Why Companies Are Becoming B Corporations: All You Need to Know
In recent times, more and more companies are changing their business models to go beyond profit-making goals. They are prioritising social and environmental responsibility, and are known as B Corporations or B Corps. These companies are reshaping the role of business in society. This article examines why B Corporations are gaining popularity and the advantages they offer to businesses and the community.
3 Reasons Why Companies Are Becoming B Corporations
Aligning Profit with Purpose
Companies choose to become B Corporations because they want to connect generating profits with a larger purpose. In the past, businesses focused on maximising shareholder value, often hurting other stakeholders and the environment. Now, businesses are shifting towards a more comprehensive perspective, understanding the link between economic, social, and environmental factors.
B Corporations prioritise the impact of their decisions on all stakeholders, including employees, customers, suppliers, the community, and the environment. They integrate purpose into their values and decision-making processes to create long-term sustainable value instead of focusing solely on short-term gains.
According to an article in Fast Company, Patagonia is an outdoor clothing company that has embraced the B Corp model and aligned its profits with its purpose. Despite potentially sacrificing short-term profits, Patagonia has prioritised environmental sustainability and social responsibility, which has resulted in customer loyalty and strong financial performance, with annual revenues of over $1 billion in recent years.
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Meeting the Expectations of a New Generation
The rise of B Corporations can be linked to the shifting expectations of consumers and employees, especially among younger generations like Millennials and Generation Z. These groups, who make up a notable proportion of both consumers and the workforce, tend to favour businesses that are socially and environmentally responsible.
It was found that the younger generations tend to prefer and interact with companies that are genuinely dedicated to ethical practices, environmental sustainability, and social causes. Deloitte's survey discovered that 76% of millennials think that companies should have a bigger purpose beyond only generating profits, and 66% are happy to spend more money on eco-friendly products and services.
B Corps, like Ben & Jerry's, a socially and environmentally conscious ice cream company has effectively engaged with the younger generation of consumers. Ben & Jerry's loyalty to using ethically sourced ingredients and backing different social justice projects has assisted them in building a committed customer base and upholding a powerful brand image (B Corporation).
Accessing Financial and Market Advantages
Apart from the ethical responsibility, there are practical benefits for companies that decide to become B Corporations. Several studies indicate that B Corps enjoy a competitive advantage in recruiting and retaining the best talent since workers are now seeking more purposeful work and a favourable organisational environment.
According to the Harvard Business Review, a study revealed that workers in B Corps had greater job satisfaction, engagement, and commitment in comparison to those in traditional companies. The research also stated that B Corps saw a decrease in turnover rates, leading to lower expenses related to hiring and training.
In addition, B Corporations can access an expanding group of mindful customers who give importance to sustainable and ethical goods and services. These customers are eager to endorse businesses that share their beliefs, potentially resulting in higher customer loyalty and brand visibility.
Nielsen's research showed that a majority of global consumers are willing to modify their consumption habits to minimise their environmental impact. Specifically, 73% of consumers are open to such a change, while 66% are willing to pay extra for products from sustainable brands. Consequently, businesses that obtain B Corporation certification gain a notable edge in attracting and retaining customers who prioritise sustainability.
Moreover, by obtaining the B Corporation certification, companies gain entry to a network of similar businesses, which promotes collaboration and the exchange of knowledge for the common good. This supportive community can lead to opportunities for partnerships, investments, and shared resources, ultimately aiding B Corps in succeeding in a world that requires business practices driven by purpose.
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Redefining the Role of Business
B Corporations are companies that are driving a significant change in the way business is carried out. Their approach involves considering social, environmental, and financial performance - the triple bottom line - when determining success. By doing so, these companies are challenging the traditional belief that profit and purpose cannot coexist.
B Corporations are setting an example for other businesses by being accountable and transparent in their reporting. This has led to changes in the corporate landscape and even government regulators are taking notice, with some places creating laws to formally recognise and support B Corporations as their own distinct entity.
In 2019, New York joined eight other US states in passing a law that allows companies to become Benefit Corporations, which are a type of B Corporation that have legal recognition. This law offers protection to companies that prioritise social and environmental goals, and it also promotes responsible practices among other businesses. (Source: New York State Department of State).
The Bottom Line
B Corporations are changing the business landscape by prioritising social and environmental responsibility alongside profitability. This marks a significant shift in the approach to business and shows that companies with a purpose-driven model can thrive. With growing demand from consumers and employees for ethical and sustainable practices, the rise of B Corps highlights the potential for businesses to have a positive impact that goes beyond just financial gain.
B Corporations are redefining the role of business by aligning profit with purpose, meeting the expectations of a new generation, accessing financial and market advantages, and setting a new standard for corporate governance. This inspired a movement towards a more sustainable and inclusive economy.
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