The Rise Of B Corps Highlights The Emergence Of A New Way Of Doing Business
August 3, 2018
Michele Giddens Contributor
In my previous column, I talked about the growing demand for impact investments, driven by powerful global trends like the ongoing transfer of wealth to women and millennials.
Crucially, these same trends are also boosting the supply of impactful investment opportunities – by supporting the rise of a new generation of enterprises that are actively pursuing social and environmental impact alongside financial goals.
In the most recent Deloitte Millennials survey, almost 40% of respondents stated that the goal of business should be to ‘improve society’ (second only to ‘generate jobs’ in terms of priorities). And in an earlier study by the Intelligence Group, 64% of millennials said it was a priority for them to make the world a better place – while 88% wanted ‘work-life integration’.
Today’s workforce is rejecting the old Milton Friedman notion that the only social responsibility of business is to maximize profits; they think business should also be trying to make a positive difference in the world. And quite right too: why should we stop caring about the things that matter to us when we go to work?
In short, people increasingly want to work for, buy from and invest in companies that have mission and impact at their heart of their model. So for entrepreneurs, there’s an increasingly attractive business case for an impact-driven approach. By making it easier to attract top talent, additional customers, and new investors, it can actually serve as a source of commercial advantage.
A notable example of this changing mindset is the global rise of the B Corp movement, a group of businesses committed to pursuing better social or environmental performance alongside their financial targets. Founded in 2006 by the entrepreneurs behind AND1 (a US sportswear company that became one of the earliest ‘profit with purpose’ businesses), it now numbers almost 2,500 businesses across 50 countries – including the likes of Triodos Bank, Warby Parker, Patagonia, Natura and Ben & Jerry’s (disclosure: Bridges is also a B Corp).
To become a certified B Corp, a company must first submit to an independent assessment of its social and environmental performance, accountability, and transparency. If the company scores highly enough, it must then incorporate its social or environmental mission into its governance articles in order to be certified (it is subsequently reassessed every three years to make sure it is maintaining the required standard, as best practice evolves).
To take just a couple of my personal favourites: Elvis & Kresse is a UK business that began life by taking old fire-hose decommissioned by the London Fire Brigade and turning it into beautiful bags and other accessories – a perfect example of the circular economy in action (it has now averted more than 300 tonnes of waste from landfill). And AeroFarms is a US business that’s come up with an innovative way to help feed the growing population: indoor vertical farms, which have produced over 250 types of leafy green vegetables using a fraction of the land and 95% less water than standard farming.
Leafy green vegetables. Healthy meals. Shutterstock
The idea is that over time, the B Corp stamp of approval will help companies attract new customers/ employees/ PR/ investors – while also creating a community whose members can learn from each other. And the early signs are promising: the UK arm reported earlier this year that UK-certified B Corps grew on average 28 times faster than national GDP in 2017. Roughly one in three of these companies said they had reached new audiences since certification, and almost half said their B Corp status had helped them attract new staff.
Of course, becoming a B Corp is no guarantee of commercial or impact success. And it’s by no means the only way for businesses to signal their commitment to achieving social and environmental impact (there are lots of highly impactful businesses that are not B Corps).
But what’s clear from the growth of this movement (and similar initiatives around the world) is that there’s an ever-growing pool of businesses that are actively trying to pursue impact goals alongside financial goals – not only because they think it’s the right thing to do, but also because they think there’s a strong commercial rationale for it. If we can match these companies up with those investors who are looking to invest for impact, we’ll be much better equipped to tackle some of the biggest challenges facing our world.
I am a partner at Bridges Fund Management, the specialist sustainable and impact investor, which I co-founded in 2002 alongside Philip Newborough and Sir Ronald Cohen. I have over 25 years of international development and impact investing experience. I have been heavily ...MORE