The following is a conversation between Chris Marquis, Author of Better Business: How the B Corp Movement Is Remaking Capitalism, and Denver Frederick, the Host of The Business of Giving. 

Chris Marquis, Author of Better Business

Denver: Business has a big role to play in a capitalist society. It can tip the scales toward the benefit of a few with toxic side effects for all, or it can guide us toward better, more equitable long-term solutions. The latter is being achieved in large part through B Corporations. And the story of this movement is captured in a wonderful new book by Chris Marquis titled Better Business: How the B Corp Movement Is Remaking Capitalism. 

Welcome to The Business of Giving, Chris! 

Chris: Great. Thanks so much for having me, Denver.

Denver: For those who may not be familiar with this, are new to all this, what is a B Corp?

Chris: So a B Corp is a business, a company whose social and environmental performance have been certified by a nonprofit called B Lab.

CSR programs typically are peripheral to the company, and maybe they’re doing them to look good, maybe they’re doing them for the best of reasons, but they are normally not in the core of the company. A B Corp is a company that has really the social mission and focus at its core and then goes and gets this certification, very rigorous certification from B Lab.

Denver: But what would be the difference between, let’s say, a B Corp and a company that practices corporate social responsibility or CSR? 

Chris: So there is, I would say some overlap. So, both B Corps and companies doing CSR are trying to make social good, create a positive social change perhaps. 

Where I see a big difference is CSR programs typically are peripheral to the company, and maybe they’re doing them to look good, maybe they’re doing them for the best of reasons, but they are normally not in the core of the company. A B Corp is a company that has really the social mission and focus at its core and then goes and gets this certification, very rigorous certification from B Lab. And just a little bit more on the certification, so your listeners can think of it like fair trade, organic, LEED-certified buildings. These are all certifications of certain processes or products. Whereas the B Corp certification is the only one of the entire company. 

So companies from Patagonia, Seventh Generation, Ben & Jerry’s, maybe some that your listeners may expect, but also Kickstarter, Allbirds, Danone, Danone Global, a French dairy nutrition, health company. Big supporter. Actually, their US subsidiary, a $6 billion company, is a certified B Corp as well.

Denver: And I know you have to get 80 out of 200 points. What are the areas that you look in or need to be certified in to become a B Corp? 

Chris: So I think there’s about five different areas: workers, obviously employees are real important; customers; community; environment; and governance. And governance includes things that might be typically thought of as the investors, shareholders. It’s similar to … you hear about stakeholders. In some ways, it’s an attempt to capture the key stakeholders of the organization.

Denver: Talk a little bit about that. We are moving from a primacy of shareholder capitalism to stakeholder capitalism. Explain that a little bit to the listeners. 

Chris: First of all, I hope we’re making that shift. But there are indications of that. 

Denver: We’re talking about it.

Chris: Exactly. We’re talking about it, yes. The thing that really kicked it off is the statement in August of 2019 by the Business Roundtable.

So the Business Roundtable is this trade group of, let’s say, about the 200 largest US companies or CEOs who sit on it. And they came out with a statement that said, “We used to say the purpose of business was to basically deliver profits to shareholders, and we’re going to switch the purpose, our avowed, espoused purpose of business, to serving all stakeholders,” the same similar groups that I mentioned — employees, community, et cetera.

And this was seen as a big change because really for a long time, businesses focused on really the shareholder primacy model. I always think of it like the movie Wall Street, Gordon Gecko, this “Greed is good!” philosophy, and if you just follow “greed is good,” everything will fall into place. But that actually turns out not to be the case. And a lot of the income inequality, environmental degradation problems that have occurred in the last 20-, 30 years I think can be directly tied to the shareholder primacy model. So I think it’s a positive that large companies are acknowledging this and trying to shift in a new direction. 

Denver: How do you feel about that statement a year or so later? And I ask this in the context of a line by Mike Tyson, who said that everybody has a plan until they get punched in the face. And these companies have been punched in the face. And there’s always that danger that although the intentions may have been good in November of 2019, there is this survival mindset as well. And I just wonder what your take is in terms of them sticking the course with stakeholder capitalism and not reverting to shareholder. 

Chris: It’s still early, and I’m an optimistic person. So I think that, and one of the reasons why I like the B Corp model is that, it’s about accountability and transparency on these issues. And so from this group of Business Roundtable CEOs, I haven’t seen a ton of action yet, to be honest. I’ve seen a lot of talk. The president of the Business Roundtable wrote an op-ed. I think it was in Fortune on the one-year anniversary recently and said, “We’re doing great.” But it was really pretty, to be honest, a pretty vacuous statement. There were not a lot of real strong examples. 

So I think it’s good that we’re continuing to talk about it. Clearly, the COVID is a punch in the face. That’s a great analogy. And some companies have been called out. Like for instance, you might have seen, I think it was in the New York Times, Marriott–

Denver: Didn’t see that. 

