Dear Corporate America, It's Time to Walk the Walk on Sustainability
By Ed Townley
There's a sea change underway in corporate America.
For decades, top executives preached the gospel of Gordon Gekko, proudly declaring "greed is good." They happily outsourced jobs, price gouged customers, and despoiled the environment -- anything to maximize shareholder value.
But now, executives admit this rapacious behavior isn't sustainable. In August, the Business Roundtable, an association of top CEOs, pledged to advance the interests of workers, customers, local communities, and the environment, not just shareholders.
This promise is encouraging. But anyone can issue feel-good press releases. CEOs can demonstrate they're serious by transforming their firms into "B corporations," which legally bind themselves to the common good. Making this transition isn't merely the right thing to do; it'd also improve long-term financial performance.
Becoming a B corporation isn't easy -- but it proves companies' commitment to sustainability beyond a shadow of a doubt. Aspiring B corporations first apply to B Lab, a nonprofit that grades how applicants treat their employees, communities, and the environment on a scale of 1 to 200. B Lab then helps applicants develop customized improvement plans.
These firms also reincorporate as benefit companies or revise their articles of incorporation to reflect their new legal responsibilities towards all stakeholders, not just shareholders. To retain this coveted designation, B corporations undergo reassessments every three years.
When firms put people before short-term profits, they often outperform traditional corporations in the long run.
That's largely because today's consumers frown upon corporate greed. Seventy-five percent of Americans say they won't shop at companies that don't reflect their values. And 65 percent do their own research to verify firms' social and environmental claims.
Many shoppers deliberately patronize companies that advance the greater good. Just look at Unilever, the multinational firm famous for Dove body wash, Lipton tea, and Ben & Jerry's ice cream. The company's "sustainable" brands are growing 30 percent faster than its other brands. Ben & Jerry's, for example, has tripled revenue since 2000 while increasing its social and environmental advocacy.
Or look how consumers have rewarded cosmetics company Natura, which became the world's largest B corporation in 2014. Since revising its corporate articles to serve all stakeholders, its share price has doubled.
These aren't anomalies. In the United Kingdom, B corporations are growing 28 times faster than the economy as a whole.
B corporations heavily invest in their local communities. Consider my company, Cabot Creamery, the first dairy co-op to become a certified B corporation. We send free resources and samples to local parent-teacher events and fundraisers. Such goodwill gestures engender long-term customer loyalty and help us retain employees, who live in these communities, after all.
No Business Roundtable members have taken the B corporation plunge yet. But there's no reason for their CEOs to hesitate. As numerous B corporations have proved, sustainability needn't come at the expense of profitability.
Ed Townley is CEO of Cabot Creamery Co-op.
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