Are B Corporations the future of capitalism?

Britain led the world in industrialization, is home to the worlds largest financial centre and created many of the worlds biggest companies. The modern global economy was, to a great extent, invented by Britain. We also have a proud history of seeking to build a better society – whether by using the power of business to drive innovation and create wealth & employment; through government, where Britain was first to set up a comprehensive system of welfare; or through sharing knowledge – it was British academics who help to build the foundations of the digital economy by inventing the internet.

And yet… and yet. Social and environmental problems continue to persist. The role of business in society is being questioned ever more stridently, due to its failure to offer a convincing answer to so many questions — tax practices, supply chain practices, environmental degradation, employment practices, bonuses and so on. We all know the script. And it is becoming increasingly clear that government and charities cannot solve social problems either, especially not in the context of the capital that is available to them.

“The role of business in society is being questioned ever more stridently, due to its failure to offer a convincing answer to so many questions”

Bruno Roche, the Chief Economist at Mars puts it rather elegantly when he, like all economists, describes the three inputs that business relies on: Land, Labour & Capital. He says that Marx valued the labour at the cost of the others. The Greens value the land at the cost of the others. And modern shareholder capitalism values the capital, at the cost of the others. He argues that the economy needs to evolve into a place where it values all three of these things, in harmony – or as he puts it, in ‘the economics of mutuality’.

The B Corporation movement is a positive response to all of this. At its heart, it is an alternative vision for the role of business in society. It is an assertion that businesses can benefit shareholders whilst also solving social and environmental problems. If this can be done, then these solutions to social and environmental problems can be scaled, because they can attract capital.

“Businesses can benefit shareholders whilst also solving social and environmental problems”

Before the B Corp came along, the world was in this sense bifurcated: If you want to make money, go into business whose only role is to maximise profits. If you want to do good, you must constrain your balance sheet with an asset-lock, as an assurance that you are doing good and that you are not using ‘doing good’ as a greenwash as you use the balance sheet for your own private interest. The effect of this, of course, is constrain the access to capital for those who would create social value.

So how do we know that the B Corporation movement is, indeed, using business to solve social & environmental problems, and not just a greenwash? The B Corp system has three core components:

  1. The legal test – the company must change its constitution, to state that it is no longer operated for the exclusive benefit of shareholders. Instead, the business is operated for shareholders only as an equally ranking stakeholder alongside the equally ranked employees, communities and environment.
  2. The performance test – the B Impact Assessment is a quality system for the social & environmental performance of a business. It measures ‘the other two bottom lines’, and is structured to mirror the legal test, with five sections: governance, workers, communities, environment and your impact business model. To certify a company must achieve a minimum score of 80 out of 200.
  3. The declaration of interdependence, a commitment to all stakeholders.

Our experience at COOK, which certified in 2013, has been that it has transformed our company. Whilst we were always trying to do ‘good business’, the power of changing the directors duties has been seismic. It has changed the business strategy. Our long term goals used to be expressed only as a page of financial projections. No longer.

The experience of implementing the B Impact Assessment resulted in a deep change management program. We fixed the roof in literally hundreds of areas. Some of these are eye catching:

  • introducing a profit share scheme for all employees;
  • significantly expanding a program to offer employment to offenders on day release with a view to giving them jobs;
  • entering into a partnership with a homeless charity where we feed 52 vulnerable people per day (in a day centre context, with support);
  • working with NEETs charities to employ disadvantaged young people across the country in our shops;
  • becoming one of the only manufacturer and retailer Living Wage employers;
  • operating a ‘one feeds two’ program over Christmas which resulted in 200,000 free school meals for children in Malawi to promote school attendance; and so on.

But many of them were not:

  • introducing a decent whistle-blowers policy;
  • changing our building specifications to reduce carbon footprint;
  • changing our sourcing policies to meet sustainability criteria;
  • introducing gender & ethnic balance as a KPI and so on.

We have also made record profits and risen up the Sunday Times Top 100 Companies to Work for every year since we certified.

“Whilst we were always trying to do ‘good business’, the power of changing the directors duties has been seismic. It has changed the business strategy. Our long term goals used to be expressed only as a page of financial projections. No longer.”

But the true power of this has been its cultural effect. It frees the 650 people who work for COOK to see the business as a platform to affect the change that they want to see in the world. Engagement is transformed and creativity unlocked because the business is being run for this purpose. None of the ideas mentioned above came from the board. They all came from the employees. I was chatting to one of our shop managers who told me that having two women on day release from prison for the day on work experience had changed her life.

COOK would not say it’s particularly special – it only scores 80/200 in the B Impact Assessment, which is the minimum score required to certify as a B Corp. We struggle to get there. There are also over 1,200 B Corporations in the world who score more highly than COOK, based in 38 countries, in 121 industries, ranging from owner-managed businesses to Natura, Brazil’s largest cosmetics company with revenues of $2.6bn.

“Capitalism must and will evolve for the better”

Capitalism must and will evolve for the better. A growing army of inspiring, talented people are busting a gut in many different parts of the system, in many different ways, to re-purpose the current system to better align the interests of business and society. Such a re-purposing is essential if our society is to convince its population that the elemental power of business is a positive force. The long term stability of our society is at stake.

When we launch B Corporations in the UK in September 2015, we hope we will bring some new energy and momentum to the UK economy, to the benefit of us all. We look forward to working with the mainstream business sector.

 

James Perry is co-founder and Chairman of COOK and is currently helping to lead the UK launch of B Corporations in September 2015.

For more information about the B Corps movement in the UK, please get in touch at hello@bcorporation.uk


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  1. peoplecentred -

    There was an interesting article recently from Delaware Chief Justic Strine on the legal standing of for-profit business serving non-stockholder interests. This had been argued in our 1996 paper on business for social benefit, known as people-centered economic development.

    When introduced to the UK in 2004, our founder was interviewed by a diaspora leader about his preceding work in Crimea where he descibed how the model challenged convential capitalism as an “insufficient economic paradigm”

    http://www.p-ced.com/1/node/408