The interest in ethical consumption and corporate social responsibility has been gaining traction over the past several decades and companies wishing to cater to altruistic customers have been leveraging third-party certifications for proving their piety.
Social labeling has resulted in the establishment of a diversity of supervisory bodies which have inherently assumed new forms of power – and their proliferation and influence are truly impressive. Certification marks associated with ethical sourcing and sustainable initiatives have become common features on the packaging of all types of products, and one of the most recognizable logos comes from the B Lab.
The B Lab is a nonprofit initiative that was established in 2006 as a means for challenging existing marketplace norms. The B Lab asserts that the “economic model is broken” and greater emphasis must be placed on people and the planet rather than profits.
Sir Richard Branson, a leading figure of the B Team, has called upon businesses to serve a higher calling and be a force for good, essentially discrediting the good derived from an exchange in and of itself.
Essentially, any product that improves human well-being, whether physically or emotionally, is of value and should be regarded as a social good. Take for example how several grocery stores are now selling pre-peeled eggs or pre-sliced fruits, which may seem unnecessary to some but a Godsend to those with a disability associated with fine motor skills.
What is good, and what has a positive impact, is based on the individual and the interaction. And Branson should be aware of this fact given that space travel is also viewed as unnecessary by some—yet he is able to charge $450,000 a ticket for a once-in-a-lifetime experience on a Virgin Galactic flight.
Given that such flights are a fleeting use of private funds, have an environmental impact, and the social purpose of space travel has been a hot topic, Branson’s own business venture seems contradictory to his B Team connection.
One could argue that space flights should be substituted for more pressing social matters, particularly since the B Lab asserts that our planet is in jeopardy and business has played a “problematic role” in our overall well being.
There will always be trade-offs in any market-based society, and there will always be varying levels of inequality. But, given that a market is made up of individuals engaged in an exchange process, decentralized human action will always serve as a better determinant for furthering societal progress than a centralized plan and external dictates.
Indeed, without experimentation and education, little advancement can occur. For instance, many criticized the cost of Elon Musk’s SpaceX launch, but his personal mission is now saving NASA $500 million having succeeded in the creation of reusable rockets.
Nevertheless, the B Lab is not shy about being openly in opposition to traditionally publicly traded firms and the pursuit of profits based on a passion. According to the B Lab, the focus for firms should be on sustainability and society—and the B Team isn’t solely promoting its moral mantra to business professionals but also policymakers. In 2010, legislation was passed in Maryland to recognize Benefit Corporations and such recognition has since grown to more than half of all US states.
Moreover, the B Lab is not just focused on the US market. Iit has offices in Europe, Canada, Australia and New Zealand, along with a partnership with Sistema B in Latin America.
The B Lab movement has been able to institute stakeholder governance statutes in 51 jurisdictions across the globe, “including Italy, Colombia, France, Peru, Rwanda, Uruguay, Ecuador, British Columbia, and Canada, as well as 44 U.S. states, Puerto Rico, and the District of Columbia (Washington, D.C.)”. And, as declared by the B Lab: “By working with other movements, coalitions, policymakers, activists, and organizations, and by catalyzing our stakeholders — Certified B Corporations, benefit corporations, and businesses adopting B Lab’s standards — we can achieve our vision.”
Notice, however, that the focus is on B Lab’s vision, not the vision of an entrepreneur, and the emphasis is on adopting B Lab’s standards, which firms must be assessed on, abide by, and pay for.
To obtain a B Corp seal of approval, and use the B Lab logo, companies must undergo a B Impact Assessment, for a fee of course, and there are 5,000 certified firms. Major players within the B Corp market tend to be high-end sustainable apparel or health and beauty products and one of the most recognized B Corps heralded for its purpose-based dedication is Patagonia. Patagonia is so engrained in this movement that it has even created its own corporate venture fund, Tin Shed Ventures, to promote ‘responsible’ business ideas.
More and more organizations are championing the stakeholder mindset and recently the Imperative 21 Network was launched to promote business as a social actor, not as a goods producer. Imperative 21 “is a business-led network driving economic systems change” and represents “more than 70,000 businesses, 20 million employees, $6.6 trillion in revenue, and $15 trillion in assets under management.”
The prominent players within this network include: The B Lab and B Team, Chief Executives for Corporate Purpose (CECP), Common Future, Conscious Capitalism, The Global Impact Investing Network (GIIN), JUST Capital, and Participant.
What is rather ironic though about Imperative 21 is that despite the common purpose for business to have a social impact, each organization involved has varying means for financing their cause as well as methods for assessment. For instance, B Corps are assessed according to roughly 200 questions, while those connected to John Mackey’s Conscious Capitalism must abide by four principles; and for those affiliated with GIIN, ESG metrics are predominantly, and unsurprisingly, adhered to.
The influence of the supposed impact industry is growing given the interest from consumers to support businesses that ‘do good’ and the pressure from policymakers for firms to improve their ESG ratings, which B Lab assists with.
The B Lab movement and Imperative 21, however, is a worrisome matter as firms should stick to competing according to the value they offer, not the virtue these organizations may espouse.
What is ‘right’ or ‘wrong’ tends to be subjective, situationally dependent, and even debatable. For instance, several firms have responded to the Supreme Court’s overturning of Roe vs. Wade by offering assistance to those impacted by the new ruling, which is praised by some and has received backlash from others.
Even when it comes to the environment, there is much to debate about what is ‘good’ for the earth and what is safe for society. Should limits be placed on farming given that it is a primary driver of deforestation? Should wind turbines be reconsidered given the difficulty in recycling the massive blades? Should solar panels be shunned due to contributing to the heat island effect which, according to the EPA, leads to an increase in air pollutants and greenhouse gas emissions?
Because needs change, interests change, and our understanding of how the world works changes, it is best to allow for maximum creativity and flexibility so firms can pivot when needed as well as focus on their core competencies for the markets they serve.
As consumers, we should support firms that provide value and not buy into the social labeling schemes; as investors, we should direct our dollars toward ventures that will ensure a positive return and defend shareholder primacy over ESG ratings. And, as it turns out, the market for anti-ESG investing is actually quite strong, as American entrepreneur Vivek Ramaswamy is discovering.
As for businesses, do what you do best and focus on value creation with a long-term capitalist mindset—treat your employees well, cater to your customers, manage your operations efficiently, reinvest strategically, and aim to make money—and you will have a positive impact.
Success has a spillover effect and businesses should be praised, not denounced, for their role in society as simply being a business and nothing more.