Better Business: How the B Corp Movement Is Remaking Capitalism

Christopher Marquis’s book Better Business delves into the complexities and nuances of alternative business models, including “benefit corporations” and “values-based” companies, and argues that they are the way of the future.

Christopher Marquis’s book Better Business delves into the complexities and nuances of alternative business models, including “benefit corporations” and “values-based” companies, and argues that they are the way of the future.

Better Business: How the B Corp Movement Is Remaking Capitalism, by Christopher Marquis. Yale University Press; 2020; 274 pages; ISBN 978-0-300-24715-2.

Certified B Corporation ME to WE is in bad odour. Progressive (but not B Corp–certified) retailer Mountain Equipment Co-op (MEC) was recently acquired by a private investment firm. Given these two developments, this is an apt time to examine the world of B Corps and their counterparts who aspire to accomplish social, environmental, or other non-financial good without going through the hoops of formal B Corp accreditation.

Christopher Marquis’s Better Business: How the B Corp Movement Is Remaking Capitalism delves into the complexities and nuances of alternative business models and argues that they are the way of the future. Perhaps.

Structures and metrics differ widely across the realm of alternative business, and Marquis (and this review) employ a variety of terms to describe firms that do not put maximizing short-term financial success first and foremost, including “benefit corporations” and “values-based” companies.

ME to WE, in the wake of the federal government’s fumbled attempt to work with WE Charity on an initiative to support students during the COVID-19 pandemic, has seen its activities and governance subject to increased scrutiny. Sometimes less-than-stellar practices have turned up. MEC, long a leader among Canadian corporations that are embedding values beyond the bottom line into their operations, will now be subject to new forces that will potentially push it toward a more traditional business approach. Both organizations are likely to see challenging times ahead.

Better Business, given the marked growth of B Corp and B Corp–like enterprises in recent years, is rightly optimistic about the concept’s potential. But there are unrelenting forces pulling in other directions. And the structural advantages in financing, legislative frameworks, and accounting practices that traditional businesses enjoy are daunting. Traditional businesses often have such a prominent hand in setting and influencing the rules in these areas that it seems the game is hopelessly rigged.

Marquis begins by proposing a reframing of the assessment of business. Rather than using a purely economic lens to gauge success, he suggests a broader societal lens in which companies cannot ignore “externalities” that are hoved off on others while the business concentrates on maximizing profit. He critiques the privileging of shareholders over other stakeholders and argues that inclusion of for-profit firms in addressing issues of inequality and sustainability is essential for transformative societal change. “Benefit corporations” – those with stated social, environmental, or other goals beyond financial success – are his preferred vehicle for doing so.

Better Business dissects the prevailing American (and, to a large extent, global) legal requirement that equates acting in a corporation’s best interest with maximizing shareholder value. Notwithstanding some progressive leaders of major businesses nodding toward the importance of taking broader stakeholder interests into account, lack of widespread legal recognition or consistent metrics makes systemic change of this practice more of an aspiration than a reality.

The imperative to privilege shareholders is not so unrelenting north of the border, where a 2008 Supreme Court of Canada decision, involving control over Bell Canada Enterprises (now BCE Inc.), recognized a duty to act fairly in the interests of various stakeholders and beyond the short-term interest of shareholders.

Though that judgment could have paved the way for innovative legislation and regulation in this area, Canada appears no further along in encouraging alternative business approaches than many other jurisdictions. Although provisions of the Canada Business Corporations Act were amended to reflect the new jurisprudence, sweeping change remains somewhere over the horizon.

Some benefit corporation legislation has been enacted in Canada, but uptake on that initiative has been modest rather than transformative.

Some benefit corporation legislation has been enacted in Canada – most prominently British Columbia amending its corporations’ legislation to provide for benefit corporations that commit to conducting their operations in a sustainable and responsible way – but again, uptake on that initiative has been modest rather than transformative.

Essential to the development of the B Corp movement has been B Lab – an American non-profit organization founded in 2006 that is dedicated to assessing and fostering companies mandated for publicly beneficial purposes, rather than purely for financial gain. B Lab also promotes enabling legislative frameworks for benefit corporations. It was founded in Pennsylvania but now has counterparts around the world.

One of the key challenges for corporations wanting to take a different path is financing. Marquis details the history and evolution of investment vehicles to provide seed capital for “values-based” companies. He argues that the B Corp movement and, more particularly, B Lab, were crucial in moving “impact investing” from screening out “sin” stocks to evaluating the positive impacts of companies. One interesting component of this process was that the investment vehicles themselves, as well as the corporations they were putting funds into, began to be certified as B Corps. As well, as part of this process, explanatory tools on B Corp spending were created and came more widely into play in financing decisions.

These gains have been helpful, but it remains a difficult road to convince investors of the merit of obtaining or retaining B Corp status. One positive sign in this area is the growing number of cases where multinational corporations have acquired B Corps to enhance their product lines, and those corporations have opted to maintain the status of the acquired company once it becomes a subsidiary. A key question is whether these sorts of arrangements will endure.

It remains a difficult road to convince investors of the merit of obtaining or retaining B Corp status.

