B Corps: Like a company, but woker

You know what’s getting a bad rap these days? Capitalism. And no wonder. The shiny, meritocratic, use-markets-to-solve-problems system promised wealth for all—if only we could get it right. But in recent years, it has dawned on the newest professional generations, and many of their forebears, that the plan has gone awry. Two huge problems, inequality and climate change, have proved themselves immune to capitalism’s charm. In many ways the system we’ve created worsens both. Enter the B Corp. Maybe you’re a business owner trying to find a way to make sure your company does more good than harm. Maybe you’re an employee keen to push for change from within. Maybe you’re a consumer, wondering why it’s so hard to make an ethical choice as your hand hovers over a pair of shoes or a bottle of oat milk. B Corps are companies that volunteer for a regular audit of their ethics and practices, and make a legal change that commits them to subverting a classical capitalist tenet: No longer will they be accountable to shareholders alone, but to a broader group that includes their employees, customers, and the world at large. Is this the way forward? 🐦 [Tweet this!]( 🌐 [View this email on the web]( Sponsored by [Quartz Daily Obsession] B Corps March 12, 2020 Plan B Corp   --------------------------------------------------------------- You know what’s getting a bad rap these days? Capitalism. And no wonder. The shiny, meritocratic, use-markets-to-solve-problems system promised wealth for all—if only we could get it right. But in recent years, it has dawned on the newest professional generations, and many of their forebears, that the plan has gone awry. Two huge problems, inequality and climate change, have proved themselves immune to capitalism’s charm. In many ways the system we’ve created worsens both. Enter the B Corp. Maybe you’re a business owner trying to find a way to make sure your company does more good than harm. Maybe you’re an employee keen to push for change from within. Maybe you’re a consumer, wondering why it’s so hard to make an ethical choice as your hand hovers over a pair of shoes or a bottle of oat milk. B Corps are companies that volunteer for a regular audit of their ethics and practices, and make a legal change that commits them to subverting a classical capitalist tenet: No longer will they be accountable to shareholders alone, but to a broader group that includes their employees, customers, and the world at large. Is this the way forward? 🐦 [Tweet this!]( 🌐 [View this email on the web]( By the digits [>3,200:]( Companies certified as B Corps globally [9,000-10,000:]( Global public benefit corporations, a legal designation that commits companies to take multiple stakeholder needs into account [1790:]( Year in which King Arthur Flour, one of the oldest companies to become a B Corp, was founded [100,000:]( Number of employees at the biggest company currently going through B Corp certification [5.6:]( Years Etsy, the online marketplace, was a B Corp before giving up its status Giphy Explain it like I’m 5! The purpose of purpose --------------------------------------------------------------- So what does B Corp status really mean? Companies that want to certify have to score a minimum of 80 points out of 200 on the [B Impact Assessment]( a tool created by B Lab, the nonprofit organization that oversees certification. They pay a revenue-dependent fee, and have to re-certify every three years. In addition, B Corps have to make a legal change to their company structure, which eschews the traditional wording of responsibility to shareholders, in favor of a more explicit commitment to governance, employees, customers, communities, and the planet. To an extent, of course, this is virtue-signaling. B Corps don’t have to promise to treat workers well or commit to cutting their carbon footprint. They don’t have to reject growth, or cease to make money. But the assessment opens them up to both internal and external scrutiny, and telegraphing their aspirations makes them targets as well as garnering praise. Patagonia, the outdoor-wear company that has linked its brand firmly to its ethics, says [becoming a B Corp]( forced it to look holistically at all the areas of its business, and pushed it to do more. Dairy-foods giant Danone, which is in the process of becoming the biggest B Corp in the world, puts “[purpose]( at the center of its marketing strategy. But there have also been high-profile hiccups: Etsy went public with a B Corp certification, one of the first companies to do so. But less than six years later, [under pressure from shareholders]( it gave up the designation, having never committed to the required legal change. Ben & Jerry’s ice cream, which, despite its tie-dyed roots, is now owned by international corporate behemoth Unilever, [was recently forced]( to remove the claim that its milk came from “happy cows” from its packaging. [Read the Quartz field guide to B Corps]( Sponsored by EY 20 questions that will define the next decade --------------------------------------------------------------- The gig economy, new media, and geopolitical wavering shaped the past ten years. What themes will propel the generation ahead? EY spells them out for you.[Get the answers.]