B the Change: The Future of Business
Occasionally, our blog content may depart from its typical focus on food allergies to discuss topics related to business and entrepreneurship. We are a start-up, after all. In this post, we examine the role of corporate social responsibility in today’s world. This piece also coincides with a guide I wrote for entrepreneurs on the same topic, which Yale and Patagonia jointly published today.
In a recent column in The Week, William Falk discusses the loss of civility in America. He starts with a story of his pregnant co-worker standing in a crowded NYC subway car, waiting for someone to offer her a seat (spoiler alert: no one did), and segues into what he sees as a “me-first” mentality overtaking common decency in America. I was reminded of a recent experience at an airport, where I witnessed two disabled men and a member of the military waiting until the platinum, gold, and first-class passengers boarded before they were invited on the plane. Capitalism at its finest.
Falk attributes this culture shift partly to our “brutally Darwinian” workplace culture, in which overtime is encouraged and vacation is a luxury few can afford. Falk submits that this workhorse mentality fuels an economic struggle of survival that leads to competition and hostility, both inside and outside the workplace. I think few would dispute the considerable amount of economically motivated resentment in our country right now.
So how did we get here? Why the Darwinian corporate culture? I think the problem started, in part, with one man; and the solution, I believe, lies partly in the guide I mentioned at the start of this piece.
Let me explain.
In 1970, Nobel Prize-winning economist Milton Friedman, a champion of free market economics, famously stated: “There is one and only one social responsibility of business[:] to increase its profits.” In other words, companies must value profits above all else and are not bound by a commitment to the communities and people they employ and serve. This ideology came to be known as the doctrine of shareholder primacy. But the problem with this theory is that profits often come at the expense of worker well-being, community health, and the environment.
Now, say your businesses decided to consider employee well-being on par with shareholder profits in corporate decision-making. What then?
In 2006, the nonprofit organization B Lab launched a certification process aimed at supporting just those kinds of stakeholder-driven business decisions. The objective was to separate the truly “good” companies from those that merely had good marketing departments by implementing a standard vetting process. B certification created a system that measures social and environmental impact, and ensures reporting compliance through more stringent measures of accountability and corporate transparency. In 2010, states began implementing statutes under which companies could incorporate as Benefit Corporations: an alternative to a C-Corp or LLC that builds the same values of Certified B Corporations into the company’s charter and articles of incorporation. The same principles inform both certification and incorporation: to place stakeholder interests (shareholders, employees, community, and environment) on equal footing in corporate decision-making. The guide I mentioned offers a detailed roadmap for businesses interested in securing either B certification or incorporation status.
If all of this B stuff is new to you, you’re not alone—though you’ve probably heard of Patagonia, Etsy, or Warby Parker, all of which are either a Certified B Corporation or a Benefit Corporation. To date, there are nearly 4,000 Benefit Corporations and 2,000 Certified B Corporations in existence, and these entities are just the tip of the iceberg. According to a recent report, “social impact has evolved from a pure PR play to an important part of corporate strategy to protect and create value.” JP Morgan estimates that the market for socially responsible investing stands somewhere between $400 billion and $1 trillion.
We live in an increasingly interconnected world, one in which we are (ironically) becoming more and more disconnected from the communities and people around us. We often don’t know the people who sew our clothes, the farmers who grow our produce, and the manufacturers who assemble our electronics. Globalization and interconnectedness have increased trade and communication between countries, but they have also fueled income inequality and transferred millions of jobs overseas.
Our nation’s businesses and economy are only as healthy and as strong as the communities, environment, and employees they serve and on which they depend. Milton Friedman was wrong. The rise and popularity of Certified B Corporations and Benefit Corporations is largely a response to that realization. Now, more than ever, businesses must build social values into their bottom line. It’s not just good for society—it’s good for business.
— Abi, CEO & Co-Founder
Allergy Amulet is neither a Certified B Corporation nor a Benefit Corporation. Our company is currently pre-revenue and does not yet have a product on the market. Because of this, it is too early for certification and too costly to reincorporate. The company plans to pursue both designations at the appropriate time.