Chris: They investigated Marriott and its COVID hits, and they furloughed all their workers very quickly, but then also I think may have increased the dividend and paid the CEO more. So, the extent to which they’re stakeholder-driven… 

But I think the fact that it’s still in the dialogue and discourse, I think is a good thing because only through continuing to pressure the companies will it get done. And I do hope the B Corp movement and some of the work that’s being done to really include large companies in that movement, I hope will help because I really feel for these CEOs. Studying companies that have gone through the B Corp assessment, it’s actually hard to transition to a stakeholder model. It’s easy to say it, but it’s actually hard to do it, even the most well-thinking companies probably, it’s very hard. And I think the B Corp model is very useful because it almost provides a playbook to become stakeholder-driven. 

…what the founders of the B Corp movement were doing is they’re not just about creating a set of certified companies; they’re about creating a movement. And having companies sign onto this is something where they’re part of a larger whole; they’re part of a collective.

Denver: It’s not easy, and it reminds me a little bit of the stress tests that the banks had to go through a number of years ago. It can tie up your organization. You’ve really got to… this is a rigorous test. 

You know, another thing, aside from those five focus areas and getting those 80 out of 200 points, is that a B Corp needs to sign a Declaration of Interdependence. What is that?

Chris: So it’s like it sounds. So it’s basically a document that describes stakeholder principles basically. It will be governed decision-making, not just about the financial shareholders, but also about the other stakeholders… taking care of the other stakeholders that exist.

And I think that’s a real important part of this because what the founders of the B Corp movement were doing is they’re not just about creating a set of certified companies. They’re about creating a movement. And having companies sign onto this is something where they’re part of a larger whole; they’re part of a collective.

I don’t know if, to be honest, if I think about the other certifications I mentioned–fair trade, organic, whether those ones, those certifications; it’s also about a movement of changing supply of coffee or different types of foods. So I think that the Declaration of interdependence is important not only for what it says, but also, it’s a symbolism of signing onto something bigger than just the company. 

Denver: Absolutely. Chris, are you seeing consumers responding to the B Corp movement through their purchasing decisions? Or is it still not well-known enough among the public to see that happen? 

Chris: So I think it’s increasingly well-known. I think that the trends and consumer awareness have been… don’t know if it’s exponential, but definitely is — I’ve been studying it — have been going up. Even among my students. The first  Harvard Business School case study I wrote on B Lab was published in 2010. So the first time I taught about this, students had never heard of it. Now, all students… like I ask students if they’ve heard of it, and everyone has heard of it. Millennials, highly educated, that’s a demographic that I think the awareness might be a little bit higher. I think that there’s other demographics, too, I think that are really increasing in their awareness. 

But I do think that there’s still work to be done. I think that if you look at areas where there’s been a lot of penetration of this. I think among employees — there’s a lot of people, millennials in particular, they want to go work for B Corps. I think among investors — a lot of both private equity/ venture capital investors are really involved in the movement, and I think that’s spreading over to the public markets. I think lawmakers — there’s been a lot of legal changes through the movement. So I think that those are areas where the successes are a little further ahead than on the consumer. I still think there’s some work to be done with the consumer. And I hope, to be honest, that my book can help spread the awareness.  

… better employee benefits, better pay — all those things combined to having a much more positive culture where people want to go work…I think that these inside-the-company benefits are so far the biggest, in some ways, business benefits of being a B Corp.

Denver: Let me dig in a little bit more deeply on a few of those things. Beginning with the internal workplace. We’re looking at the external on how consumers are responding to it, but what’s happening inside the company, as you say, in terms of retention and talent attraction and all those things? What have you seen for organizations or companies that have become  B Corp?

Chris: So this is the area where I think that it has the biggest impact, to be honest. I just was interviewing someone recently who has a B Corp in a unique industry. And she was telling me that a lot of her peer companies say, “Why this B Corp? Why do it? What value does it have?” And she responded, “You know what? I never have to look for employees because people don’t leave.” 

I’ve studied a lot of things like restaurant chains, factory work, manufacturing, places, et cetera, and the retention rates are much higher. It’s because better employee benefits, better pay, all those things combined to having a much more positive culture where people want to go work. One thing is retention… I think attraction, too. Many companies that I’ve talked to, they say that upwards of 25% to 30% of the people that apply, when they’re asked on the application “Why are you applying to our company?” And they say “Because you’re a B Corp.” I think that these inside-the-company benefits are so far the biggest, in some ways, business benefits of being a B Corp.

Denver: The vast majority of B Corps are relatively small companies. I think about 95% of them or so have fewer than 250 employees. So the significance of a multinational corporation taking this journey is monumental. And you talk about some in your book. Who have been some of those trailblazers?

