The appeal of B Corp.

Times have changed since Milton Friedman’s declared that the social responsibility of business is to increase profits. Like B-Corps (short for Benefit Corporation), TheESGBusiness are big believers that businesses now need to consider people and planet as well as profit. The times of shareholder primacy are gone.

This is clarified in B Corp’s declaration of independence as it envisions a global economy that uses business as a force for good with business that are purpose-driven and create benefits for all stakeholders, not just shareholders.

B-Corp certification is a rigorous process that looks at various environmental, social and governance (ESG) criteria to assess a business’s performance beyond financial results. The assessment includes around 200 questions ranging from evaluating a company’s policy for reducing transportation emissions, the percentage of managerial staff that are female or LGBTQ+, to the anti-corruption reporting and preventions systems in place.

So why go through the process?

Being a B Corp will make the business look, feel, and work better, as well as likely making it more profitable.

By going through the extensive process, business’s will uncover opportunities for improvement as it provides an excellent framework for businesses to assess their operations, create or fine-tune policies and commit to the impact they want to provide.

However, there are many other direct and indirect benefits that come from being a B Corp.

Being a B Corp helps generate sales. We’ve witnessed this first hand as one of our clients couldn’t pitch for the Patagonia business because they weren’t a B Corp (something we’re helping them to rectify). B Corps, and businesses that value people and planet alongside profit, want to do business with B Corps

Being a B Corp provides credibility. Businesses can’t just claim to be sustainable or socially conscious; they must prove it. A B Corp has had to demonstrate the ways it creates a real benefit for people and the environment, it doesn’t just talk about it.

An example of the value of this credibility is the attraction of the business to investors.  70% of B Corps (compared to 56% of all companies) that seek equity finance, end up raising the amount they want. Danone openly stated that the certification helped win over sceptical investors in helping it renegotiate a €2 billion syndicated banking loan with 12 major banks at a lower cost.

B Corps are riding a wave of consumer interest in sustainable companies. According to Nielsen’s study The Sustainability Imperative, global consumers say they’ll pay more for sustainable consumer brands. This is backed up by sales of consumer goods with a demonstrated commitment to sustainability having grown more than 4% globally, while those without grew less than 1%.

But while consumers are clearly rewarding values-based businesses, there’s a very big catch: Consumers are not accepting brands’ social and environmental claims at face value. This means that companies must take steps to convince consumers that they “authentically demonstrate commitment to social and environmental impact build consumer trust and business value,” according to the study.

Like with consumers, candidates are now putting greater importance on companies that are positively impacting people and the planet. 71% of Gen Z, who will comprise 30% of the workforce by 2030, say that they would leave their employer for one that created a more positive social impact.

This is backed up by Patagonia which reports that certification helps promote and validate its employee-centric culture, which attracts great candidates because of the company’s reputation as a great place to work.

 At Flow Advisor we concur with the words of the B Corp founders, that businesses must continue to lead, to take risks, to demands an economic system that works for all people and the planet. That is why B Corp exists.

 If you’re looking to join the movement, Flow Advisory help expedite your journey. Contact us to find out how.