Business leaders hold the power to accelerate this movement. They hold even more power when they choose to work, not just as heroic individuals, but collectively, as a movement to change the whole system. As a co-founder of the nonprofit B Lab, I share in this post how the B Corp movement provides a blueprint for a more inclusive economy that can help capitalism serve people and the planet. This article is an edited version of my keynote address for 2017 Harvard Social Enterprise Conference. The full presentation is available here.
We are in the early stages of an historic global culture shift that is changing the role of business in society. It is a movement of people using business as a force for good. That movement is evolving capitalism from a 20th century model of wealth maximization for shareholders to a new system that maximizes value for society.
What will it require to change the system and realize that vision? Systems change requires two conditions: first, recognition of system failure; and second, existence of a viable alternative. We have arrived at a unique moment for this conversation because today there is wide recognition of system failure, and there is at least growing recognition of a viable alternative.
The past couple of years have shown a total breakdown in trust in our system of democratic capitalism. Despite a long period of economic progress and technological innovation, we are experiencing extraordinary inequality, environmental crisis and societal disaffection. In other words, if the promise of capitalism is to create a shared and durable prosperity, then capitalism is not living up to that promise because its rules are flawed for the problems we face.
System Failure = New Opportunities
Moments of system failure — and the resultant chaos — create opportunity. My own loss of faith in existing systems is what led me here. In the early 2000s, I had been working in the private-equity industry for my entire career. I was increasingly disaffected by the uncontrolled financialization of our economy by capital markets players who had no objective but to scale and to amass wealth for the few without consideration for the damage or benefits amassed by society. I had become equally cynical about government’s ability to address our greatest challenges because of the increasingly hyper-partisan environment in Washington. Sound familiar?
So, 10 years ago, we launched B Lab, the nonprofit that created a certification program for companies to manage and govern their impact on stakeholders (workers, communities, customers, the planet) not just shareholders. Today more than 5,000 companies have incorporated as benefit corporations — companies that are using a new legal form of incorporation that requires high standards of social and environmental purpose, accountability and transparency. More than 2,300 companies are certified by B Lab as Certified B Corps for their high performance. And increasingly, the venture and private equity community have become supportive. Just about every major VC in Silicon Valley has invested in a B Corp. So have many big private-equity firms. Earlier this year, for the first time in the history of the world, a company had an IPO with a legal form making itself accountable to create value for society. The IPO was supported by Wall Street investment banks, and its shares were purchased by major institutional investors. The train has left the station.
Ten years in, on the shoulders of giants, every important conversation about the role of business in society looks to the B Corp movement for leadership. But is it enough? Especially right now? As fast as it’s growing, so is the power of financial institutions and corporations that are designed to externalize as many costs on all of us as possible. I often lay awake in the middle of the night wondering if we are making a difference.
Playing the Long Game
We know these companies will have a much better chance of succeeding if we can inspire and engage stakeholders to support them as consumers and workers and investors. So that’s the strategy: a certification program has become a movement, and now it’s time for that movement to gain power. The B Corp movement is scaling rapidly. It is scaling globally. It has millions of followers. Ten years in, on the shoulders of giants, every important conversation about the role of business in society looks to the B Corp movement for leadership.
But is it enough? Especially right now? As fast as it’s growing, so is the power of financial institutions and corporations that are designed to externalize as many costs on all of us as possible. I often lay awake in the middle of the night wondering if we are making a difference. Clearly, what got us here won’t get us where we need to go. That’s disappointing.
But it gets worse! We are experiencing a total breakdown in trust — many white working class folks have joined people who have been marginalized for generations in believing that the system isn’t working for them. They don’t believe that the institutions built to serve society are serving them. They see their leaders as lacking courage and as careless — about them, about the truth.
Let me be clear about an important distinction between right now and the long game.
In this specific and divisive moment, we all need to double down on care and courage to protect vulnerable people and vulnerable institutions. The market won’t solve all our problems. We all have a role to play in standing against injustice and discrimination, and in insisting that the institutions of our democracy do what they were built to do.
