10 Ways That B Corps Show How Business Can Create Value for All Stakeholders
Best For The World Honorees Forge a Path for Business Roundtable to Follow
We are in the process of putting into practice a new social contract between business and society. The most recent evidence is the Business Roundtable’s August announcement that 181 CEOs of America’s largest companies were committed “to lead for the benefit of all stakeholders.”
As I wrote with my fellow co-founders of the Certified B Corporation movement: “While it is appropriate to note, even celebrate, the Business Roundtable’s announcement as a sign of an accelerating culture shift, it is important to recognize that the people who are demanding this shift are demanding action.” More than 30 CEOs from B Corps like Amalgamated Bank, Lemonade and Patagonia took out an ad in the August 25, 2019, Sunday edition of The New York Times to express their eagerness to help the Business Roundtable CEOs turn their bold words into concrete actions.
Many of the businesses who signed the open letter to Business Roundtable CEOs are also on the recently released annual Best For The World list, created by B Lab, the nonprofit behind the B Corp movement, which honors the B Corps achieving the most positive impact, as well as those making the largest measurable improvements to their positive impact on people and planet each and every year. These 2019 Best For The World honorees shine a path for the Business Roundtable (BRT) to follow in achieving each of its five newly announced commitments:
BRT Commitment №1: “Delivering value to our customers. We will further the tradition of American companies leading the way in meeting or exceeding customer expectations.”
- Serve those most marginalized. Mass incarceration directly impacts more than 7.5 million Americans and their families and communities. According to the U.S Department of Justice, roughly 70% of incarcerated people return to prison or jail within 3 years of release. American Prison Data Systems provides incarcerated learners with the digital tools they need to succeed as returning citizens. In partnership with corrections personnel, ADPS provides safe, secure, curated content and customized instruction to reduce recidivism and help people rebuild their lives and contribute to their communities. Robert Green, director of the Maryland Department of Correction and Rehabilitation, said, “You’re looking at increasing their grade-level testing 3 or 4 grade levels in 60 days. That’s incredible.”
- See customers as whole people. For health care provider Northwest Permanente, delivering value to their customers includes tackling issues outside the clinic. “Over 60% of health issues are around housing, security, education, and transportation,” says Carolyn Allison of Northwest Permanente. “As physicians, our voices are among the most trusted, yet the field of medicine has been slow to respond to the climate crisis.” Northwest Permanente recently released a climate action plan whose first tenet is to “ensure that the most vulnerable populations in our communities have a leading voice in planning for climate interventions.” This broader vision of customer care is consistent with their nonprofit parent Kaiser Permanente’s new social health network platform, called Thrive Local, that connects health and social service providers to better coordinate care.
The 2019 Best For The World Honorees are building a more inclusive, regenerative economy focused on having a positive impact for all stakeholders.
BRT Commitment №2: “Investing in our employees. This starts with compensating them fairly and providing important benefits. It also includes supporting them through training and education that help develop new skills for a rapidly changing world. We foster diversity and inclusion, dignity and respect.”
- Share power with employees. Ian Martin Group, a 60-year-old Canadian engineering, technology and IT-hiring firm, stands out for shifting to a self-management organizational structure. Tim Masson, the Ian Martin Group’s chief steward and CEO, says the move is paying off because without supervisors, a self-management system enables workers to reshape their roles over time to better achieve their goals and the goals of the business.
- Share ownership with employees. EILEEN FISHER is a 35-year-old women’s clothing brand with 1,100 employee owners: 40% ownership of the company has been distributed via an employee stock ownership plan (ESOP). This brand’s success using such a model isn’t a one-off: A new report by the Democracy Collaborative on mission-driven, employee-owned firms finds that these businesses outperform conventionally owned firms in overall positive environmental and social impact.
BRT Commitment №3: “Dealing fairly and ethically with our suppliers. We are dedicated to serving as good partners to the other companies, large and small, that help us meet our missions.”
- Help suppliers become better companies. Best For The World honoree Happy Family Organics creates organic food for babies and toddlers. The company recognizes that providing the highest quality food to customers means working with and educating farmers on regenerative agriculture practices. “Regenerative agriculture [uses] time-honored methods that improve soil health, conserve water, and restore ecosystems. The result is more productive farmland that helps to mitigate climate change by pulling extra carbon out of the atmosphere and putting it back in the ground, [while] adding valuable nutrients to the soil,” says Katie Clark, the company’s director of sustainability. “We are investing more than $100,000 between 2018 and 2019 in on-farm grower education, helping some of the farmers that we source from learn more about regenerative methods.”
