Is it more important to be ethical than profitable?

The only social respon­si­bil­i­ty of a busi­ness is to increase its prof­its, pro­claimed econ­o­mist Mil­ton Fried­man in 1970. He was ush­er­ing in a new era of share­hold­er pri­ma­cy that would dom­i­nate the way com­pa­nies were run for almost half a cen­tu­ry, often with scant regard for the plan­et or for peo­ple. But the growth of the B corp move­ment sig­nals a shift in men­tal­i­ty, as share­hold­ers, employ­ees and con­sumers increas­ing­ly demand social and envi­ron­men­tal per­for­mance be weight­ed along­side a corporation’s bot­tom line.

Reimagining business to have a positive impact

In 2006, US-based non-prof­it B Lab, cre­at­ed a new cer­ti­fi­ca­tion sys­tem to help busi­ness­es define them­selves as social­ly and envi­ron­men­tal­ly respon­si­ble. If suc­cess­ful, a com­pa­ny would become a cer­ti­fied B corp, the B stand­ing for ben­e­fi­cial. The frame­work, which includes a min­i­mum thresh­old and ris­ing slid­ing-scale score, was set up as a coun­ter­weight to share­hold­er dom­i­nance and to help avoid out­comes such as in 2000 when the founders of Ben & Jerry’s were forced by investors to sell the ice cream com­pa­ny to Unilever.

There are now more than 3,585 cer­ti­fied B corps world­wide in 74 coun­tries, includ­ing 396 in the UK. 2019 was a par­tic­u­lar­ly strong year for growth with the num­ber of cer­ti­fied B corps ris­ing by 25 per cent.

A com­mit­ment to social and envi­ron­men­tal per­for­mance, which B corps in the UK are legal­ly oblig­ed to out­line in their arti­cles of asso­ci­a­tion, does not mean, how­ev­er, that busi­ness­es should focus on pos­i­tive impact at the expense of their bot­tom line.

Chris Turn­er, exec­u­tive direc­tor of B Lab UK, says the notion of ethics ver­sus prof­it is a false dichoto­my, as com­pa­nies don’t have to choose between the two. “The idea we’ve been prov­ing, for over a decade now, is busi­ness­es that are eth­i­cal are the sort of busi­ness­es which thrive in the long term,” he says.

This is par­tic­u­lar­ly true this year, he says, when we’re not just fac­ing the pro­found chal­lenges of the cli­mate emer­gency and extremes of social injus­tice, as high­light­ed by the Black Lives Mat­ter move­ment, but also the coro­n­avirus pan­dem­ic. “It’s now more urgent than ever that busi­ness­es look after those var­i­ous stake­hold­ers. It’s vis­cer­al; peo­ple real­ly notice it in terms of the busi­ness­es they inter­act with,” Turn­er adds.

The idea we’ve been prov­ing is busi­ness­es that are eth­i­cal are the sort of busi­ness­es which thrive in the long term

The out­door cloth­ing brand Patag­o­nia, which has been a cer­ti­fied B corp since 2012, has con­sis­tent­ly advo­cat­ed a pro-envi­ron­men­tal agen­da. For Alex Weller, mar­ket­ing direc­tor for Europe, run­ning a prof­itable and eth­i­cal com­pa­ny are insep­a­ra­ble goals. “The most impor­tant part is to be finan­cial­ly healthy, so you can sup­port your most impor­tant stake­hold­ers, your employ­ees and part­ners, so every­body can be focused on being a force for good, to affect the issues that mat­ter,” he says.

Can you be too big to be a B Corp?

B corps include com­pa­nies you might expect such as Abel & Cole, Vivo­bare­foot and the Brazil­ian cos­met­ics com­pa­ny Natu­ra, which owns The Body Shop. But there are also com­pa­nies that might sur­prise, includ­ing wealth man­age­ment com­pa­nies, prison data sys­tems and the sub­sidiaries of big multi­na­tion­als such as those with­in Danone, Coca-Cola-owned Inno­cent and Unilever’s Ben & Jerry’s.

For Weller, to ask if there’s a dan­ger the B corp mis­sion could be dilut­ed as it expands is to miss the point of the process. “B corps is a very thor­ough, con­sis­tent and objec­tive frame­work,” he says. “Whether or not you have a sub­jec­tive point of view on whether a busi­ness should be a B corp or not, it doesn’t real­ly mat­ter as B corps has scored them and they have met the cri­te­ria.” Weller also notes that, as it’s a slid­ing scale, there is always room for improve­ment in any company’s score.

Bournemouth University’s Dr Michael O’Regan, who research­es B corps, ques­tions the scal­a­bil­i­ty of the con­cept. “We have 5.7 mil­lion busi­ness­es in the UK, B corp, while eth­i­cal and try­ing to do a good thing, might attract low-hang­ing fruit, those already social­ly, envi­ron­men­tal­ly respon­si­ble,” he says. “What of the mil­lions of oth­er pri­vate busi­ness­es?” O’Regan ques­tions whether the mod­el is a tem­plate for “rad­i­cal change”.

But accord­ing to Weller: “It’s one of the most pow­er­ful tools out there now right now, both for busi­ness­es them­selves, but also for cit­i­zens to inter­act with, to see if a com­pa­ny maps their val­ues.”

