Opinion: Yes, B Corps are at a crossroads. The path to take now is political

The B Corp movement risks being “an irrelevance, a sideshow, a palliative hopey-changey end-of-days party”, as destructive capitalism rumbles on. It's time to think bigger: to reclaim democracy, says James Perry.

James PerryErinch Sahan’s recent article (Does B Corp status really signal a force for good, or just a 'force for less bad'?) is a high quality reflection on the challenges that face B Lab, and a timely provocation.

As someone who helped to create two B Corps (Cook and Snowball), co-founded the B Corp movement in the UK and now sits on the B Lab board that governs the global movement, these are questions that I, too, wrestle with – as does everyone at B Lab.

Erinch’s timely provocation made me take a step back.

B Lab has become a global phenomenon... but the core problem it set out to address remains

When B Lab started there was simply one idea for mainstream business, that had become an intellectual monoculture originating from the Chicago school in the 1970s and taught in business schools around the world – that the role of business is to maximise profits, because this is what creates prosperity. Responsibility for negative externalities is outsourced to the government, which regulates to address them. Clearly this doesn’t work, and now, in part thanks to B Lab, there is a coherent alternative. B Lab was started in 2007 in a tiny spare bedroom of Jay Coen Gilbert’s house in Philadelphia and has become a global phenomenon. An alternative vision for business is taking root all over the world. By changing its purpose to create value for everyone – people and planet alongside shareholders – business can regenerate and renew, become part of the solution, a force for good.

However, the core problem that B Lab set out to address – that big business has become a plague of locusts feeding off people and planet to convert them into profit – remains. And the social and environmental data gets ever more frightening. The imperative to change the orientation of all business is now desperately urgent. Corporate capitalism is becoming ever more destructive, emitting ever more carbon, suppressing wages, excluding the global south, creating extreme wealth, serving us fake news and avoiding tax. The demands for growth at any cost – albeit with a shiny new palliative wrapper of ESG – are louder than ever, from progressives as well as conservatives.

So has B Lab actually achieved anything, other than a diverting sideshow? It has passed laws around the world, but companies must opt in to metamorphosis. Efforts to pass compulsory change, such as the Better Business Act campaign in the UK, have not been taken up, despite the energy that has been put into them. Even now, only one in ten S&P 500 firms mention scope 3 emissions in their reporting. The plague of locusts moves on regardless, enabled rather than challenged by our ‘democratic representatives’.

 

Serious or sideshow?

All of Erinch’s suggestions are worthy of deep consideration. But I want to focus on the third of his provocations, the role that B Corps can play in creating the new economy.

In many ways it is irrelevant whether the B Corp movement achieves its mission itself, or whether it is simply the second horizon (disruptive innovation) which becomes overtaken by an as-yet unknown third horizon (emerging future). No one I know at B Lab – from the chair of the board to the newest recruit – cares about the answer to that question.

What we all do care about is that the role of business in our world is transformed; that the fundamental idea driving the global economy changes, from maximising profits to maximising wellbeing. Sadly, we all know that we are a long way from achieving this. In some ways, the more successful the B Corp movement has been, the more obvious it has become how small it is in relation to the global economy. We are tiny in comparison to the scale of the laggardly 90% of the S&P 500 who are not even measuring scope 3 emissions. We risk being an irrelevance, a sideshow, a palliative hopey-changey end-of-days party while the death cult in its juggernaut rumbles on regardless.

The more successful the B Corp movement has been, the more obvious it has become how small it is in relation to the global economy

The pressure and urgency that we all feel risks creating division. Some of this is good, such as Tariq Fancy resigning his job as chief sustainable investment officer at Blackrock, running from the building screaming about its egregious ESG “greenwash”, “like giving wheatgrass to a cancer patient”. Some is friendly fire, where allies turn on each other – such as sustainability guru Professor Bob Eccles’ spat with fellow sustainability gurus Professor Carol Adams and Professor Charles Cho about single versus double materiality.

My reflection after 15 years on the front line of this battle, is that Erinch is right. We have indeed reached a fork in the road. We now know that there is an alternative path to the death cult of shareholder primacy. We know that this alternative works and that it can work for everyone. But we are surrounded by a policy environment that enables laggards and incentivises unsustainable business. I have reluctantly concluded that without fundamentally changing the rules, we cannot succeed.

