Are B Corps the Future of Business OR Just Another “Elite Charade for Changing the World”?

What’s the best way to solve our biggest problems? Government regulation or via market solutions?
Feb 14, 2019 1:40 PM ET
Blog

By Brad Zarnett

Having just read the book Winners Take All: The Elite Charade of Changing the World by former New York Times columnist, Anand Giridharadas, and mostly agreeing with it, I thought that it would be interesting to read a critique by Jay Coen Gilbert, the co founder of the movement for Certified B Corporations, which happened to fall into the crosshairs of Giridharadas’ criticism.

For those who haven’t read the book, here’s a simple synopsis: Giridharadas provides a well written and detailed explanation of how the idea of “changing the world”, has been hijacked by billionaires and elites whose efforts at doing good are second only to their desire to uphold the inequality expanding, environmental degrading and socially exploitive status quo.

To bring everyone up to speed, this discussion started as a conversation in front of a few hundred people in Philadelphia at an event organized by The Citizen. As Gilbert states, “I thought it would be fun to continue the conversation here and engage a wider audience with this important debate.”

“MarketWorld”

According to Giridharadas, B Corps have many of the ingredients for positive change but they don’t go far enough and are inevitably trapped in a worldview that the market alone can solve our problems.

The concept of “MarketWorld” is a central component of Giridharadas’ thesis. He refers to it as a set of beliefs that have overtaken our culture with the idea that “if you really want to change the world, you must rely on the techniques, resources, and personnel of capitalism,” ignoring the possibility that capitalism itself, as it is largely practiced today, might be at least one cause of the problems we are seeking to solve.

In agreement with Giridharadas is Joseph Stiglitz, the Nobel Prize winning economist, who states:

“Like the dieter who would rather do anything to lose weight than actually eat less, this business elite would save the world through social-impact investing, entrepreneurship, sustainable capitalism, philanthro-capitalism, artificial intelligence and market-driven solutions. They would fund a million of these buzzwordy programs rather than fundamentally question the rules of the game— or even alter their own behavior to reduce the harm of the existing distorted, inefficient and unfair rules.”

Gilbert also finds much to agree with Giridharadas when he says:

“There is often more talk than action in elite gathering places like Davos and Aspen. And the actions taken —perhaps particularly by elites in business and finance—are often marginal, sometimes self-serving, and almost always unquestioning of the existing system that produces the problems in the first place. Loudly applauded TEDTalks, open letters, and corporate programs that “do well by doing good” amount to little more than efforts to rearrange deck chairs on the Titanic of an economic system that seems, as Giridharadas says, to be producing much technical innovation, but little human progress.”

So where does Gilbert take issue with Giridharadas? It would appear, at the point that Giridharadas takes direct aim at B Corps.

Giridharadas is uncomfortable with all manner of billionaire and elite “social club/networking events” such as the World Economic Forum, the Aspen Institute and the Clinton Global Initiative, that strive for change without actually changing anything, and while he clearly doesn’t compare B Corps to these type of events he does see one glaring similarity. B Corps have adopted the market as their chosen lever to drive change. According to Giridharadas, “A new breed of community-minded so-called B Corporations has been born, reflecting a faith that more enlightened corporate self-interest—rather than, say, public regulation—is the surest guarantor of the public welfare.”

Gilbert Defends B Corps

Gilbert is rightly proud of his B Corp movement and stands up for the 10,000 certified companies from around the world but I find Gilbert’s response unconvincing and overreaching. Remember Giridharadas isn’t taking issue with the good work of B Corps – you can’t help but look at the list of certified companies and be impressed. His argument is whether it goes far enough, whether it plays into the worldview of “MarketWorld” and whether it has the ability to alter the core flaws in how business is conducted and who is best to regulate it.

According to Gilbert, “we have launched a new breed of community-minded corporations that reflect a belief that more accountable corporate governance–perhaps alongside, say, public regulation—is the surest guarantor of—or at least a necessary contributor to—the public welfare.”

He goes on to say that, “B Corps believe that business has a necessary role to play because government and nonprofits are, like business, necessary and also insufficient to solve our most challenging problems alone. We can only do this together. That is the most fundamental belief of the B Corp community as expressed in its founding document the “Declaration of Interdependence.”

It’s interesting to see how quickly, either on purpose or unknowingly, Gilbert strays toward Giridharadas’ thesis that we’ve moved towards a worldview in which all problems are best solved at least in part via the wisdom of market solutions.

