Q&A: B Corps + Better Business
After we had the pleasure of hearing Chris Marquis speak about Remaking Capitalism and his new book ‘Better Business’, there were many more questions than time available to answer in the Q&A session. Chris kindly agreed to a follow-up interview to answer some of these.
Here are the key takeaways from the conversation:
Q: Why B Corp as a model?
In Chris’s view, B Corp reporting provides accountability and allows scrutiny. For example in the US, organised labour and capital had worked together effectively in the first half of the century, but then the labour movement was broken, as corporations’ focus narrowed to place shareholders in the paramount position. In this absence of a labour counterbalance, B Corp certification is one way that companies can be held accountable to the broader society.
This is also important in regards to externalities, such as pollution and natural resources that create tremendous costs for society, which companies have exploited for a long time. B Corp holds companies to account in this respect as well, going beyond the governmental regulations.
Q: How should companies balance the needs of different stakeholders – for example between wage rises, price rises and shareholder dividends?
Chris explained how every company will be different in how it balances commitment to different stakeholders - some companies may prioritize environmental impact, some their communities and some employees. The B Impact Assessment (BIA) takes a holistic view, and companies can settle their own individual foci. But, Chris suggested, maybe there should be some more non-negotiables within the BIA – for example a company’s position on climate change, living wage etc – that all companies have to fulfill, and after that companies can focus their attention on areas consistent with their missions.
Q: Do you think that B Corps can assist in creating better social mobility?
Chris Marquis’ recent book ‘Better Business: How the B Corp Movement Is Remaking Capitalism’.
Chris acknowledged that addressing this is a fundamental issue around the world. He spoke of three ways that B Corps can assist in creating better social mobility.
The first is bringing CEO pay back into a more appropriate ratio. He spoke of how CEO pay has gotten out of control, with stock options playing a large part in this, and making a huge contribution to inequality. In the US in recent years CEO to average worker pay has exceeded 350:1 in some years. Some B Corps have limit ratios for CEO pay to average pay, for example 15/20:1. There is even an initiative in South America focusing on 10:1 as being the most appropriate ratio. Executives are making 350x what the average worker makes is “obscene” and needs to be addressed.
The second approach is increasing attention on the living wage and the definition thereof, and many B Corps have focused on this.
The third way is through changing ownership structures, and in particular focusing on distributed ownership to employees or other cooperative means. One thing Chris said he learned from the B Corp community and especially employee owned ones is that “almost all ownership structures have the effect of increasing inequality.’” For example if a family or set of private investors owns a company, when the company grows they share disproportionately in the gains and this only increases over time. By changing to employee owned and co-op owned companies, structures which many B Corps use, this directly helps to address inequality.
Q: How popular is B Corp for B2B companies?
Chris said that companies are often attracted to B Corp for the social and environmental benefits. But there are many other benefits, such as process improvement through the BIA (B Impact Assessment tool), or how implementing B Corp processes affects employee attraction and retention, that generally apply even more to manufacturing companies than B2C companies.
In his view, consumer awareness of B Corps is still a bit limited, so the brand and reputational benefits that B2C companies would achieve from the B Logo are not as large as the process improvement and employee focused benefits that all companies, both B2B and B2C companies, can achieve from certification. He gave the example of Cascade Engineering, an injection moulding company, which has gained huge advantages from being part of the B Corp movement. Becoming a zero waste company has saved them $280k a year, from not having to pay for waste disposal and using fewer materials. Understanding process improvements in this way can be hugely beneficial for B2B companies.
Q: So if research shows all the benefits, what are the barriers to more or all companies becoming B Corps?
The first barrier that Chris identified is governance, as to become a B Corp, companies have to become a Benefit Corp or embed stakeholder principles in their corporate charter documents. This is a big change and investors and boards might feel that it could limit future investment down the road and get in the way of becoming public. But that barrier is becoming overcome, in the last year, many B Corps have gone public and a number of already public companies have changed their corporate form to a Benefit Corporation. To do this, they have had to take a shareholder vote and have these passed with over 99% support.
The second is cost. Particularly if you are a larger company, the cost of becoming a B Corp is likely to give you pause, as it is calculated as a percentage of sales.
Then there is also the difficulty of the BIA itself, as not every company is going to be able to meet the standards, at least on an initial pass. But, as Chris says, companies can use the BIA to help make them better, even if they decide not to go for certification.
A practical consideration is also the limited bandwidth that B Lab has to process certifications.
Q: And what can we do ourselves to help promote B Corp?
A simple way is to support B Corp companies, and make sure you are buying from companies that are making a difference, using your dollars, pounds or euros for good. And hopefully this will help the movement to grow faster.
Thanks Chris for your insights! And we highly recommend his book, ‘Better Business: How the B Corp Movement is Remaking Capitalism’, if you’d like to dive more into this topic.