Certification Provides Tangible Benefits That ‘Future-Proof’ Businesses

Photo by Javier Allegue Barros on Unsplash

Although parts of the economy are beginning to reopen, the economic impacts of the coronavirus will continue to reverberate for years to come, and while some companies will weather the storm, many others will not. Luckily for many Certified B Corporations, businesses built around stakeholder governance tend to be more resilient than others. As Nell Derick Debevoise, founder and CEO of B Corp Inspiring Capital, wrote in Forbes, “in the last financial crisis, certified B Corps were 63% more likely to survive than other businesses of similar size.”

B Corp resiliency is not a coincidence — it is a function of designing a business to operate with purpose. This resiliency does not just manifest in times of crisis either. B Corps have a strong competitive advantage all the time, especially as consumers and employees are increasingly holding businesses to higher standards. Recent studies from Forrester Research revealed seven in 10 millennials and 52% of all online U.S. adults “consider company values when making a purchase.” The Harvard Business Review found that nine out of 10 people would be willing to earn less in order to work a purposeful job.

All of this research points to the same thing: Stakeholder governance is the future of capitalism. Based on my own research for my forthcoming book, Better Business: How the B Corp Movement Is Transforming Capitalism, becoming a B Corp is a compelling way to embed stakeholder governance into an organization’s structure. In this new report, How Becoming a B Corp Is a Way to ‘Future-Proof’ Your Business, I share some key reasons why B Corp certification effectively establishes this structure within a company. Below are excerpts from the report.

Sustainability Through Long-Term Governance

B Corp governance offers a legal framework to protect all stakeholders. To become a B Corp, companies are required to amend their governing documents to expand fiduciary duties to include consideration of the interests of all stakeholders. If a company is a limited liability company (LLC), it can amend its existing operating agreements. For corporations (e.g. C Corps, S Corps), if the law in their country or region allows altering their articles of incorporation to include non-fiduciary objectives, then they must do this. Alternatively, in some locations where this is not possible, B Corps can fulfill this obligation by becoming a benefit corporation, a new corporate form that recognizes companies’ responsibility to create a positive benefit for society and the natural environment, and be publicly transparent and accountable about those impacts.

In addition to providing legal protection, extending fiduciary duties beyond a company’s shareholders provides a learning opportunity for the board, investors and rating agencies. The certification also signals to leadership that the mission is to be concretely executed against, with the impact of decisions measured and reviewed based on multiple metrics, not solely profits to shareholders.

Aligning Investors with Social Mission for the Long-Term

As companies with social missions grow and take on outside capital from investors, they run the risk of mission drift, or focusing too much on financial stakeholders and straying from other stakeholder obligations over time. In addition, most venture capital comes with an expectation of a relatively short period for a high percentage investment return.

In recent decades, an increasing proportion of investors are paying attention to not just a firm’s financials but also its social and environmental performance. The B Impact Assessment (BIA) provides a framework for businesses — and investors — to assess these potential risks across the stakeholder profile. By reviewing the BIA for recertification every two years, company leadership is required to review and set goals for improvement — transparently — which guides continuous improvement.

Build a Lasting Employee Culture

Building and maintaining a positive organizational culture is one of the biggest challenges that business leaders face. A strong theme in my research for Better Business is that through its focus on positive employee practices and mission, the B Corp model helps companies build a positive and reinforcing organizational culture that provides a lasting competitive advantage for firms.

The employee-focused workplace of B Corps is commonly cited as leading to high employee attraction and retention rates. In addition, B Corps are measured in how well they are creating an inclusive and equitable workplace, as the BIA has increasingly focused on these topics. Numerous studies have shown that companies with more diverse perspectives to contribute to ideas, projects and company decisions are more resilient and, as a result, successful over the long term. Such practices will become even more important over time with demographic changes. B Corps are positioning themselves to win the talent battle of the current and future working generations.

To learn more about how B Corp certification can future-proof businesses, access the full report for free.

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.

Good News: B Corps Are More Prepared for the Future was originally published in B The Change on Medium, where people are continuing the conversation by highlighting and responding to this story.

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