Means&Matters
Stories of Money and sustainability

The Four Reasons B Corps Are the Business Model of the Moment

BY Natalie Burg

Mar 31st 2020

We are often taught to assume hard economic times demand sacrifices for the bottom line. And this is key for business resilience. So, why is it that Certified B Corporations, which balance profit with societal benefit, were 64% more likely than other businesses to survive the 2008-09 recession?

Even now, the movement among business leaders to build a better society and healthier planet is actually thriving.

“What we’ve really seen over the last 15 to 20 years is the shift toward looking at a whole company—a really comprehensive evaluation of a brand. And that is what is breeding loyalty,” says Jenn Swain, Global Senior Sustainability Manager for snowboarding company Burton. Burton is a certified B Corporation. “It’s no longer about the product—it’s the expectation that a company, on the whole, is taking action that has positive impacts for people and the environment.”

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Burton’s Jenn Swain on Brands and B Corps

The movement that began with 82 certified B Corps in 2007 has burgeoned into more than 3,500 B Corps in over 70 countries worldwide. A person could probably go the entire day just using the products of B Corps, and then still have ice cream for dessert. B Corps include household names such as Ben & Jerry’s, Allbirds, Patagonia, Athleta, and Beautycounter.

Why is it that B Corps, which balance profit with societal benefit, were 64% more likely than other businesses to survive the 2008-09 recession?”

B Corps are attempting to change what businesses prioritize and proposing that social good is more than just a trend; it’s the future of the economy. There are (at least) four reasons why the winds of change are at their back.

1. The Post-COVID Economy Will Demand Sustainability

John Elkington, the sustainability writer and entrepreneur who coined the term “triple bottom line,” has pointed out how the global pandemic could serve as the catalyst to drive change at a global scale never seen before.

“One of the things I think will very likely come out of the COVID-19 crisis will be a renewal of interest to invest in health,” Elkington says. “And I don’t mean just simply individual health or family health or community health. Nor do I even mean the health of societies and economies. I mean global health, including the health of the planet.”

Elkington believes this trend will result in a regenerative capitalism that occurs through sustainability, in which prioritizing long-term resilience and responsibility replaces the current focus on efficiency and maximizing short-term shareholder value. That was precisely entrepreneur Jay Coen Gilbert’s vision when he cofounded B Lab in 2006—to rewire the goals of business.

In a post-pandemic world where business decision makers will have to consider resiliency and sustainability, existing B Corps are ahead of the game, serving as a model for other companies.

2. Investors are Valuing Sustainability

The perils of short-term, profit-only thinking are becoming obvious to more than environmentalists. A growing number of investors today are prioritizing impact investing, with the number of sustainable investment funds tripling since 2008.

Sustainability turns out to be a smart way to screen investments; ESG (environmental, social and governance) funds comfortably outperformed their conventional fund peers in 2020. And investors, have bucked a historical trend of turning away from sustainability during hard times. The pandemic has only spurred ESG investing to new heights with $51 billion in net new money flowing into these funds over the past year – a record, and more than double the prior year.

“So in these challenging times, not only are we seeing inflows, but we’re seeing actual strong performance,” Wilson-Otto said. “From my perspective, a lot of that is due to the link around sustainable business practices and actual business resilience, so we’re definitely seeing that come through in the data.”

2018 analysis by Yale Center for Business and the Environment sheds light on that link between sustainability and resilience, calling B Corps “just good business.” The researchers assert that rigorous B Corp standards mitigate risk by building good governance into the business and providing a framework for performance benchmarking and transparency. The Yale report also acknowledges B Corps’ unique ability to attract and retain talent. These built-in features hold powerful appeal to investors.

B Corp standards mitigate risk by building good governance into the business and providing a framework for performance benchmarking and transparency.

Finally, market winds are clearly blowing in favor of B Corps. A 2019 survey found that 47 percent of consumers would pay at least 25 percent more for a sustainable product. Those numbers are something investors aren’t likely to overlook, particularly when the data shows up-and-coming consumer group Gen Z leading the trend; they’re willing to pay 50-100 percent more for sustainable products compared with other age groups.

3. They’re at the Forefront of a Global Movement

The 17 United Nations Sustainable Development Goals (SDGs) aim to create healthier environments, and stronger, resilient communities worldwide by focusing on people, planet, prosperity, peace, and partnership.

B Corps are built to thrive in markets that prioritize exactly those values. Their certification requires them to “consider the impact of their decisions on their workers, customers, suppliers, community, and the environment.”

Participating governments will need to build a global network of partnerships to achieve the SDGs, and B Corps are well positioned to contribute. Specifically, B Corps aim to provide livable wages and healthy working conditions for employees, and take innovative approaches to minimize environmental impacts and mitigate climate risk.

4. B Corps Are Ideal Suppliers

A 2020 Harvard Business Review article described the rising number of multinational corporations that have pledged to work only with sustainable suppliers. The ripple effect of this could be significant, as suppliers demand the same from their own suppliers, and so on, throughout global supply chains.

Of course, the challenges of ensuring a supply chain meets social and environmental standards are complex. A core obstacle is a company’s inability to measure lower-tier suppliers’ sustainability practices. However, thanks to their third-party certification, B Corps bring visibility and validation to the process. This adds value to suppliers with B Corp certification.

Some businesses are leveraging this value.

“Make your business more sustainable by using shared truckload service in your supply chain,” Southern California freight shipping company Flock Freight said in this summer’s announcement of its B Corp designation.

B Corps function as a network, and this adds to their appeal as suppliers. They are easy to find, and they share knowledge and best practices that aim to strengthen each B Corp, as well as the collective so-called B Economy.

As B Lab explains: “Our ultimate vision is that one day there will be no B Economy—just a global economy that aligns its activities toward achieving our common purpose of a shared and durable prosperity for all.”

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