The case for starting your company as a B Corp

What is the purpose of companies?
What is the purpose of companies?
Image: Henri Campeā
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Founders who want to create sustainable businesses should consider putting the principles of stakeholder capitalism—and not just the wishes of shareholders or investors—at the legal heart of their companies from day one, according to the leaders of two well-established B Corporations.

Alison Whritenour, CEO of Seventh Generation, which makes plant-based cleaning products, and Kirsten Tobey, co-founder and chief impact officer at Revolution Foods, which prepares and delivers healthy meals to people with limited food access, were speaking at a Quartz panel on companies that center sustainability as well as profit in their business models.

“Whenever entrepreneurs come to me for advice I always say, if you haven’t incorporated yet or if you’re early in your trajectory, you should incorporate as a PBC [public benefit corporation], because it’s always easier to start as something than even go through the administrative process of making the change,” said Tobey. She explained that Revolution Foods, which she co-founded 16 years ago after a first career as a teacher, had been a B Corp for almost 10 years, and recently became a public benefit corporation as well.

What is a B Corp?

The two structures are distinct but related: Becoming a B Corp involves going through an assessment process run by B Lab, a nonprofit organization that judges companies based on their interaction with governance, employees, customers, communities, and the environment. It certifies them as B Corps if they achieve an 80-point threshold out of a possible 200.

Becoming a public benefit corporation, meanwhile, is a change that enshrines some responsibility to multiple stakeholders, not just shareholders, in a company’s legal structure. All B Corps are now required to become public benefit corporations, but not all PBCs are B Corps.

Seventh Generation has a different story to many B Corps, explained Whritenour: Started as an independent company, and a B Corp since 2007, it was bought by Unilever in 2016. Whritenour now runs “a company within a company,” and being under the Unilever umbrella allows Seventh Generation to “influence beyond our reach,” she said.

Unilever can’t force Seventh Generation to contradict its stated values, and its commitment to remaining certified, according to Whritenour. “It’s also been a pretty incredible tool to say, actually, we can’t do that because of our B Corp standards,” she said. “It’s been an advantage, I think, in a lot of conversations with our parent company.”

What happens when boards aren’t on board

Jorge Fontanez, CEO of B Lab in the US and Canada, and the third member of the panel, brought up food giant Danone, a listed company and the biggest to seek B Corp status. Its former CEO, Emmanuel Faber, Fontanez noted, had pushed for the transformation but later been ousted by the company’s board.

Etsy allowed its certification to lapse, apparently because some investors didn’t like the idea of it becoming a public benefit corporation. Clearly, not everyone agrees that setting more rigid sustainability standards and submitting to outside oversight is a good idea for business.

On the flip side, there are also investors out there that care specifically about social impact. For these, Tobey said, B Corp status or incorporation as a public benefit corporation, or both, are becoming something of “a necessity.”

Such investors want to know that the company can’t be easily pushed off course, and that there is “some kind of under-girding of the mission, and it’s not something that can be watered down by one owner or investor having a different idea of how to increase profits,” she said.

Fontanez noted that before Faber was ousted by Danone’s board in 2021, he enshrined the company’s mission in French law: In 2020 the company became the first listed company in France to adopt the “Entreprise à Mission” status created in 2019, which lists societal and environmental objectives as part of a company’s core goals.

The B Corp moment?

The B Corp movement is growing. There are about 4,500 B Corps globally, up from 3,300 in early 2020. How big it can get depends on how many companies—and perhaps particularly how many big, global companies like Danone—prove willing to put themselves through a time-consuming, challenging process that takes resources and might necessitate major changes. Quartz is in the process of B Corp certification.

For the moment, its relative rarity is a plus for the companies that have gone through the certification. They say customers respond well and prospective employees use it as a differentiator.

“Being a mission-driven company is one of the things that helps us to attract talent to the company,” said Tobey, from local drivers keen to deliver meals to their communities’ schools, to the new CEO.

Whritenour added that her company’s mission also helped with talent retention in a “complicated environment” where the pandemic has made many reassess their relationship with work.

The status also helps with decision-making and planning for the future, she said: “It’s an amazing tool when thinking about: Where do I need to be in three to five years?”