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Business

30 September 2015

Redefining Success 

In making decisions, the investment industry is accustomed to considering criteria such as environmental sustainability and social responsibility. That trend is broadening with the “B [for Benefit] Corporation,” a US-based initiative allowing companies to proclaim their adherence to social and ethical values.

“B Corps,” as they are widely known, pledge to consider the interests of all stakeholders, not just shareholders, while harnessing the business’s energy, resources and influence to resolve social and environmental problems. The movement – which was launched in the US in 2008 and in Europe in April 2015 – now counts more than 1,400 member companies in 42 countries, including France, Germany, the Netherlands, Spain, Switzerland and the UK.

B Corporation seeks to persuade companies to voluntarily adhere to higher standards of transparency, accountability and performance. Legislation is now in place enabling B Corps to be formally established in 30 US states, and the movement is attracting high-profile recruits, such as crowdfunding platform Kickstarter.

Companies that sign up must rewrite their articles of association to give environmental and social goals the same priority as financial performance. US adherents to date include ice-cream maker Ben & Jerry’s and outdoor clothing group Patagonia, both of which already boast socially responsible pedigrees.

For the time being, B Corp has attracted few larger groups or multinationals for which membership would necessitate a significant change in practices, such as energy companies. Some critics also say that the B Corp concept is vague, and adherence to the movement’s standards hard to measure.

Nevertheless, B Corps report benefits in hiring and retaining talent, particularly among younger people. They also look ahead to a time when governments may award public contracts based on social and ethical, as well as cost, criteria. And as the Volkswagen emissions controversy has highlighted, perceived ethical failings can have a knock-on effect in the stock market, too.