B corporations: A stakeholder capitalism that works for people and planet?

This post was first published on mother nature network on June 7, 2011.

Economic growth: it is perhaps one of the only ideas that enjoys widespread bipartisan support these days in Washington. “Grow the economy!” is the rallying cry heard from Wall Street to Main Street, and probably even on Sesame Street (two marshmallows are always better than one, right?).

While the economic growth paradigm is questionable for reasons too numerous to get into here, not all economic growth has the same environmental and social impact. Many business owners believe that the forces of capitalism can be harnessed to promote positive change in their communities and around the world. And while many such businesses and non-profits have an explicitly social or environmental dimension to their missions, corporate law still places institutional barriers on for-profit companies attempting to do more than increase their bottom-line.

Enter the B corp, or benefit corporation, a new type of corporation specifically structured to serve a larger social and environmental purpose. While current law legally obligates corporations to maximize profits — corporate executives can be fired or sued for making decisions that benefit the community at the stakeholders’ expense — B corps represent an alternative for social entrepreneurs with the common good in mind.

The founders of B Lab, a non-profit dedicated to developing, certifying and promoting B corps, have envisioned a different way of structuring corporations that would build in transparent social and environmental performance standards. This entails a profound shift from stakeholder capitalism to shareholder capitalism — a way of doing business that formally recognizes the many diverse shareholders that every corporation has beyond their investors.

Any corporation can become a certified B corp by taking a comprehensive Impact Assessment that measures a corporation’s practices in five fundamental areas: accountability, employees, consumers, community and environment. This certification, similar in function yet significantly distinct from other product certifications like free trade or organic, serves as a powerful indicator that an entire company follows a determined set of ethical standards. And the new corporate form liberates social entrepreneurs to recognize community, employee and environmental shareholders in the corporation’s operations. The certification creates the framework for companies to institutionalize social values and then recognizes those that have done so.

There are currently more than 400 certified B corps around the U.S., despite the fact that only four states* (now up to seven states as of February 2012)have legally recognized this new corporate form. Virginia was the most recent state to sign benefit corporation legislation into law in 2011, but seven other states have legislation pending.

I had a chance to meet Hardik Savalia, one of B Lab’s first employees and team members, as part of Climate Ride’s Expert Speaker Series. And though I am generally wary of business models that still operate within the dominant growth paradigm, I certainly see the value in B Lab’s mission to institutionalize social entrepreneurship and create legal space for mission-driven companies. While no one expects the Forbes 500 to all immediately alter their business perspectives, the B corp model adds significantly to the larger cultural narrative of sustainability and engages the massively powerful business sector in creating a better world.

In that endeavor, we need all the help we can get.


5 thoughts on “B corporations: A stakeholder capitalism that works for people and planet?

    • Yeah, I think its definitely worth exploring alternative forms of capitalism as part of the larger re-imagining of what the economy is and what it is supposed to be for. It may be that capitalism’s time has come…but I’m less inclined to get trapped in ideological debates. Given the dynamic period of transition we find ourselves in, all opportunities are worth experimenting with and learning from.

      • It’s a very interesting trend that you’re observing, and certainly one I’ve been exploring as well. I couldn’t agree more about the need to go beyond the B-Corp model though – this is an article written about 4 years ago, my understanding of the need for deep economic change has matured quite a bit since then. However, the broad category of not-for-profit does not necessarily imply democratic governance or fair labor conditions or ecological decision-making. Governance is another central element of the grassroots economic transformation that not-for-profits have not grappled with thoroughly enough. Most seem to follow rather traditional hierarchies in my experience. Any insights on that question?

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