- Measure your impact. Wakami, a handmade jewelry and fashion enterprise based in Guatemala that works with rural artisans, is addressing the country’s gender gap (one of the biggest in the world). Recognizing that once women are empowered they change reality for their children, their families, and their communities, Wakami measures its impact on the women in its supply chain: “What we are seeing is that 60% of [Wakami suppliers’] children with chronic malnutrition are starting to recover and children of Wakami suppliers have 75% more school attendance than the national average. Also, 95% of the women who work with Wakami [are] more empowered by having a source of income for the first time,” says Wakami’s co-founder Maria Pacheco.
BRT Commitment №4: “Supporting the communities in which we work. We respect the people in our communities and protect the environment by embracing sustainable practices across our businesses.”
- Empower young women. Even before the era of #MeToo, Oakland-based Spotlight: Girls, a minority- and women-owned business, began holding camps to help women and girls “overcome the perfectionism, violence and oppression we face in order to take center stage in our lives and communities.” And the results for the camps’ attendees are measurable: 56% of attendees report feeling happier and more confident after just 2 weeks of camp.
- Tackle hunger. Soulfull Project is a food company that addresses food insecurity. According to the USDA, food insecurity is defined as a lack of consistent access to enough healthy food for a healthy, active life and negatively impacts 40 million Americans, including 12 million children. Soulfull Project, based in Camden, New Jersey, donates a serving of its 4 Grain cereal to a food bank for each serving of hot cereal purchased. So far, the company has made nearly 1 million donations to families in need.
BRT Commitment №5: “Generating long-term value for shareholders, who provide the capital that allows companies to invest, grow and innovate. We are committed to transparency and effective engagement with shareholders.”
- Adopt stakeholder governance. Danone North America, the largest B Corp in the world, formed in 2018 when Danone (BN. PA) purchased WhiteWave and merged it with Danone’s existing North American dairy business. From the outset, the new entity adopted stakeholder governance using the Delaware benefit corporation legal structure. Already, the governance structure, which builds stakeholder management into the company’s operating DNA, has not only created value for Danone North America, but also for the rest of Danone. Shortly thereafter, 12 leading global banks amended Danone’s $2 billion syndicated credit facility, including a provision that offered Danone a lower cost of capital as it increased the percentage of its global revenues that achieved credible levels of verified performance in its environmental, social and governance practices.
- Adopt stakeholder governance. Yes, this idea is so game-changing, it’s worth repeating. On April 14, 2015, Natura (BVMF: NATU3), the multibillion-dollar Brazilian cosmetics giant, became the first publicly traded company to adopt stakeholder governance. When describing their engagement with shareholders about the proposed change in its corporate governance, Natura shares that their institutional investors said “this is just Natura being Natura,” pointing to the fact that Natura, in operation since 1969, has been a leader in sustainability and social responsibility for decades. Since the change to stakeholder governance, Natura has acquired both The Body Shop and Avon, the latter in a multi-billion-dollar all-stock transaction, and its stock price has more than doubled from 27.26 to 65.98 as of August 30th.
In their response to the Business Roundtable announcement, the Council of Institutional Investors worries that stakeholder governance creates a situation in which “accountability to everyone means accountability to no one,” creating “hiding places for poor management.” The existence of more than 10,000 successful B Corporations and benefit corporations who have already adopted stakeholder governance and are delivering value to their shareholders and to their customers, employees, suppliers, and communities, while preserving the natural systems on which all life depends, is evidence that this understandable concern is not consistent with the facts on the ground.
The shift from shareholder primacy to stakeholder capitalism is a natural evolution. Evolution happens through positive mutations. B Corps, especially Best For The World honorees, are the kinds of positive mutations that will outcompete in a marketplace that increasingly values an authentic commitment to purpose. The purpose of business is to strive to be best for the world. These businesses show us the way to turn bold words about purpose into concrete actions that create value for all stakeholders, including shareholders.
Let’s follow these leaders down to the path and make real change happen. Let’s get to work.
This article was originally published in Forbes. B the Change gathers and shares the voices from within the movement of people using business as a force for good and the community of Certified B Corporations. The opinions expressed do not necessarily reflect those of the nonprofit B Lab.
10 Ways That B Corps Show How to Create Value for All Stakeholders was originally published in B the Change on Medium, where people are continuing the conversation by highlighting and responding to this story.