Chris: So I think that the biggest trailblazer is Danone. Like I mentioned, out of Paris, a $30 billion company. As of now, I think 20 of their subsidiaries are B Corps. Over 30% of their global revenue is from their B Corp subsidiaries. And they’ve committed as a global organization to becoming a B Corp by 2025. So that’s one example.

 Another example, well-known, is Natura, which is a Brazilian cosmetics company. And they’ve been pioneers for a long time for natural ingredients. They have a model, like an Avon-type model where they actually try to develop micro entrepreneurs among the Brazilian women. I think there are about two million women that actually work for them, and they provide training and economic opportunity.

 Natura is really interesting because they have purchased in the last few years The Body Shop, which is, as you know, a UK-based pioneer in the natural ingredients, and then also recently purchased Avon within the last year. So they’re now, I think, a $10 billion global cosmetics powerhouse as a B Corp and as a publicly traded firm, too. 

Denver: So you just mentioned, they are a French-based company and a Brazilian-based company. What are some of the hot regions around the globe for B Corp?  And how is the US doing against that?

Chris: The movement was founded in the US, and I think that there’s a lot of really pioneering businesses in this space in the US. Certainly, some of the ones I mentioned like Patagonia, Seventh Generation, Ben & Jerry’s, et cetera. I do think though that in other regions of the world, it’s really taken off. Actually, over half of the B Corps are outside the US as opposed to inside the US.

 You have, as we mentioned, Europe is a big, big hotspot. South America also. Actually, the first non-US B Corps were from South America. Australia is another place where the movement has really taken off. I’d say those are the three areas of the globe other than the US where there’s a really super vibrant B Corp movement. 

I would say on the larger companies’ side, though, it does seem that at least the early stages, that Europe and South America are leading the US. The US– I don’t know if it’s the Wall Street culture where these large multinationals in the US public markets are really very closely tied to quarterly earnings, in which case some of these more long-term perspectives fall by the wayside. So they’re not as long-term as both Europe and South America companies.

Denver: That is a very fair statement. 

Chris, in an attempt to create a broader community, B Lab came up with a new program called B Movement Builders. Tell us about that. 

Chris: So this, I think, is a real ingenious way to expand the movement. The B Impact Assessment is a really hard and rigorous assessment. As you mentioned, getting 80 out of 200 is the threshold. It sounds like 40%, so we would not really want that on our test when we were going through school, but it’s actually really difficult to get. And so, when you’re a large multinational company, even the number of legal subsidiaries you might have, and to get the 80 out of 200, it’s really difficult to think about where to even start. So this is a program that really provides an on-ramp for these larger, much more complex companies to, step by step, work their way into becoming a B Corp. 

So they have to do a few things. Signing the Declaration of Interdependence. They have to actually also commit to actually start certifying perhaps subsidiaries of their company or using the B Impact Assessment to help drive change through their company in a variety of ways and increase that over time. So it’s like a slower on-ramp into the world of the B Corp.

And this was announced about a week or two ago. The program came out, the first six companies involved. So again, as we discussed, the leading large companies are mainly European and South American. Three of the companies were from Europe. Two of the core companies in it — one was from France. One was from Switzerland, and Danone signed on to be a mentor actually since they have such experience. And then from  South America, there was actually a steelmaker and a retailer, and also Natura signed on. So these six companies are going to, two of the mentors going through it themselves, are going to work together.

And I think this is again similar to signing the Declaration of Interdependence– part of this is a movement where you want to establish connections between peers, best practices for other companies to follow. So, it’s much bigger than just one multinational going through it, but it’s about creating a model for all large companies to really understand how to take this process on.

Denver: What a great idea to get people to come through the door for the first time without being intimidated by trying to hit that high score.

This will seem like a strange question, but does that Impact Assessment… would that work for nonprofit organizations? Obviously, not the profit aspect of it or the shareholder. But is that something that nonprofits could actually take a look at to see if they’re doing what they need to do to be better stewards in their community?

Chris: I think definitely there’s a lot of aspects of it that could be. Actually, I titled the book Better Business because so many of the companies that I talked to said, “We started in on this because we wanted to be more socially and environmentally better.” But actually, it turns out that it’s like a playbook for running your business in a better way.

So I think that there’s a lot of things. Nonprofits, as they’re running their organization, everything from maternity/ paternity leave policies, to recycling and dealing with waste, carbon neutrality, a whole range of diversity inclusion measures. So I do think that actually, it would be very applicable to nonprofit organizations because it really is about running a business in a much more sustainable way. And nonprofits, even though they don’t have the profit part of that 

Denver: They got all the rest. 

Chris: They got all the rest. They’re still large organizations. Exactly. 

Denver: We should do something about that. I think it would really be a tremendous breakthrough. 

Chris: Great idea! 

