People often bemoan the loss of family values at listed corporations driven by the profit motive. But they are not dead – only sleeping.
B Lab is at the centre of a global reawakening by offering B Corp certification to companies willing to show they will deliver a social agenda while producing their revenues.
This puts purpose before profit, just like family businesses out to produce a legacy for future generations.
Many have their roots in family businesses, as do the other 3,500 B Corp corporate members, 8,000 associates and 100,000 firms which use B Lab impact assessments
Dennis Jaffe of Wise Business Research says B Lab and families share the same ethos: “I see the resemblance. B Lab is a great group, offering family businesses an assessment they can use.”
Dan Miskulskis of London-based consulting firm LCP is another B Lab fan. He says: “I think you can reasonably draw a parallel with family values … in some way, I guess when I think of a family-run firm I am thinking of something that has a sustainability ethic and focuses on more than shareholder value.”
The Covid-19 pandemic and climate change have stepped up demands that companies should act in a more sustainable fashion. A study backed by the Ford Foundation has just demanded proof statements from CEOs that they will deliver on their sustainable promises.
On 10 September, B Lab launched a B Movement Builders lobby group for large multi-nationals dedicated to redefining the role of business in society.
Founding members, with collective revenues of $60 billion comprise Bonduelle, a vegetable processor; Gerdau, a steelmaker; Givaudan, a fragrance company; Megalu, a retailer; Danone, the food company, and Natura, a beauty concern.
Many have their roots in family businesses, as do the other 3,500 B Corp corporate members, 8,000 associates and 100,000 firms which use B Lab impact assessments.
Danone is a family business which has always sought to treat employees as an asset, not a cost centre. CEO Emmanuel Faber said: “We applaud this cohort of B Movement Builders and encourage others to follow.”
Bonduelle CEO Guillaume Debrosse said: “Doing good is no longer a nice to have, but a must do.”
At its simplest, B Lab, a not-for-profit organisation, believes companies should work for the planet, as well as on the planet. Key stakeholder concerns include climate change, social injustice and wealth disparity.
It believes in social impact, where investors seek social and environmental returns, as well as a decent profit.
One of B Lab’s three founders is Andrew Kassoy, a former private equity specialist, who previously worked for MSD, Michael Dell’s family office.
The other two are Bart Houlahan and Jay Gilbert, who pioneered social responsibility as founders of AND1, a basketball shoe company. They sold it in 2005, only to watch its sustainable approach disappear.
B Lab, an avid user of data, is backed by large foundations such as those set up by the Rockfeller family, Jeff Skoll and Ford.
It offers B Corp certification to companies which achieve a high grade for social and environmental performance, along with transparency and legal accountability.
B Lab wants a global shift away from the profit motive, towards a model which produces a social and environmental impact. Its analysis could be boosted by the International Accounting Standards Board which has pledged to expand coverage of sustainable issues.
Companies opting into B Corp compliance expand their fiduciary duties to the stakeholder community and broaden shareholder rights.
Surveys show consumers, particularly the younger generation, are keen on proof statements when seeking jobs or buying products. In 2009 consultant Aon Hewitt found that listed companies with a high level of employee engagement easily outperformed.
Family Capital has published research by PwC which shows family businesses have outperformed the index for years, although slow adoption of technology has held them back.
Investors who get to the heart of sustainability, like Generation Investment Management, a B Corp member, are top performers.
Twelve global consultants, including LCP, have agreed to follow a sustainable agenda. Willis Towers Watson has found that long-term investors outperform.
Marc Benioff, CEO of software provider Salesforce, has repeatedly criticised the corporate obsession with profits. In announcing bumper profits in August he said: “This is a moment when we have to think, not only about serving all of our customers, but how to take care of our communities because they are in so much pain.”
Salesforce has worked with B Lab since 2008. Despite disappointment with layoffs in August, it continues to be highly rated for its sustainable approach.
Benioff has, in effect, turned this into a competitive advantage when dealing with clients, investors and the media.
This is in line with a 2016 paper by Harvard Business School and EY which showed companies driven by purpose, rather than profits have a competitive advantage. It is a big calling card for B Lab, in its new attempt to grab the attention of multinationals
Right now, the majority of larger US corporations are failing to deliver on their promises.
In 2019, for example, 180s CEOs belonging to the US Business Roundtable pledged to become more inclusive.
But a 22 September study by KKS Advisors, funded by the Ford Foundation, showed that CEOs promising reform failed to deliver a detailed proposal to their governing boards.
Shareholders in Wells Fargo asked their board to achieve B Corp status, but the company’s legal advisers opposed the idea. Jeff Bezos, founder of Amazon, has devoted billions to fight climate change, but this did not stop Amazon being criticised by KKS for its employment practices.
To get a grip on corporate behaviour the European Union talks of banning quarterly reporting and earnings guidance to achieve a corporate long-termism
But US corporations are happier with opting into a process aligned with family values.
B Corp certification makes the aspiration clear: “Businesses should aspire to do no harm and benefit all. To do so requires that we are each dependent upon one another and thus responsible for each other and future generations.”
A family business couldn’t put it better.