The business world has been abuzz with the need for an end to the shareholder
primacy
as a default approach to business for years; and in 2019, when the Business
Roundtable redefined the purpose of business as creating an economy
that serves the needs of all
stakeholders,
it felt like a landmark moment. Heavyweights including Salesforce CEO Marc
Benioff
and financial services giant Morningstar acknowledged and validated the
trend;
and even more “conservative” figures such as Republican Senator Marco Rubio
have apparently recognized shareholder primacy as the root cause of the
short-termism plaguing our capital
markets,
crowding out investments in innovation and undervaluing workers).
Since then, walk behind that talk has mostly come in the form of proclamations
from individual companies in the same vein — until late last month, when a quick
succession of big business and finance moves signaled what just might be the
dawning of the age of stakeholder
capitalism:
The World Economic Forum launched two major initiatives in which over 100
global companies have committed to new standards for doing business that are
reflective of this ethos — in one, over 60 business leaders have committed to
report on a new set of Stakeholder Capitalism Metrics; the other sees 48
companies committing to building more equitable workplaces. And that same
week, BlackRock CEO Larry Fink’s annual, highly influential CEO letter
expounded on the need to see both of these priorities and more from its clients.
While enthusiasm has been growing around these ideas in the business community,
many companies are likely at a loss as to how to actually embrace them into
their business models. So, last week, B
Lab — certifier of B Corporations —
released a playbook designed to help purpose-driven companies do just that.
With an introduction by Allbirds co-founder Joey Zwillinger, the
playbook uses companies including Allbirds, Change.org, Danone and
Ripple — all examples of both certified B Corps and public benefit
corporations
(a status that is now a requirement of B Corp certification) – as cases to
illustrate how the budding corporate structure sets companies up to not only
fulfill their purpose-related promises, but to excel in this new era of
stakeholder capitalism.
Through the legal structure of a benefit corporation, businesses expand their
focus beyond shareholder primacy — corporate actions are then viewed through the
lens of their impact on a broader range of stakeholders including workers, customers, community,
environment and shareholders. Of course, the bottom line remains important;
but the business also must deliver value to this broader group and take
responsibility for any negative impacts it creates.
As B Lab explains in a
post:
“As the gap between haves and have-nots grows and the climate crisis
accelerates, business leaders can seize the opportunity to address economic
disparity and take climate action by adopting a model for a new economy —
stakeholder capitalism — and pursuing benefit corporation status to embed their
company’s purpose and ensure a positive legacy. …
“Our belief is that waiting for voluntary change simply will not get us where
we need to go fast enough to solve the challenges we face. To restore trust in
capitalism — and for capitalism to be worthy of our trust — we must pull policy
and regulatory levers to ensure that all companies and investors are responsible
for the impact of their decisions on all stakeholders and the economic system as
a whole.”
“Only when stakeholder governance becomes normative and institutional will this
be accessible for the companies with limited resources but unlimited passion to
serve their communities and their workers,” says Andy Fyfe, Growth Catalyst
at B Lab US & Canada. “This playbook levels the playing field as the most
practical guide to date for companies to adopt the highest form of stakeholder
governance.”
In his introductory letter, Zwillinger shares why Allbirds pursued benefit
corporation status and how that decision shaped and drives the business:
“Adopting this governance framework has legal tradeoffs. On one hand, it
provides broader latitude to executives to act on behalf of public beneficiaries
in addition to shareholders. On the other hand, it also creates liabilities for
companies and its executives, such that investors can hold the company
accountable to achieving the public benefits it has chartered in its governance
documents. This is flexibility and accountability. Great leaders should have
both, but it takes courage and a sense of responsibility for what the
executive’s role is in the world.”
Read more insights from public benefit corporations, and the pathway to getting
there, in B Lab’s Board
Playbook.
Get the latest insights, trends, and innovations to help position yourself at the forefront of sustainable business leadership—delivered straight to your inbox.
Sustainable Brands Staff
Published Feb 10, 2021 1pm EST / 10am PST / 6pm GMT / 7pm CET