But we need to play the long game, too. We need to take action to address inequality and injustice and environmental degradation by building an inclusive economy that works for all, for the long term.
And as an old Wall Street private-equity guy, I want to say something to the business school folks reading: An inclusive economy also means creating those opportunities for their own sake without defaulting to the constraints of market forces. Thousands of B Corps are proving every day that we don’t need to live in business-case jail.
Last year, B Lab issued a call to action to all business leaders to stand up to injustice, and to take action to use their businesses to build a more inclusive economy. We have created a list of concrete actions businesses can take with their workers, in their communities, for their customers, for the environment. We have published best practices and case studies to help them on the path.
What does it look like for business to play a role in building a more inclusive economy? It looks like a living wage for every worker; it looks like a boardroom and a management team with the same beautiful diversity as the shop floor or our whole country; it looks like the opportunity to have a job with dignity and growth regardless of one’s attributes of identity or place of birth; it looks like a legal structure that actually makes the company accountable to create value for its marginalized stakeholders. And as an old Wall Street private equity guy, I want to say something to the business school folks reading: an inclusive economy also means creating those opportunities for their own sake without defaulting to the constraints of market forces. Thousands of B Corps are proving every day that we don’t need to live in business case jail.
I also believe that in a divisive time, an inclusive economy can be a unifying force. If businesses stand together to create opportunity for people and communities, not just wealth for shareholders, they can create common cause amongst the disaffected Trump voter, the disaffected Bernie voter, the disaffected non-voter. That’s a powerful opportunity.
The Courage to Make Ripples
This is an ugly time. It’s easy to lose hope. That hopelessness reminds me of one of my favorite speeches.
In the darkest days of apartheid, Bobby Kennedy went to South Africa and gave his famous “Ripples” speech. I can’t inspire with his Massachusetts lilt, but maybe with his words:
"Few will have the greatness to bend history; but each of us can work to change a small portion of the events, and in the total of all these acts will be written the history of this generation…. It is from numberless diverse acts of courage… [and]… belief that human history is shaped. Each time a person stands up for an ideal, or acts to improve the lot of others, or strikes out against injustice, he sends forth a tiny ripple of hope, and crossing each other from a million different centers of energy and daring, those ripples build a current that can sweep down the mightiest walls of oppression and resistance."
We stole this idea of ripples years ago and applied it to the B Corp movement as a motive factor that B Corps could use to inspire themselves and all their followers to take action to sweep down the walls of resistance to practicing business as if people and place mattered. Over the years, we’ve recorded over 15,000 ripples — actions taken by individuals or businesses to build a more inclusive economy.
Kennedy was telling us that we are powerful change agents as individuals. The roles we each play in a globalized and connected world — as workers, investors, consumers and entrepreneurs — make us powerful advocates for a better way to do business.
This is especially true of the next generation of business leaders. The establishment is sometimes dismissive of the B Corp movement when I talk about it. I get the “Oh, that’s cute” pat on the head. But they start listening the moment I start talking about millennials. They understand the need to attract and retain the best and the brightest. They understand that people in this generation are looking for both money and meaning in their careers. They know they don’t want a job, they want a purpose, they want to bring their whole selves to work.
I’d like every millennial and Gen Z-er to start or work for a B Corp. I know that’s the height of hubris, and not everyone will. But I am asking that the younger generations demand more from wherever they work. Demand higher standards of performance, transparency and accountability. Demand a workplace to be proud of.
Up-and-coming business leaders hold the power to accelerate this movement. They hold even more power when they choose to work, not just as heroic individuals, but collectively, as a movement to change the whole system. Because, ultimately, social change is a team sport.
That’s what lets me get back to sleep in the darkness of night.
B the Change gathers and shares the voices from within the movement of people using business as a force for good and the community of Certified B Corporations. The opinions expressed do not necessarily reflect those of the nonprofit B Lab.
A version of this article originally appeared on B the Change. B Lab is building a global community of Certified B Corporations. Read more stories of people using business as a force for good in B the Change, or sign up to receive the B the Change Weekly newsletter for more stories like the one above, delivered straight to your inbox.