Government’s Once Crucial Role

At this point it’s important to pause and recognize just how much has been accomplished with government leadership over the past century. Some examples of great projects led by the US government are; the Interstate System, the Hoover Dam, The New Deal, The Marshall Plan and the Apollo Space Program.

These achievements occurred at a time before big banks, oil and gas companies and the corporate class flipped the narrative. Starting in the 1970’s a new era of deregulation and lower taxes for the rich began. Government was positioned not a solution provider, but rather, as part of the problem (Reagan quote). As the government became more discredited and defunded, it began to lose its ability to be a strong player in a truly opportunistic and equitable society.

The myth of trickle down economics was sold to Americans and they bought it. And 40 years later, 22 cents of every dollar (up from 9 cents) that is earned in the US gets gobbled up by the 1% while the bottom 20% have watched their incomes stagnate. Those waiting for the promise of shared wealth are angry and feel misled, they will vote for anyone who promises to bring some of that wealth their way but that will have to wait for another article.

Do No Harm

Gilbert states that there is a fundamental design flaw in how business operates within our economic system and that B Corps believe that all “businesses should aspire to do no harm and benefit all”. To address this, B Corps take direct aim at “shareholder primacy; the legal principle that drives corporations to maximize profits for shareholders by any legal means necessary, even if doing so harms people, communities and the natural environment.” Current business laws have failed to legislate a change that protects each of these distinct groups and B Corps have filled the gap by instituting a legal requirement that aims to balance the interests of shareholders with the interests of workers, customers, communities and the environment.

“If the idea of B Corps was swaying large companies, investors and billionaires around the world to behave differently, then perhaps we wouldn’t need regulations. But in large part, this is not the case and to claim otherwise is wishful thinking.”

Gilbert may be speaking more about his wish than of reality. He clearly overreaches when he says that, “B Corps fundamentally shift power structures and the legal system which reinforces them. B Corps fundamentally change the rules of the game.”

Perhaps some companies are drawn to this way of thinking. There is certainly a growing subculture of companies that long for a way to act as moral leaders and to be seen as such but the vast majority of large global companies, especially the 100 companies responsible for 71% of global emissions, aren’t jumping on the bandwagon. In fact, quite the contrary, most global companies have found that doing the bare minimum when it comes to the biggest global environmental and social issues is the best way to safeguard earnings while maintaining a favourable brand image among an already confused public. [I explored this idea in a recent article entitled, “The Unhold Marriage Between Crony Capitalism and Sustainability”.]

If the idea of B Corps was swaying large companies, investors and billionaires around the world to behave differently, then perhaps we wouldn’t need regulations. But in large part, this is not the case and to claim otherwise is wishful thinking.

Where Do We Go From Here

We are trapped in a exploitative economic global system that creates massive inequality – and it’s getting worse. Many in the elite class would legitimately like to make the world better through various philanthropic efforts that often have a MarketWorld approach but as Giridharadas argues, these efforts zoom into a particular failure caused by structural flaws, such as poverty, while failing to look at the systemic reasons that cause so much poverty in the first place. This works well for the elites as the status quo does not need to be challenged.

“Many of them believe that they are changing the world when they may instead—or also—be protecting a system that is at the root of the problems they wish to solve.”

Another important and challenging aspect of the broken system is all of the people who are trapped inside, especially the elites and thought leaders who are wrapped up in their own biases like fish who don’t know what water is. According to Giridharadas, “many of them believe that they are changing the world when they may instead—or also—be protecting a system that is at the root of the problems they wish to solve.”

My question for everyone:

In the era of a looming climate crisis that will likely arrive sooner than expected, as positive feedback loops shows signs of accelerating, Are voluntary efforts at stakeholder capitalism like B Corps, however well conceived, simply not moving us at a pace that is commensurate with the challenges that are bearing down upon us? Can we survivewithout immediate and meaningful government regulation?

Brad Zarnett is the Founder of the Toronto Sustainability Speaker Series (TSSS) which has been showcasing sustainability leadership since 2008. Brad is considered a “tribal” leader in the Canadian sustainability movement; he is a connector of people and ideas. Brad has a Masters in Environmental Studies from York University in Toronto and regularly writes and speaks on the topic of corporate sustainability. You can follow Brad on twitter at @bradzarnett or on LinkedIn