There are now more than 3,500 B Corporations in the world. These are companies that have been officially certified by nonprofit B Lab, for their commitment to not only pledging, but concretely showing, environmentally and socially beneficial business practices, public transparency, and the “legal accountability to balance profit and purpose.” B-Corps-to-be must pass a 200-question assessment that judges performance across five impact areas: governance, the environment, workers, customers, and community.
Christopher Marquis, a professor of sustainable global enterprise at Cornell University, started research for his new book, about the ongoing vitality of the B Corporation ethos, in 2017, but it’s during the past summer that he’s seen the B Corporation movement picking up some serious speed. In the last few months, two B Corporations have gone public, and six large, multinational companies have begun the journey to qualifying for B Corporation status. “This summer really indicates a sea change, in some ways, in the movement,” Marquis says.
In his book, Better Business: How the B Corp Movement Is Remaking Capitalism, Marquis documents the gradual trend towards responsible business, which he says has its roots in the urge to reform capitalism from its “overwhelming shareholder primacy system.” For roughly 50 years now, he says, the singular responsibility for businesses has been to shareholders, and the sole focus has been on profit maximization. That’s taken a social toll: “Many…things, from income inequality to environmental degradation, really stemmed from this shift that occurred,” he says. As it tries to refashion that structure, the B Corporation movement makes one of its top priorities putting all stakeholders—employees, customers, the community—”on the same legal playing field as shareholders.”
Marquis first heard about B Corporations from one of his students while teaching at Harvard Business School. He says the movement is partly down to a cultural shift led by new millennials and Generation Z, who are more committed to buy from or work for companies that have similar values to theirs. The shift has also touched investors. Not only are mainstream VC firms now funding B Corporations, such as in the cases of Andreessen Horowitz (Altschool), Union Square Ventures (Kickstarter) and Sequoia Capital (Lemonade), but some are also becoming certified B Corporations, such as real estate investor Fifth Wall and tech investor Foundry Group.
This past summer, two B Corporations held their initial public offerings and became publicly traded companies: insurance company, Lemonade, and certified-as-humane egg purveyor Vital Farms. They join just a handful of other B Corporations—including international university operator Laureate Education, and Brazilian cosmetics group Natura &Co—that have made the leap to a public offering. Vital Farms’ CEO, Russell Diez-Canseco, says the company has been rooted in “conscious capitalism” since its founding. “We really believe that our purpose is to improve the lives of people, animals, and plants through food,” he says. And, entering the public market has attracted more “really incredible impact investors who were very supportive of the mission, and really saw the potential for us to have a positive impact in the world.”
The months-long move to become B Corporation-certified was laborious, as are the continual impact assessments required; they have to get recertified every three years in order to remain a B Corporations, and the organization looks for substantial outcomes, such as carbon neutral plans by 2030. (One of the drawbacks that have stopped some companies from entering the process is how rigorous and time-consuming it is). “The bar keeps moving,” Diez-Canseco says. “They continually revise the criteria. So, what’s great is you can’t rest on your laurels.” These stringent checks are ways for B Lab to keep companies accountable for their word—and to stay free from criticism such as the one lobbed at the Business Roundtable, that “accountability to everyone means accountability to no one.” With these gauges, companies can effectively track and report and be transparent about their stakeholder commitments.
Also this summer, two companies—Amalgamated Bank and Danone—officially changed their articles of incorporation to include language about benefitting stakeholders. Danone is also one of six large, multinational corporations to have signed onto a new B Lab program, B Movement Builders, which is a way for large corporations, which make $1 billion or more in revenue, to “slowly on-ramp” as certified B Corporations. The process has proved harder for these companies in the past because they often comprise complex legal entities that span many countries. Danone North America, and 26 of Danone’s complex web of global entities, are already B Corporation-certified, representing 45% of the company— but the corporation as a whole unit is not.
None of the six corporations entering the on-ramping are American (Danone is headquartered in France), which shows the U.S. corporate world’s comparative slowness to adopt some of the B Corporations’ values. “I do think that the U.S. focuses more on shareholder primacy. Sort of, meeting the Wall Street quarterly numbers,” Marquis says. “In the next few years, the large companies that become B Corporations may be predominantly European and South American.”
Still, Marquis has seen the movement gain momentum over the years, culminating in this fortuitous summer success. Businesses have come a long way since the case of Etsy, an early B Corporation, which opted to give up its certified status after pressure from its public market shareholders, who it feared would not support its transition. Now, in contrast, Diez-Canseco hopes the movement can continue catching on. “I’m just excited to have this be the topic of conversation in more boardrooms,” he says. “I’m excited to have our example inspire a few other companies to take a similar path.”