One defining feature of benefit corporations is their treatment of their employees. There is lots of evidence that values-based organizations make attractive employers (and keep those workers longer) and that many job seekers – particularly those of younger generations – prefer working for companies with goals that go beyond merely profit-making. Marquis discusses this and other positive aspects of what he dubs an “Employee-Centric Culture” and notes the business benefits associated with commitment to diversity and the payback of heeding the needs and input of workers. He also looks at what employee ownership brings to a company, both as a way of ensuring that stakeholder, rather than shareholder, interest informs decision-making and as something that sets benefit corporations apart from the “gig” economy.

Two further chapters explore the aspects of the B Corp community and movement, regionally and globally. They include stories of community mobilization in the face of disaster, and networking opportunities made easier through shared values. Marquis cites Ben and Jerry’s as an example of a company that uses B Corp status in choosing its business relationships. The clustering of B Corps in certain geographic areas has been instrumental in enabling work on systemic change and in providing a critical mass for collective action. This includes multiple B Corps banding together to support a particular non-governmental organization or a specific environmental or social initiative. As the movement spreads, it becomes ever more practical to use B Corp status as a tool to vet financing requests, partnering opportunities, and other business-to-business dealings.

Critical to the success of any new approach to business will be whether it can win support globally – and not just in the developed world. The organic nature of the benefit corporation movement has helped it establish a presence in various parts of the world without a US-style model necessarily being applied in every instance. Marquis discusses the development of the B Corp movement in Central and South America. That development is based not merely on achieving critical mass in the number of benefit companies, but on the need to enlist broader “communities of practice” – that is, to bring all the key actors (academia, large market players, opinion leaders, etc.) on board.

Elsewhere, the movement took slightly different forms but now counts the United Kingdom, Europe, Australia and New Zealand, Asia, and parts of Africa as hubs at various stages of development. There is also a toehold in China, but how much upside there is in that country is unclear. Differential regional and national development has led to tensions in the certification aspect of the work, with competing visions of how best to gauge a company’s merit beyond its bottom line. This stems in part from a widespread view that though the US economy – where the B Corp concept originally took root – is very innovative and creative, it is not the most responsible economy. Three distinctive B Lab standards for accreditation in different parts of the world have been developed in response to this tension.

Financial and legal setbacks with some early B Corps have also led to some tweaking of the B Lab program in the US. Efforts have been increased to try to better “measure what matters,” to drive impact through supply chains, and to dovetail with the United Nations’ Sustainable Development Goals.

If the benefit corporation movement is going to have the kind of transformative societal impact it seeks, it will need to recruit significant numbers of multinationals and publicly traded companies as part of its program. In the US, Elizabeth Warren has promoted legislation that would require corporations with more than US$1 billion in revenue to have a governance model where the interests of major stakeholders are taken into account in company decisions. But it does not appear such a sea change is likely to happen soon. Marquis delves, in his chapter “Big Isn’t Always Bad,” into some of the challenges faced by large corporations considering B Corp accreditation (or commitment to values-based operation) and offers food company Danone’s North American branch as an example of a major corporation that successfully worked its way through accreditation.

The chapter goes on to explore the need to develop pathways for accreditation of larger corporations and touches on issues like bringing investors on board with the model and commitment to continued improvement of company practice. When a modest-size initiative like B Corp accreditation involves itself with large actors, there is always a risk that those actors may do something that reflects poorly on the initiative. One aspect of the accreditation process is a form requiring companies to complete a disclosure questionnaire. Although not linked to accreditation criteria, the form seeks information about negatives (“sensitive practices, fines, sanctions”) that might adversely affect the public’s view of the corporation (or the accrediting body).

While there seems to be a reservoir of consumer goodwill toward businesses committed to social, environmental, or other goals beyond financial gain, the benefit corporation movement will not be successful without building on and maintaining that goodwill. That raises questions about getting consumers to care, communicating the reasons they should care, the use of Trustmarks, and the integrity of the process for evaluating whether companies adhere to the claims they make. The potential of technology to make supply and production processes transparent (through, for example, QR coding on products) is enormous, but perhaps the bigger issue – which Marquis seeks to grapple with in the chapter “Convincing Consumers to Care” – is whether this can ever be made a top-of-mind issue for enough of the populace to be transformative.

The Canadian examples mentioned earlier are illustrative of both the fragility of the “doing business differently” approach and of forces pulling in other directions. Perhaps a “negatives” questionnaire or some other refinement of the B Corp accreditation process will prevent or limit damage to the reputation of the values-based business model when circumstances like the WE Charity brouhaha arise. Perhaps MEC will be able to carry on with its innovative procurement and governance practices under its new ownership. The term “late-stage capitalism” is often bandied about these days. Seemingly it is used to suggest something else is coming next. A reformed approach to business, as envisaged by Marquis and others, is certainly possible. But as books like Katharina Pistor’s The Code of Capital show, many of the problematic features of the corporate and financial world have deep historical roots and are firmly embedded in the current economic paradigm. Marquis has given us an informative and thoughtful book. One wants to bet on his hopes, but the odds may be longer than he acknowledges.


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