The rise of the B Corp
Pop culture is rife with evil businessmen. From Gordon Gekko in Wall Street to virtually every James Bond baddie, the stereotypical plutocrat is single-minded and cold-blooded in their pursuit of profit. What was that about carbon footprint? Don’t make me laugh.
But times, they are a changin’. The idea that business – and business leaders – can be a force for good is gaining traction. Less Wolf of Wall Street, more Mother Teresa.
One of the clearest examples of this shift is the rise of the B Corp.
Short for Certified B Corporation (the ‘B’ stands for ‘beneficial’), B Corps are for-profit businesses that meet the highest standards of social and environmental performance, public transparency and legal accountability. They are the brainchild of US entrepreneurs Jay Coen Gilbert, Bart Houlahan and Andrew Kassoy, who realised they could bring greater awareness to purpose-driven companies by creating a credible and recognisable seal of approval.
In 2006, the trio founded B Lab, a nonprofit that sets global standards, awards B Corp certification to businesses and advocates for the adoption of ‘benefit company’ status at a state level. Their idea has now become a movement.
Today, there are 26 B Labs and more than 2800 B Corps worldwide, including 270 in Australia, which is the fastest growing country per capita for B Corps. Among them are several retail businesses, such as Outland Denim, Etiko, Koala, GlamCorner, Bellroy, Flora & Fauna, KeepCup, Good Day Girl, Arndsorf and Kester Black, as well as numerous other brands.
In July, B Lab Australia and New Zealand sought to capitalise on this momentum with a month-long marketing blitz. Local B Corps posted videos on social media, offered discounts and participated in events to raise awareness among businesses and consumers. It wasn’t the first B Corp Month the nonprofit had orchestrated in Australia, but it was by far the biggest.
“We’ve really stepped it up this year and the B Corp community have stepped it up with us. We want to spread the word about what they’ve done,” says Anna Crabb, general manager of B Lab Australia and New Zealand.
You have to earn it
As the B Corp movement gains steam in Australia, it is beginning to attract bigger businesses, such as T2, which is mid-way through the process of becoming certified. Once it meets criteria, it will be one of the biggest retailers with B Corp status in Australia.
“As a business, we are very passionate about the commitment we have to do the right thing by the planet and the communities we serve. That’s always been a part of our ethos, but we wanted to ensure we set ourselves to a really high standard,” says T2 CEO Nicky Sparshott of the company’s decision to pursue B Corp certification.
The leadership team started discussing the topic at the end of 2018, after the company had made progress on some of its own sustainability goals, including the eradication of single-use plastic from its packaging and the sustainable sourcing of its teas.
According to Sparshott, everyone was on board with the idea, despite the fact it would require the company, which was acquired by Unilever in 2013, to make some significant changes.
“We were acutely aware that we would need to reduce, or at a minimum, offset, our carbon footprint, and we’ve since put measures in place that we’re really proud of,” Sparshott says.
T2 is also working on improving its employee diversity. Although the company’s workforce is balanced in terms of gender, sexual preference and cultural representation, Sparshott believes there is still room for improvement.
“Could we be more representative around age, and cater to people who have disabilities? These are the areas we’re working on now,” she says.
By making these changes, T2 hopes to improve its score on the B Impact Assessment, an online tool created by B Lab, which asks around 200 questions in five key areas: governance, workers, community, environment and customers.
Positive practices and policies are associated with points, and businesses need to earn a certain number of points to become a Certified B Corporation. But it’s not really possible to fail the assessment; B Lab simply considers businesses that don’t meet the threshold as being “on their way” to becoming certified.
According to the nonprofit, more than 52,000 businesses worldwide have engaged with the tool, which means just 5 per cent have actually become Certified B Corps over the past 13 years. There’s no question the process is rigorous. And that is one of its biggest drawcards.
“It’s not a certification you can buy. You have to earn it by the way you operate, and you need to provide strong evidence,” Sparshott says.
Sparshott has tasked T2’s sustainability manager with leading the B Corp project. If businesses care about their impact, she says, they will find a way to apply existing resources to it.
“It should be business as usual, and part of our day jobs.”
A big needle-mover
The rise of the B Corp reflects a broader shift towards mindful consumption in recent years. A recent Nielsen study showed an 11 per cent increase in ethical cosmetics sales in 2018, primarily driven by millennials. At the same time, leather shoe sales declined.
“What I’m seeing is consumers want ethical products and they’re buying them,” says Dr Eloise Zoppos, senior research consultant and research fellow at Monash Business School’s Australian Consumer and Retail Studies centre.
“It’s not just a mindset anymore, people are starting to make choices that align with their values,” she tells Inside Retail.
For many consumers who want to shop their values, however, a tricky question emerges almost immediately. What exactly is an ethical product? Is it an item with a small carbon footprint? Is it part of the sharing economy? Is it made by people who earn a living wage?
Retailers that want to cater to these shoppers face a similar challenge. There is no single definition of what it means to be a sustainable business, a responsible business, an ethical business, or a business that is a force for good.
This is one of the main benefits of being a B Corp, according to Dane O’Shanassy, country director of Patagonia Australia and New Zealand.
“You get a toolkit, a set of standards to work through, which will hopefully elevate your business. But you also get a third-party certification, which is something consumers can trust,” says O’Shanassy.
“It’s a great way of communicating to customers about something that is hard to communicate.”
The local business is a 100 per cent subsidiary of Patagonia Inc, which became a Certified B Corp in the US in 2012, and remains a poster child for the movement globally.
Like all B Corps, Patagonia is required to recertify every three years and publicly share an impact report, which includes the score from its most recent assessment. In its last report, Patagonia’s score increased by 20-30 points, which O’Shanassy says is unheard of.
“Businesses of our size normally go backwards not up,” he says.
But over the past four years, Patagonia has made a concerted effort to move as much of its overseas production as possible into fair-trade-certified factories. In FY18, some 40,000 people were employed in fair-trade-certified factories, double the number from the year before.
“That has been a big needle-mover for us, but the great result has been the impact on workers’ lives,” O’Shanassy says.
A term that frequently comes up in conversation with B Corps is ‘mission lock’. This refers to the process of making purpose and impact a permanent part of a company’s operations.
Many businesses are founded and run by people who care deeply about their environmental and social impact, but what happens to those values when a new CEO takes over, or an investor comes on board? And what about publicly-listed companies like T2, that have a legal obligation to act in the best (financial) interest of their shareholders?
By becoming B Corps, they are legally required to consider the impact of their decisions on all stakeholders, such as employees, suppliers and the planet, not just shareholders. This locks in their purpose, no matter who owns or runs the company.
According to B Lab, the legal requirement can be fulfilled through a variety of structures, from LLCs and traditional corporations to benefit corporations and cooperatives. But benefit companies currently have no legal status in Australia.
Crabb, the general manager of B Lab Australia and New Zealand, says the nonprofit is actively campaigning for an opt-in legal form to be introduced through a minor amendment to the Corporations Act. The organisation has engaged leading business figures on the topic and prepared a model bill, and is hopeful it will be taken up by the current government.
If it does go through, it would send an important message to Australian businesses and consumers, O’Shanassy says.
“I think it would go beyond the symbolism of being a B Corp, which is fantastic; it would be a physical signal that business can be a force for good, not just the source of all problems.”
Thinking of becoming a B Corp? Read our Q&As with three retailers that have become certified, including GlamCorner’s Dean Jones, here.
GlamCorner’s Dean Jones and Mindy Leow from B Lab will be speaking at the next Inside Retail Academy in Sydney and Melbourne in September. Visit: insideretail.com.au/academy
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