 

Reclaiming democracy

So the fork in the road that I see is whether we turn on each other, arguing about who has the third horizon innovation which will break through. Or we take a cold, hard look in the mirror, accept our reality and acknowledge our weakness. There will be no third horizon breakthrough while the complex set of regulations, tariffs, fiduciary duties, incentives and market architecture remain built on the idea that the role of business is to maximise profits to create prosperity.

Yet there is so much to be hopeful about. The ingenuity of business has created the solutions – they are available to us. We are in the midst of a mind-blowing technical and knowledge revolution. And even now there is enough food for everyone – we throw away more food than is needed to solve global hunger. Green technologies are available that could enable a transition to a low carbon future. There is plenty of wealth to go around.

But we have a distribution problem, and we have a purpose problem. We have no public concept of ‘enough’… instead our system design is the insatiable pursuit of ‘more’ – of profit maximisation and inexorable growth. Starvation, housing crises, mental health crises, cost of living crises and planetary collapse are not inevitable. We have the tools that we need to resolve them – if only we can publicly agree and formalise what is ‘enough’, in every sense.

The existential problem caused by our economic system is a problem of governance, of political will

Eisenhower said that if you can’t solve your problem, make it bigger. So I believe that the time has come to recognise that the existential problem caused by our economic system is a problem of governance, of political will. I wish it were not so, but my reflection on Erinch’s provocation is that none of us can succeed without big political change. And the time has come for us to saddle up and address ourselves to that challenge. The time to debate the details will come – double versus single materiality, how best to scrutinise supply chains or how best to test whether stakeholder governance is really authentically being implemented. But for now, we need to turn our attention to the biggest question – to reclaim our democracies from their capture by the death cult. The global tech oligopoly whose algorithms are designed to capture our eyeballs and our data to serve us ads, rather than serve our needs as humans; the oil companies who make $8.5bn in quarterly profits and spend some 40% of it on a share buyback and the rest on dividends – while underdelivering their capital investment commitments in green technology by a factor of four so far this year. We need to reclaim them from the lobbyists and media who set the agendas of our ‘representatives’. Representatives who believe their own rhetoric – which is now so obviously devoid of credibility – while the corporate media sell it to us to enable their status quo to roll on.

 

Rotten, divisive, outdated

For me, in the UK, this starts with breaking up the anachronistic first-past-the-post electoral system that forces often good people to enter one of two rotten old political parties, captured by vested interests, entrenched in political power. A binary system of representative democracy whose core design principle is opposition – to prevent change, to divide. Designed to make continuity, consistency and consensus impossible.

We should remember that we only have representative democracy because when the ‘glorious revolution’ was forced on the vested interests of the day in 1688 there was no alternative. We now have direct democracy in every part of our lives, from Surveymonkey to Tripadvisor to Love Island. In fact everywhere except, well, our democracy. And everyone knows that proportional representation is a better system of representative democracy than first-past-the-post, because it means that every vote counts, it opens up the field to everyone, and it can incentivise agreement and co-operation through coalition. Meanwhile citizens’ assemblies are a new tool that enable a deeper democratised consideration of issues. Subsidiarity is a broadly supported principle which has never been systematically implemented. Every system that we use in our lives is regularly updated and improved except our democratic system, which was established in 1688 and has not significantly changed since – because the last thing that vested interests want is to be interrupted by true democracy.

My reflection on Erinch’s provocation is that if we are serious, we need to confront the fundamental design principles of the economic system head on, which means we need to get serious about our democracy. And it’s blindingly obvious that – as currently designed – what passes for democracy in the UK is not fit for purpose. It is hundreds of years out of date and is evidently incapable of addressing the challenges that we now face.

This is my reflection. My response is much simpler – to invite Erinch, and anyone else reading this, to get in touch with me if you have reached the same conclusion. The time has come to find friends and allies in the field of democratic transformation, because my conclusion is that we cannot succeed with our vital and urgent work to change the core idea at the heart of our economic system without first upgrading our democracy.

James Perry is co-chairman of Cook; he co-founded the B Corp movement in the UK, and serves on the global board of B Lab and the board of B Lab Europe. He is also a founding partner of Snowball. He writes in a personal capacity.

Contact James Perry via jameselliotperry121@outlook.com.

 

Image by Josh Barwick on Unsplash

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