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Is it more important to be ethical than profitable?

The number of certified B corps is growing as shareholders, employees and consumers seek out companies with a proven positive impact. But can B corps all be a force for good?
Patagonia b corps

The only social responsibility of a business is to increase its profits, proclaimed economist Milton Friedman in 1970. He was ushering in a new era of shareholder primacy that would dominate the way companies were run for almost half a century, often with scant regard for the planet or for people. But the growth of the B corp movement signals a shift in mentality, as shareholders, employees and consumers increasingly demand social and environmental performance be weighted alongside a corporation’s bottom line.

Reimagining business to have a positive impact

In 2006, US-based non-profit B Lab, created a new certification system to help businesses define themselves as socially and environmentally responsible. If successful, a company would become a certified B corp, the B standing for beneficial. The framework, which includes a minimum threshold and rising sliding-scale score, was set up as a counterweight to shareholder dominance and to help avoid outcomes such as in 2000 when the founders of Ben & Jerry’s were forced by investors to sell the ice cream company to Unilever.

There are now more than 3,585 certified B corps worldwide in 74 countries, including 396 in the UK. 2019 was a particularly strong year for growth with the number of certified B corps rising by 25 per cent.

A commitment to social and environmental performance, which B corps in the UK are legally obliged to outline in their articles of association, does not mean, however, that businesses should focus on positive impact at the expense of their bottom line.

Chris Turner, executive director of B Lab UK, says the notion of ethics versus profit is a false dichotomy, as companies don’t have to choose between the two. “The idea we’ve been proving, for over a decade now, is businesses that are ethical are the sort of businesses which thrive in the long term,” he says.

This is particularly true this year, he says, when we’re not just facing the profound challenges of the climate emergency and extremes of social injustice, as highlighted by the Black Lives Matter movement, but also the coronavirus pandemic. “It’s now more urgent than ever that businesses look after those various stakeholders. It’s visceral; people really notice it in terms of the businesses they interact with,” Turner adds.

The idea we’ve been proving is businesses that are ethical are the sort of businesses which thrive in the long term

The outdoor clothing brand Patagonia, which has been a certified B corp since 2012, has consistently advocated a pro-environmental agenda. For Alex Weller, marketing director for Europe, running a profitable and ethical company are inseparable goals. “The most important part is to be financially healthy, so you can support your most important stakeholders, your employees and partners, so everybody can be focused on being a force for good, to affect the issues that matter,” he says.

Can you be too big to be a B Corp?

B corps include companies you might expect such as Abel & Cole, Vivobarefoot and the Brazilian cosmetics company Natura, which owns The Body Shop. But there are also companies that might surprise, including wealth management companies, prison data systems and the subsidiaries of big multinationals such as those within Danone, Coca-Cola-owned Innocent and Unilever’s Ben & Jerry’s.

For Weller, to ask if there’s a danger the B corp mission could be diluted as it expands is to miss the point of the process. “B corps is a very thorough, consistent and objective framework,” he says. “Whether or not you have a subjective point of view on whether a business should be a B corp or not, it doesn’t really matter as B corps has scored them and they have met the criteria.” Weller also notes that, as it’s a sliding scale, there is always room for improvement in any company’s score.

Bournemouth University’s Dr Michael O’Regan, who researches B corps, questions the scalability of the concept. “We have 5.7 million businesses in the UK, B corp, while ethical and trying to do a good thing, might attract low-hanging fruit, those already socially, environmentally responsible,” he says. “What of the millions of other private businesses?” O’Regan questions whether the model is a template for “radical change”.

But according to Weller: “It’s one of the most powerful tools out there now right now, both for businesses themselves, but also for citizens to interact with, to see if a company maps their values.”

Is there a benefit to being a certified B Corp?

Aside from being a force for good, the question whether businesses get a tangible benefit from becoming a B corp is not clear cut. Research by the London School of Economics suggests there isn’t a measurable improvement in financial performance, though they found B corps do experience positive non-financial strategic results, including organisational reputation and socially responsible action.

Perhaps the strongest impact of those non-financial benefits is felt among employees. According to research by B Lab UK, three quarters of businesses said being a B corp helped them attract or retain talent. As Turner says: “Working for a company that shares your values is obviously very important, especially for younger members of a workforce.”

It’s also possible that all UK citizens may one day benefit from the B corp movement as the organisation is campaigning to change the Companies Act to ensure all businesses are responsible to people and the planet. Asked whether it’s a failure of government that businesses are the ones pushing for these social and environmental standards, Weller says: “The science is known, the symptoms are real and present, but there is still not a legislative pathway out of this, and that does mean there are clear vacuums of leadership and of hope in some ways.”

While he doesn’t think it’s necessarily the responsibility of companies such as Patagonia to fill the void, Weller believes they should show others that business can be part of the solution. “If all businesses did that, maybe we’d have a chance,” he concludes.

“Vote the ***holes out”: when environmental initiatives get political

It’s reasonable to expect that Patagonia, a company whose stated mission reads “We’re in business to save our home planet”, might not be fans of US President Donald Trump. He leads a government whose continued rollbacks of environmental regulation and rejection of the Paris Agreement on Climate Change have without doubt impeded the global response to the climate crisis.

But in September, the California-based outdoor clothing brand and certified B corp made those views clear by launching a line of shorts with “Vote the a**holes out” sewn onto the underside of the label.

Alex Weller, Patagonia’s marketing director for Europe, explains how the idea came about. “The company’s position on climate deniers, particularly in American corporate politics, has been clear for a long time,” says Weller. “That is whenever you see climate deniers in office, who are taking money to turn a blind eye to ecological destruction and open up public land to extractive industries, then you need to use your own vote and get them out.”

It’s a message Patagonia’s founder and owner Yvon Chouinard has been extremely vocal about. Earlier this year, he penned an open letter to the 1% for the Planet network, whose members donate 1 per cent of their gross revenue to environmental causes, which included the PS: “Remember, vote the a**holes out.”

Weller says the phrase has been in the lexicon of Patagonia for a while, but the decision to put it in pairs of shorts ahead of November’s US election was entirely down to the “smart idea” of individuals working in the product team. “It wasn’t a marketing initiative at all,” he says. “As marketers we were reacting to it in real time with the rest of the world.”

Did the company have any concerns the move might alienate some potential customers? “Having spoken to the people involved, the intent wasn’t a partisan in-joke or about reinforcing who is for and who is against us. The intent was to get people out to vote in defence of the planet.”

For Weller, “Vote the a**holes out” is the latest in a long line of ideas to emerge from a company where environmental activism is encouraged, and everybody has a chance to get involved and participate or even “enviro-strike” and join in rebellions or participate in climate strikes. The company provides legal support for employees who are arrested or detained during such protests.

He cites the decision to stay open on Black Friday and give 100 per cent of their profits to grassroots environmental groups as another example of an employee-driven idea that Patagonia picked up and ran with.

“If the ideas are good and the owner likes them, they get given the green light,” he says. As for how Chouinard responded to the “Vote the a**holes out” label? “I need those in a 32,” he said.

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