of corporate greed.

Yet, amidst  the profit-above-all mentality of so many companies, a counter trend has emerged. Some businesses are embracing the idea that they can make positive contributions to society and still be in the black at the same time. B or Benefit Corporations are companies who commit to incorporating specific social values in every aspect of their business.

The Background – Conscious Capitalism

B Corporations are part of a larger social movement known as conscious capitalism. According to Entrepreneur, there are four basic tenets of this movement are:

Conscious Leadership –  The Japanese have incorporated an ancient saying in their business philosophy: “The fish rots from the head down.” This simply means that the leaders of any organization need to be role models. They ultimately need to accept the responsibility for any business failures, instead of scapegoating workers.

Stakeholder Orientation – Traditional business only takes into account shareholders. Making a profit for them is the one and only point. Conscious capitalists also consider stakeholders, including customers, employees,  the community in which they operate, the greater society, and even future generations.

Conscious Culture – Promoting a value-based business culture that pays more than lip service to what is in the company handbook or press releases. It is actively embodying the values the organization articulates to the world.

A Higher Purpose – This involves something more than making money. It could an internal goal, like providing employees with a true work-life balance. Or it could be an external goal, like environmental responsibility or community development.

The Specifics – B Corporation Certification

Many companies  claim to espouse the above values. B Corporations go beyond rhetoric with active steps to insure their actions are in line with their values. A business can not give itself a B designation. B-Lab, a nonprofit founded by a group of international business leaders, has a certification process for for-profit companies that want to become official.

This process involves an assessment based on criteria such as how they treat employees and their social and environmental impact. When certified, they then incorporate these values in their official charter. Their certificates are then good for three years.

The first B Companies were certified in 2007. According to the Harvard Business Review, as of 2016 there were 1,700 B Corporations in 50 countries.  Some well known companies of this type include Patagonia, Better World Books, and Danone North America ( Silk, Horizon Organics, and Earthbound Farms).

Although many use the term B Corporation and Benefit Corporation interchangeably, Jonathan Storper of  Conscious Company Media holds that there is indeed a distinction. A B Corporation has been certified by B Labs. A Benefit Corporation is a specific type of corporation that has legal protection for its socially conscience agenda.  Stemming from the B Corporation movement, 27 U.S. states offer such protection to companies that have added the additional three legal attributes of accountability, transparency, and purpose.

B Corporations vs. Social Entrepreneurs

Some people confuse B Corporations with social entrepreneurs. While there is certainly overlap in principles, there is a technical difference. A social entrepreneur is a person who uses their business to help ameliorate a social problem. The companies they run are part of their social activism, but they may or may not be an official B Company. Anita Roddick, founder of The Body Shop, is one example of a social entrepreneur. Not only was this company involved with many charitable causes, Ms. Roddick started it with the intention of providing quality skin care products without making false claims about what the creams could do, or promoting inachievable beauty standards.

B Corporations and Government – A Natural Fit

B Corporations have much more in common with governments at all levels than traditional businesses. Governments have always had to take into account stakeholders. They  juggle multiple priorities in securing what is best for those within their jurisdiction. They perennially must consider economic development, environmental protection, quality of life, and future needs. There is no pretending they exist in a vacuum so they can rationalize every decision based on how their financial profile looks to investors.

While governments must take these things into account, B Corporations choose to do so. They make a conscious decision to to what is right for the greater good. Since their goals are more in alignment with government agencies, perhaps more government vendors will consider this designation. Both their customers and their consciences may be the better for it.

Further Reading

B Lab has everything you need to find out about B Corporations including how to find them: http://www.bcorporation.net/

The PBS series “The New Heroes” features 14 social entrepreneurs changing their communities through business:

https://www.youtube.com/watch?v=roWNJRV073U

Sherie Sanders is part of the GovLoop Featured Contributor program, where we feature articles by government voices from all across the country (and world!). To see more Featured Contributor posts, click here.

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Profile Photo Blake Martin

Awesome piece, Sherie! I had no idea the B designation existed, but I’m happy I do now. I’ll definitely be keeping an eye out for this as a consumer; its nice to see a few familiar names on their list already!