Denver: Chris, there are so many politicians who say that we simply can’t build back, but must build back better to assure for a more fair, just, and equitable society. So, in light of that, are there any public sector champions out there who are promoting the B Corp as part of that answer in terms of building back better? 

Chris: Good question. I think it’s, in some ways, a missed opportunity. I think this is a natural. 

So many people want to put, I don’t know, like Bernie Sanders or Elizabeth Warren into like this socialism category when actually they’re very much, particularly Elizabeth Warren, is someone who as an example is pro-markets. Actually, she’s one of the ones that I would think is closest to being a champion for the B Corp movement because her Accountable Capitalism Act actually drew on a number of the ideas from the benefit corporate legislation that the B Lab and B Corp movement had incorporated. 

But I understand that she and some other senators are still working on some law to actually create sort of a stakeholder-driven governance for all large companies in the United States. So I’d say that it doesn’t say, “OK. We all should be B Corps,” but there would be a law where the thousand largest companies would be required to actually have stakeholder provisions in their governance. So that’s one.

Another one that’s not as strong as I would like is Jamie Raskin, who I interviewed and quote quite a bit in the book. So he was a Maryland state senator, I believe, and was responsible for passing the very first benefit corporation law in the world in Maryland, and he’s now a US House Representative member. And in the recent high tech — Bezos, Cook, Zuckerberg, et cetera — hearing, he actually asked the high-tech CEOs. He said, “Have you thought about becoming a B Corp or a benefit corp?” And silence. He was met with silence. 

Another one that I want to just call out because it’s inspiring to me is actually there’s a founder of a B Corp in North Carolina. His name is Eric Henry. It’s a B Corp called TS Designs. And in North Carolina, they’ve struggled with passing benefit corporation law. So he actually went and said, “You know what? I’m going to actually run for the state house.” And he’s right now in an election, this year, a Democratic representative, competing for, I think it’s the 64th district in North Carolina. And he’s doing it. One of the big reasons why is to pass Benefit Corporation law. So he’s someone who’s a champion definitely. 

Denver: That’s great. I think right now it’s in 36 states? 

Chris: It’s in 36 states, plus DC and Puerto Rico, and outside the US — Italy, Columbia, Ecuador, British Columbia, and Canada. 

Denver: You know, I’d be curious, Chris. How did you become interested in the B Corp movement?

Chris: What I’d studied for a long time is corporate social responsibility of companies. And one day in my class, I was teaching on this at Harvard Business School, a student said, “We should focus not on companies where they’re doing this as a side project, but companies where it’s a core of their work, like B Corporations.” And I had never heard of B Corporations at the time. 

This was in 2009 that this happened. B Lab was founded in 2006, I think, and the first B Corp chartered in 2007. So very early, the student was very, very prescient in this movement that it would take off. So I went and learned about it online and got in touch with the founders of B Lab. And then in 2010, wrote the first HBS case study on them. 

…it’s not forgetting that these organizations are businesses. So, clearly, they’re trying to make profit, but also need to balance that with understanding how you affect the community, what effect it has on your employees, and what effect it has on the environment…

Denver: There you go. Let me close with this. Being a part of this B Corp community, how do things change? How does the language change…the kind of questions that people are asking compared to, let’s say, a more traditional corporation?

Chris: So I think that you start asking new questions. So for instance, at least a few companies I’ve talked to. I asked them this. I say, “OK. So you become a B Corp or a Benefit Corp. What practices have changed inside your company?” They had a lot of practices for various HR policies or to improve their carbon impacts, but a number of them told me that in their capital planning process, if there are new buildings they’re going to build or renovations, they actually have a number of new KPIs related to environmental impact, community impact, et cetera. 

So I think it’s not forgetting that these organizations are businesses. So, clearly, they’re trying to make profit, but also need to balance that with understanding how you affect the community, what effect it has on your employees, and what effect it has on the environment, for instance. 

Denver: You’re really part of a community, as you said before. It’s part of a group and a movement, and the peer interactions I would imagine are paramount.

Chris: Yeah, definitely. 

Denver: The book is titled Better Business: How the B Corp Movement Is Remaking. The interest in remaking capitalism has never been greater, and probably no more effective way of doing that now than through the B Corp movement. In addition to buying your book, where else can people find out more about this, Chris?

Chris: So I always direct people. It’s It’s the B Lab, B Corporation website where people– if they want to get deep in understanding what it is to be B Corp, maybe take the B Impact Assessment themselves as a company– that’s one place. Also, my personal website has stuff more on the book, and also some other resources actually. 

So I’ve done a number of other discussion guides if you’re a faculty member, a teaching guide. And if you’re an entrepreneur, various business guides as to how the B Impact Assessments can help you develop a long-term sustainability for your company.

Denver: Good stuff. Thanks for being here today, Chris. It was a real pleasure to have you on the program. 

Chris: Great. Thanks so much, Denver. Really enjoyed it. 

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