( Quotable “As one of our Mexican colleagues recently told me: B Corp is a way for us to be a company closer to what we, each of us, truly aspire to be as a person. This is my guiding compass in the journey, and this is why Danone will be a B Corp.” —[Emmanuel Faber, CEO of Danone]( “What I found about being a B Corp is that I get a better quality of employee applying for jobs.” —[Laura Tenison, founder and CEO of JoJo Maman Bébé]( Vera Kratochvil pop quiz Which of these corporations is NOT represented in the B Corp “family”? The GapCoca-ColaUnileverAmazon Correct. Incorrect. If your inbox doesn’t support this quiz, find the solution at bottom of email. This one weird trick! Good for the bottom line? --------------------------------------------------------------- In 2018, research conducted by Ella’s Kitchen—which is itself a B Corp, so take it with a grain of organic sea salt—[found that]( UK B Corps grew much faster than the national average for businesses. The 150 UK B Corps it surveyed saw an average year-on-year growth of 14%, compared to 0.5% across UK firms. Have a friend who would enjoy our Obsession with B Corps? [ [Forward link to a friend](mailto:?subject=Thought you'd enjoy.&body=Read this Quartz Daily Obsession email – to the email – US Department of Labor. Origin Story The B Corp bros --------------------------------------------------------------- Andrew Kassoy, Jay Coen Gilbert, and Bart Houlahan met at Stanford, and went on to become successful businessmen: Coen Gilbert co-founded AND1, a basketball shoes and clothing brand, with Houlahan later serving as CFO, COO, and president. Kassoy went to work in private equity. They kept seeing social entrepreneurs coming up with great ideas, then failing to get funding because investors couldn’t understand that their main aim was not to maximize profits. Eventually, Kassoy told Quartz, the three realized: “There was something wrong with the system, and wrong both with democracy and with capitalism.” Over several years, Kassoy said, they talked through potential solutions, their thinking shaped by the dotcom crash, and the Sept. 11 terror attacks. They founded B Lab in 2006 as a new way of incentivizing business to compete, not on profits, but on purpose. So far the roster of B Corps is small, and features many companies that are already “purpose driven.” Are they making inroads to real change? In answer, B Lab points to a swelling in the interest from bigger firms and new markets: Danone is the first huge multinational to certify, but they say they have been approached by lots of others interested in the process. In 2019, the first global [private equity firms certified](. Brief history [1602:]( Stock traded in the Dutch East India company marks the invention of the “share.” [1970:]( Milton Friedman publishes an essay in the New York Times popularizing the idea that the social responsibility of a company is to return value to shareholders. [1976:]( Michael Jensen and William Meckling establish the “agent theory” of the firm, which states that CEOs and board members are agents of the shareholders. [1993:]( The US caps the tax deductibility of executive salaries, leading to an explosion of compensation in the form of stock options. [2006:]( B Lab is founded by three college friends. [2007:]( The first B Corps are certified. [2018:]( Danone takes over as the biggest B Corp in the world when its entire US subsidiary certifies. [2019:]( The influential US Business Roundtable says for the first time that companies should serve stakeholders, not just shareholders Fun fact! There is just one B Corp in Afghanistan, but it’s huge. Roshan is the country’s biggest telecom company, and its biggest employer. [The company’s story]( is extraordinary. Watch this! Come si dice B Corp? --------------------------------------------------------------- Italy is a hotbed for B Corps. It ranks in the top 10 countries, globally, for raw numbers of certified companies, and was the first sovereign state outside the US to bring in specific public benefit corporation legislation, which mirrors the US legal change (now adopted in 36 states) to enshrine returning value to multiple stakeholders in a company’s structure. Entrepreneur Eric Ezechieli, who founded the first Italian B Corp and campaigned for the legal change, talks through the B Corp philosophy (in Italian, with subtitles). take me down this 🐰 hole! Capitalism, but make it conscientious --------------------------------------------------------------- When it comes to doing capitalism better, companies (and among them B Corps) are only one part of the picture. Governments and international bodies have a major role to play—many would say, by far the biggest role. In 2015, the UN adopted the [Sustainable Development Goals]( a blueprint for the world in 2030, which has target-setting measures for countries, but also both companies and investors. There has also been a massive upsurge in the past few years of investors interested in ESG, or environmental, social, and governance, investing, sometimes called impact investing. The organizations in this space [are numerous]( including [FTSE4Good]( launched in 2001, and the [Global Impact Investing Network]( which developed the IRIS standard for assessing investments. The [Carbon Disclosure Project]( has been working since 2000 to get companies and countries to self-declare their carbon footprints, and 2019 saw the launch of the S&P 500 ESG Index, which is like the S&P but “[without the bad stuff.]( There’s more pressure on business leaders and investors to be vocal about their sectors’ responsibilities ([Paul Polman]( former CEO of Unilever, and [Larry Fink]( head of BlackRock, have both been prominent), and on rich people like Jeff Bezos, CEO of Amazon, to use their money better, including [giving much of it away](. Giphy poll Does a company’s ethics make a difference to you? [Click here to vote]( Absolutely. I’m a conscious consumer and boycott brands with bad practices.Yes, in theory. In practice, it’s impossible to know what’s real and what’s spin.No. Companies need to compete on price and quality, not “ethics.” 💬let's talk! 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