Since the 1970s, American corporations have generally adopted a shareholder-centric attitude. As many corporations were seeking to maximize value for shareholders, however, some unintended consequences arose, including ever-widening income gaps between executives and workers and an increase in environmental damages.
However, in recent decades, there has been a societal shift. Now, more than ever before, there is a demand for corporations to be more socially responsible and considerate of all stakeholders—including planet Earth. Public corporations increasingly tout their corporate social responsibility (CSR) initiatives, even as they continue to create societal harm.
At the same time, the rise of the B corporation movement has begun.
B Lab, a nonprofit organization that created the B corporation certification for for-profit companies (often referred to as B Corps), has certified over 4,000 companies as B Corps over the past decade. This certification distinguishes them from competitors for meeting exceptionally high standards of social and environmental performance, accountability and transparency.
“An important thing about the B Corp movement is that they’re challenging these public companies who are trying to get better, and saying that’s not good enough,” says Todd Schifeling, assistant professor of management at the Fox School.
Schifeling explores the rise of B Corps in his new paper, “Good Corp, Bad Corp, and the Rise of B Corps: How Market Incumbents’ Diverse Responses Reinvigorate Challengers,” published in Administrative Science Quarterly, with Boston College’s Suntae Kim.
“The thing that really interested me was that there were these two different motivations that B Corps seemed to be expressing,” says Schifeling, reflecting on the self-reported motivations of why nearly 500 pioneering B Corps sought out certification.
“Some companies were more motivated by this goal of growing the movement and improving the way all businesses operate,” says Schifeling. “And others were more motivated by what we call ‘authenticity concerns,’ or establishing that they’re the ones that really care.”
These two very different motivators propel the B Corp movement in seemingly opposite directions. For B Corps seeking broader change, growth is the focus. They want the strength of its movement to further disrupt the shareholder-centric status quo.
For B Corps motivated by authenticity concerns, however, the goal is to effectively purify the movement by publicly holding themselves to higher standards of CSR than their competitors. Compared to those that prioritize transforming capitalism, B Corps with authenticity concerns seek to stay true to their tenants of sustainability rather than encourage growth, which could lead to lower standards.
For example, amid the popularity of “greenwashing,” or the process of giving a false impression or making unsubstantiated claims about the sustainability of a company’s products or services, B Corps like Allbirds, a sustainable footwear company, emphasize the authenticity of their claims. Unlike other footwear companies with broad and elusive CSR initiatives, Allbirds has distinguished itself as a company that cares deeply about sustainability through its B Corp accreditation.
Seeking transformation and authenticity can, admittedly, seem contradictory because each motive maintains a different end goal—either growth or purity. But, although these motives may seem paradoxical, Schifeling explains they can, and actually should, coexist for challenger B Corps to successfully compete against incumbent public companies.
“By having these two motives and sort of oscillating—going back and forth between seeking growth and seeking authenticity—B Corps have the potential to drive more fundamental changes,” explains Schifeling. “The right mix of motives that enable [challengers] to not just be completely co-opted, but also not remain as an isolated group.”
By achieving a balance between pursuing growth and authenticity, these B Corps not only may be able to better avoid marginalization and cooptation by incumbent public companies but also may facilitate them to better achieve the transformative change they are seeking. By raising the bar for CSR and growing the movement, B Corps are increasingly challenging all companies to do better.