In Part Two of Pro Bono Australia’s interview with Whole Kids about the emergence of B Corporations in Australia, we talk about a few of the issues, and opportunities, for growing the movement here:
What needs to occur for the B Corp movement to expand in Australia?
Legislative change to recognise the legal corporate status of B Corporations is very important to expanding the movement in Australia. All B Corps in Australia have voluntarily undertaken certification because they believe the B Corp seal lets the public know their commitment to generate “profit with a purpose”. They are already making business decisions based on that operating principle even though there is no legislative requirement to do so.
Another thing that needs to occur is a change in corporate leadership mindset from a shareholder-focused model to one based on maximising value for all stakeholders. This can be a challenge for a business that is a public company, has a diverse shareholder base or has an organisational culture steeped in the “profit maximisation” ethos.
If a large socially and environmentally responsible Australian corporation decided to become a B Corp, irrespective of whether legislative change occurred, that would also provide a fillip for other values-based companies to also consider certification. I can think of a few that would make exemplary B Corps and provide a catalyst for others to join!
Parallel to legislative change, the investment community also needs to re-evaluate their valuation and financial models to consider the broader impacts and value generation that a B Corporation can create beyond bottom-line profit. When larger companies come on board, a key driver of growth would be the adoption of superannuation funds to proactively invest in B Corporations.
What is the key to getting larger Australian companies on board?
I think we need to make a distinction between large companies that are publicly-listed and those that are privately-held. I believe there are higher barriers for, say ASX200 companies, to become B Corporations. Presently there is no recognition of B Corp certification under Australian corporation law and this will need to change for public companies to consider certification as a viable change to their incorporation status.
Listed companies are also primarily driven by the need to maximise shareholder wealth. While studies have shown that purpose-led companies like B Corporations can perform better in creating shareholder wealth compared to other public companies, most large Australian companies would require a substantial change in leadership philosophy, operating models and processes, shareholder commitment, and cultural realignment to make the transformation to a B Corp.
For large privately-held companies, particularly those owned by a single family or founder or those operated as a cooperative, the decision to become a B Corporation may be more straightforward. Indeed, many may already be purpose-driven businesses and becoming a B Corporation is a validation of how they already operate, like we did at Whole Kids.
The key takeaway?
While the B Corporation movement is new, there is really no barrier to entry based on company size. What is really needed is committed leadership to make the change. Well-known large companies in the US like Ben & Jerry’s (now a subsidiary of a huge multinational), Patagonia and Plum Organics demonstrate that large companies can become B Corps. Often these companies are already operating along B Corp principles and values, and becoming certified gives them the “proof in the pudding” for their stakeholders.