Is there a benefit to being a certified B Corp?

Aside from being a force for good, the ques­tion whether busi­ness­es get a tan­gi­ble ben­e­fit from becom­ing a B corp is not clear cut. Research by the Lon­don School of Eco­nom­ics sug­gests there isn’t a mea­sur­able improve­ment in finan­cial per­for­mance, though they found B corps do expe­ri­ence pos­i­tive non-finan­cial strate­gic results, includ­ing organ­i­sa­tion­al rep­u­ta­tion and social­ly respon­si­ble action.

Per­haps the strongest impact of those non-finan­cial ben­e­fits is felt among employ­ees. Accord­ing to research by B Lab UK, three quar­ters of busi­ness­es said being a B corp helped them attract or retain tal­ent. As Turn­er says: “Work­ing for a com­pa­ny that shares your val­ues is obvi­ous­ly very impor­tant, espe­cial­ly for younger mem­bers of a work­force.”

It’s also pos­si­ble that all UK cit­i­zens may one day ben­e­fit from the B corp move­ment as the organ­i­sa­tion is cam­paign­ing to change the Com­pa­nies Act to ensure all busi­ness­es are respon­si­ble to peo­ple and the plan­et. Asked whether it’s a fail­ure of gov­ern­ment that busi­ness­es are the ones push­ing for these social and envi­ron­men­tal stan­dards, Weller says: “The sci­ence is known, the symp­toms are real and present, but there is still not a leg­isla­tive path­way out of this, and that does mean there are clear vac­u­ums of lead­er­ship and of hope in some ways.”

While he doesn’t think it’s nec­es­sar­i­ly the respon­si­bil­i­ty of com­pa­nies such as Patag­o­nia to fill the void, Weller believes they should show oth­ers that busi­ness can be part of the solu­tion. “If all busi­ness­es did that, maybe we’d have a chance,” he con­cludes.

“Vote the ***holes out”: when environmental initiatives get political

It’s rea­son­able to expect that Patag­o­nia, a com­pa­ny whose stat­ed mis­sion reads “We’re in busi­ness to save our home plan­et”, might not be fans of US Pres­i­dent Don­ald Trump. He leads a gov­ern­ment whose con­tin­ued roll­backs of envi­ron­men­tal reg­u­la­tion and rejec­tion of the Paris Agree­ment on Cli­mate Change have with­out doubt imped­ed the glob­al response to the cli­mate cri­sis.

But in Sep­tem­ber, the Cal­i­for­nia-based out­door cloth­ing brand and cer­ti­fied B corp made those views clear by launch­ing a line of shorts with “Vote the a**holes out” sewn onto the under­side of the label.

Alex Weller, Patagonia’s mar­ket­ing direc­tor for Europe, explains how the idea came about. “The company’s posi­tion on cli­mate deniers, par­tic­u­lar­ly in Amer­i­can cor­po­rate pol­i­tics, has been clear for a long time,” says Weller. “That is when­ev­er you see cli­mate deniers in office, who are tak­ing mon­ey to turn a blind eye to eco­log­i­cal destruc­tion and open up pub­lic land to extrac­tive indus­tries, then you need to use your own vote and get them out.”

It’s a mes­sage Patagonia’s founder and own­er Yvon Chouinard has been extreme­ly vocal about. Ear­li­er this year, he penned an open let­ter to the 1% for the Plan­et net­work, whose mem­bers donate 1 per cent of their gross rev­enue to envi­ron­men­tal caus­es, which includ­ed the PS: “Remem­ber, vote the a**holes out.”

Weller says the phrase has been in the lex­i­con of Patag­o­nia for a while, but the deci­sion to put it in pairs of shorts ahead of November’s US elec­tion was entire­ly down to the “smart idea” of indi­vid­u­als work­ing in the prod­uct team. “It wasn’t a mar­ket­ing ini­tia­tive at all,” he says. “As mar­keters we were react­ing to it in real time with the rest of the world.”

Did the com­pa­ny have any con­cerns the move might alien­ate some poten­tial cus­tomers? “Hav­ing spo­ken to the peo­ple involved, the intent wasn’t a par­ti­san in-joke or about rein­forc­ing who is for and who is against us. The intent was to get peo­ple out to vote in defence of the plan­et.”

For Weller, “Vote the a**holes out” is the lat­est in a long line of ideas to emerge from a com­pa­ny where envi­ron­men­tal activism is encour­aged, and every­body has a chance to get involved and par­tic­i­pate or even “envi­ro-strike” and join in rebel­lions or par­tic­i­pate in cli­mate strikes. The com­pa­ny pro­vides legal sup­port for employ­ees who are arrest­ed or detained dur­ing such protests.

He cites the deci­sion to stay open on Black Fri­day and give 100 per cent of their prof­its to grass­roots envi­ron­men­tal groups as anoth­er exam­ple of an employ­ee-dri­ven idea that Patag­o­nia picked up and ran with.

“If the ideas are good and the own­er likes them, they get giv­en the green light,” he says. As for how Chouinard respond­ed to the “Vote the a**holes out” label? “I need those in a 32,” he said.

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