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4 ways to build businesses that work for good, right now

Breaking news from the CEO Roundtable this fall sent a combination of shockwaves, enthusiasm and relief throughout the business world

By: EBR - Posted: Monday, November 25, 2019

B Corporations, or B Corps, are “businesses that meet the highest standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose.”
B Corporations, or B Corps, are “businesses that meet the highest standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose.”

by April Rinne* 

Breaking news from the CEO Roundtable this fall sent a combination of shockwaves, enthusiasm and relief throughout the business world. As the headlines proudly proclaimed, 181 CEOs of the world’s largest corporations have finally figured out that it’s time for a shift from shareholder to stakeholder capitalism. No longer is merely making money a sufficient corporate purpose; rather, businesses must “share a fundamental commitment to all of their stakeholders,” including customers, workers, suppliers and the broader communities within which they operate.

For people working in social enterprise and impact investing, this is not news, although it is very much welcome. However, the bigger and still-outstanding question remains: will this be merely a press release that achieves little beyond a season’s-worth of good PR, or will it lead to tangible, substantive change?

On the one hand, there are myriad ways corporations can tweak around the edges to improve their workforce policies, environmental policies and so forth. On the other hand, despite being well-intentioned, such efforts can - and all too often are - wiped out by a new CEO or a disappointing financial quarter. What about deeper, more permanent and lasting change at the ‘company DNA’ level?

In other words, how can we build business for good, from the ground up?

 

 

It can be easy to overlook simple solutions. But that is exactly what’s needed - and here are four clear, straightforward options to start.

1. B Corps

B Corporations, or B Corps, are “businesses that meet the highest standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose.” A company receives B Corp status via certification, which is a rigorous process that includes a comprehensive third-party assessment of social and environmental performance on a range of metrics. Only a fraction of applicant companies receive B Corp status on their first try. Upon certification a company signs the Declaration of Interdependence and pays annual certification fees, which range based on the company’s annual sales.

B Corps have achieved robust traction in recent years, with more than 2,500 certified B Corps in more than 50 countries. The B Corp founders were quick to respond to the CEO Roundtable news, making it clear that they’ve been doing this for years (the first 82 B Corps were certified in 2007) - and these lofty goals are nothing new.

Thus far, none of the 181 CEO Roundtable signatories have become B Corps (though time will tell). One challenge for long-term goals is that a company can decide to decertify at any time. The most notable recent example of this is Etsy, which gave up its B Corp status in 2017 when a new CEO was put in place who didn’t share the same priorities as the ousted CEO, Chad Dickerson, who had taken the company public. Etsy provides a helpful case study from which other companies can learn.

2. Benefit corporations

I am often surprised by how many people think that B Corps and benefit corporations are the same thing. Not the case!

While B Corps are required to meet standards and maintain their certified status, benefit corporations are both legally authorized to lock in positive social, environmental and community impact (in addition to profit) in their constitutional and governance documents, and they are legally protected to make decisions and investments in furtherance of these non-financial goals. In other words, benefit corporations’ commitments to more responsible, inclusive and sustainable business cannot be changed by a new owner or new CEO deciding to change course. Etsy’s B Corp decertification would not have been able to happen had Etsy been a benefit corporation.

Can a company be both a B Corp and a benefit corporation? Yes. You undertake both processes: you go through the process of B Corp certification and the legal and governance requirements to become a benefit corporation.

Benefit corporations exist in almost all sectors today, from finance to retail, education, government and publishing (in fact, publisher Berrett-Koehler is an example of a company that’s both).

3. (Platform) cooperatives

Rather than being owned by investors or shareholders who may have no direct connection to a company, cooperatives are owned by their respective communities: the people who build, grow and maintain the organization. Cooperative members share in the upsides, downsides, governance and long-term wellbeing of the cooperative, hence the name.

Organized cooperatives date back to the 18th century and exist in a variety of sectors, from agriculture to retail to housing. (Indeed, agricultural co-ops and housing co-ops can be found in almost every corner of the world.) They can be quite large, such as Mondragon in Spain (81,000 employees), though most are relatively small, in alignment with their local and community roots.

The two primary types of cooperatives are worker-owned and member-owned. Worker-owned cooperatives are owned by the employees. Member-owned cooperatives are owned by members, who have less vested interest than employees. REI (retail) and Stocksy (photography) are member-owned co-ops. Lifetime membership at REI costs $20, which entitles members to an annual dividend based on their purchases at the company. Stocksy members are photographers who contribute images.

Platform cooperatives combine the cooperative business structure and ethos with the efficiencies of digital platforms. Rather than venture capital, for example, imagine a driver-owned Uber (La’Zooz ‘Fair Share’ concept) or a host-owned Airbnb (FairBnB). The drivers and hosts are the owners. They share in the upsides as well as the risks. When Uber went public for $82 billion in spring 2019, the millions of drivers who actually made the platform valuable (indeed, without them the platform could not exist today) did not share in that upside. With platform cooperatives, such an inequitable outcome would not have been possible.

One of the primary challenges to platform cooperative growth is access to finance. Because cooperatives do not aim to exit - or if they do, they wish to ‘exit to community ownership’ rather than publicly traded markets - traditional financial vehicles find them unattractive (and indeed, may be barred from investing). However, given the fundamentally more equitable and sustainable principles upon which cooperatives are built, it is all but inevitable that they will play an increasingly important role in the economy. (For more on cooperatives, read Everything for Everyone or attend the annual Platform Co-op conference.)

4. Zebra companies

Unlike B Corps, benefit corporations and platform cooperatives, zebra companies do not have a defined structure or set of standards they must meet. In fact, zebra company ranks easily could - and do - include all of these variations. As Zebras Unite co-founder Mara Zepeda has said, “The business model is the message. We show our values in how we operate, and we can do that intentionally.”

Zebra companies are an antidote to unicorns. They stand in stark contrast to venture capital-backed startups that seek hockey-stick growth and astronomical payouts. Rather, Zebras seek sustainable returns over time, resilience, commitment to community and the broader ecosystem within which they operate. They are not lone mythical creatures in a forest; they run in dazzles (yes, that’s the official name of a group of zebras!), have great stamina and adaptability, and have never been domesticated. They prioritize more than growth; they seek to thrive as a group. Zebra companies are a nascent global movement, with local chapters of entrepreneurs connecting with their peers worldwide.

*Founder and Principal, April Worldwide

**first published in: www.weforum.org

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