Challenges before a Rising New Economy of BCorps

"There’s nothing inherently evil about wanting to be profitable, and there’s no virtue in embracing a lofty vision while your business tanks."

Patagonia, the first California-based venture to be certified as a B Corp in January 2012, is a silent sports apparel retail company worth $600Mn and comprising 2000 employees. According to a  recent Wall Street Journal article, Patagonia had to face conflicts related to producing quality clothing while staying true to its values of causing “no unnecessary harm.” The decision of company executives to stop buying wool from a chain of South American farms that were on the hit list of PETA for their treatment of sheep, caused a financial blow to the 43-year-old company, which had just introduced a popular line of wool clothing.

Such ethical dilemmas are, of course, common for companies, but unlike C Corps, whose responsibility is generally focused towards its shareholders, B Corps are specifically permitted to have more nuanced loyalties.

However, more corporations are now donning the persona of a responsible citizen, while continuously performing practices to maximize profit. In a world where everybody claims to be “green” and “good”, B corporation provides an alternative form of organizing mission-driven businesses and harness the opportunity for communicating their commitment to society and to the natural environment better. Hence, the traditionally “green” and ethical businesses have been motivated to unite and stake a claim to their authentic difference, thus fueling the growth of B corporations and other new types of organizations.

For a corporate society, this steady but solid growth of alternatives represents an emerging challenge to the historic monopoly of the shareholder-centered incorporated entity. If the public corporation is no longer the default organizational form for businesses, but rather one of many alternatives, how can managers be prepared to ensure long-term competitiveness? How might leaders think about their fundamental organizational structure when they seek to distinguish their value propositions in a noisy marketplace of more conventional companies? The current rise of B Corporations among pioneering firms has demonstrated that efforts to reform and evolve industry standards increasingly require changes to the fundamental purpose and legal form of an organization.

The traditional corporate form has dominated our understanding of how we think as well as talk about “business” in many ways. The rise of new forms of organization will, therefore, require re-imagining what (and who) are the fundamental building blocks of business.

References

Patagonia [Wikipedia]
Patagonia is Certified as B Corp
Should Your Startup Take the B Corp Route

Why Companies Are Becoming B Corporations
Patagonia's B Impact Report

- Karishma Shah