With the rise in building social enterprises, there has been a growing trend in social innovation that urges a moral imperative for business to consider society and the environment, in addition to profits in their decision making.
Juxtaposed to the concept of social innovation, Benefit Corporation (B Corporation) is a rapidly growing legal structure being adopted by business entities to enhance value creation. This type of corporation allows businesses to institutionalize stakeholders’ interests in their governing documents, including articles of corporation. The goal of a Benefit Corporation is to expand the responsibilities of a business to take into consideration the interests of stakeholders. This includes social, economic, legal, suppliers and customers of a company or its subsidiaries, together with the short-term and long-term interests of its shareholders and the effects of a company’s operations on the environment, and the extent to which a substantive and tangible positive impact is made on the environment and economy.
While the enhanced value creation of a B Corporation is more focused on qualitative performance, based on the Benefit Corporation’s stated objective, a traditional corporation is judged strictly on financial performance. According to David Brooks, op-ed columnist for the New York Times, “B Corporations are a way to transcend the contradictions between the ineffective parts of the social sector and myopic capitalism.”
From this model, several businesses have recalibrated their corporate governance structures to broaden the scope of Corporate Social Responsibility (CSR) to bridge the gap between Benefit Corporations and traditional corporations, where the value creation from both models can be collectively exhaustive for businesses to be a force for good. Corporate Social Responsibility has re-emerged to appeal to the corporate conscience of businesses to be good corporate citizens by adopting the three pillars of Corporate Social Responsibility: social, ecological and financial. Driving profits and Corporate Social Responsibility are not mutually exclusive. Both can co-exist!
While a Benefit Corporation does not need to be certified-as it is a legal status conferred to a business entity by the state, and is only required to publish an annual report assessing its overall social and environment performance against a third party however Certified B Corporations are leading the way in redefining business success by meeting higher standards of certification. Certified B Corporations are for profit companies certified by the B Lab and are required to meet a minimum score and assessment for social and environmental performance to satisfy the requirements that a company integrates B LAB commitments to shareholders into company documents in order to maintain and preserve the certification status. Likewise, there is a critical mass of companies that have recognized the need to innovate by adopting sustainable practices in their business operations to reduce the impact of climate change. If left unaddressed, climate change will undoubtedly affect the environment with disruption in the supply and distribution chain and added uncertainties to markets; all of which will lead to increased costs of doing business.
Moving forward with that recognition, a lot of companies have voluntarily conducted Environmental Impact Assessments, with the scope of evaluating their carbon footprint to ensure environmental impacts are considered, whether or not to change course and the areas where their business activities have the most impact on the environment.
Some businesses (including global luxury brand, Chanel) have found that the biggest impact they can make in reducing their environmental or carbon footprint is in their supply-chain management. This includes packaging, moving raw materials and finished goods.
During a 2011, PCD interview, Michel Dupuis, Ex-Senior VP Purchasing and Development at Chanel cited:
“We decided to assess our carbon footprint. It transpired that packaging accounted for half of our Co2 emissions, followed by transportation of finished products to your shops and warehouse. Getting to work or other forms of business travel ranked third. Based on these findings, we drafted our plan of action.”
From assessment to action, the question remains: How do businesses evolve from adopting sustainable practices to being active participants, constantly integrating and implementing sustainable business practices in their operations?
The same question might be phrased around innovation or continuous process improvement to drive business efficiency however every business should add the following question to the list of concerns that keep their executives up at night: Is my business meeting the needs of the present world, without compromising the ability of future generations to meet their own needs?” Simply put: How sustainable are we?