Last week on the Outthinker blog, we discussed how Environmental, Social, and Governance (ESG) practices are transforming the energy industry. We referenced Chris Marquis’ work, How the B Corp Movement is Remaking Capitalism, and his visit to speak to our Outthinker Strategy Network of chief strategy officers. This week, we continue with the theme of B Corps, to emphasize how important we feel this movement is for the future of our environment, our local communities, and our ability to live and work together in society.
The growth and appeal of Certified Benefit Corporations – or B Corps – have moved from the sidelines to a real, profitable movement in business. The purpose of a corporation has shifted from primary service to shareholders to a commitment to multiple stakeholders (customers, employees, suppliers, communities, and shareholders). Investors, customers, and potential employees are paying attention and redirecting their attention and resources toward companies that have a holistic, accountable, and transparent strategy to benefit multiple stakeholders.
Your organization does not need to be (or have any intention of becoming) a Certified B Corporation to benefit from incorporating these practices into your strategy. In fact, even taking some of the steps that B Corps take to get certified could have a lasting, positive impact on your business and your bottom line.
What is a Certified Benefit Corporation? (And why should you care?)
Certified Benefit Corporations are businesses that are “legally required to consider the impact of their decisions on their workers, customers, suppliers, community, and the environment.” Globally, 3,979 companies across 150 industries in 74 countries have become Certified B Corps (find the full directory here). The list includes an increasing number of publicly traded companies, such as Lemonade, Coursera, and Oatly.
According to Chris, B Corps must prove their:
- Purpose: They create a positive impact on society and the environment in addition to profit.
- Accountability: They have a fiduciary duty to consider the impact of their decisions on all stakeholders.
- Transparency: They periodically prepare a public report using an independent, credible, and comprehensive standard.
When Chris explained the rise of B Corps to our network of CSOs, at first, some of them were skeptical. Sure, a B Corp model could work for Patagonia, a smaller, B2C, environmentally friendly outerwear company. Could it also apply to a large enterprise or B2B organization?
Chris’ response to our CSOs was that, by acting like a B Corp, any company can establish long-term governance, align with investor interests, and build a vibrant culture. Organizations with strong ESG strategies have better employee retention, are more attractive to millennial job-seekers, and appeal to the strongest candidates.
Consumers value ESG as well. Sixty-one percent of people think buying from socially responsible companies is important. And “impact investing” is on the rise. All of the major venture capital companies hold social mission companies with Benefit Corporation governance and B Corp certification in their portfolios. One hundred fifty venture investors have invested $2B in B Corps.
Chris explains further in the following video:
What steps can you take to follow the B Corp model?
Chris offered a free tool that will let you know where your organization stands on incorporating an ESG strategy. The B Impact Assessment measures your impact on your employees, your community, the environment, and your customers.
Keep in mind, this tool is meant to track your progress. The average organization scores 51 out of 200. A company must receive a score of 80 to become a B Corp, and each year they can assess again to improve their score.
Using the tool, you’ll be able to:
- Better understand your company
- Holistically view your business
- Manage risk and responsibility
- Compare and learn from other organizations in your industry
Chris’ biggest tip for organizations: Don’t wait. Incorporating ESG practices earlier on is much easier than trying to transform later. Even in a long-established company, adopting some of the efforts that B Corps take can make a major impact.
The B Corp movement continues to grow and welcomes organizations of all sizes, across industries. Markets are shifting to prioritize companies whose strategies contain ESG policies. Companies that are winning today are those that are taking the time to analyze and transform their business models for the benefit of all stakeholders.