The Future of the B Corporation in Australia - Part Two

In part two of our B corp vox pop feature, seven Australian B corporations share their views on the future of the movement in Australia.

While the movement has burgeoned overseas, with legislation passed in the United States enshrining B Certification into law, in Australia, progress has been slower.

Since Small Giants became the first certified Australia B Corporation in July last year, around 15 companies in Australia and New Zealand have followed.

The torch here continues to be carried by a small group of dedicated and passionate SMEs emerging as vocal advocates for B Certification.

What needs to occur for the B Corp movement to expand in Australia?

Time – unfortunately our politics are devoid of long term thinking, so it needs to be lead by the impact investing markets and private investors until there is some scale.  Probably there needs to be a few hundred medium companies certified before there is a tipping point.

What is the key to getting larger Australian companies on board?

The B Corp criteria are very onerous and it is very difficult to get large companies on board.  The key is to introduce a lower threshold (B Governance) for larger companies that allow them to transition over X years.  I think B Corp should have a board and management level certification first, then look at supply chain and operations afterwards for the full certification (B Corp).

The key takeaway?

At Kingston Equities, we are investors in 12 small and medium businesses that we are in the process of getting certified one by one.  This is a long and expensive process but will be very valuable for the movement here.

What needs to occur for the B Corp movement to expand in Australia?

We’re gaining a lot of momentum, and I think we’ll reach the tipping point soon where we see a lot more companies that become certified, and quickly. We’re seeing a rise in the social enterprise sector in Australia, as more and more organisations look to place themselves in that gap between the traditional not-for-profit structure and the corporation model. A B Corporation fills that gap very well.

What is the key to getting larger Australian companies on board?

The B Corporation brand is very well recognised in the US with larger companies like Ben & Jerry’s and Patagonia on board. I think it’ll take larger companies to recognise that they need to move beyond just triple-bottom-line or sustainability initiatives to really thinking about the social value that they create by being in business.

There is a lot of research to suggest that companies that address risks around sustainability fared better in the GFC, for example, and now that externalities like carbon are being priced, it really makes sense for a large business to start redefining what success means. By voluntarily meeting higher standards of transparency, accountability, and performance, Certified B Corps are distinguishing themselves in a cluttered marketplace by offering a positive vision of a better way to do business.

The key takeaway?

The B Impact Assessment is a wonderful (and free) tool which is the first step to becoming a B Corporation, but is also helpful to see where the gaps are for your business, and where your business might be able to improve its impact: http://b-lab.force.com/bcorp/AssessmentReg

What needs to occur for the B Corp movement to expand in Australia?

I think generally it is a public awareness issue here in Australia of the Certification being available.  I am fortunate in that I travel regularly overseas for work particularly to obtain the latest investment trends and business ideas so came across this certification whilst abroad which lead us to becoming Certified with B Corp.  

What is the key to getting larger Australian companies on board?

It is my belief that generally larger business particularly publicly listed companies are generally slow adopters, generally they need to witness the results from small to medium size companies and their success before they may take action.  They also face a larger range of complexities within their business which are not faced with smaller to medium size businesses.

It is my belief this movement will be driven from small to medium size businesses and once critical mass is obtain within Australia the larger businesses will follow behind.

With the above in mind Australia on average has one of the highest number of small to medium size businesses globally which is very exciting from the B Corporation growth perspective so the movement has an exciting future.

The key takeaway?

Ed Freeman is a US PhD Professor who stated: “We need red blood cells to live (the same way a business needs profits to live), but the purpose of life is more than to make red blood cells (the same way the purpose of business is more than to simply generate a profit)".  

Most of our competitors judge their success by the financials/profits they forget about the bigger picture the intangibles which are generally hard to measure.   B Corporation provides you with a matrix to evaluate these intangibles.  An external PhD study found that if you can successfully align particular intangibles within a company the financial performance results will be exponential compared to there peers.

It is my opinion that business will have to adopt these practices in the future. Discontinuity theory is a study that showed that a business that generally missed evolution business changes no longer remained competitive and in some cases ceased to exist. I believe B Corp is one of these evolution in business any business owner can not afford to miss out on.

What needs to occur for the B Corp movement to expand in Australia?

There are a number of businesses that are interested in the certification. What they need is to set a time to fill it in and submit it. As mentioned earlier, there is so much to learn from the process regardless of whether you pass or not.

We can certainly improve our communication B certification and invite more people to attend workshops to help them understand the accreditation process. These initiatives are happening, and they are growing in scale. Our last event attracted nearly 100 people.

As B Corporation Australia and New Zealand launches in the New Year, this will give the community added momentum.

Ultimately, in the same way as in the US, there needs to be legislative change that supports and encourages B Corps. If we see the same enfranchisements as have taken place in America, businesses would be much quicker to realise the value of B certification.

What is the key to getting larger Australian companies on board?

Legislative changes would make a significant difference. What we need to prove, however, is that our movement has a direction, it is moving forward, and that they need to jump on board. Often we talk about how B Corps are creating a new economy. When we can prove this without a doubt then businesses will quickly follow.

What needs to occur for the B Corp movement to expand in Australia?

Education and awareness. Oh and more articles such as this one!

What is the key to getting larger Australian companies on board?

We believe that a CEO at a large Australian company has a unique opportunity to be known as the “first mover” in this space. There are already a number of large businesses who are committed to ethical and sustainable business practices and given the small investment we think the decision is simple.

The key takeaway?

For us the B Corporation certification is incredibly important. IIG is the first Australian fund manager to have become a B Corporation. We share the B Corp community’s goal to redefine success in business.

In addition to generating competitive financial returns for our investors, IIG intentionally structures its investments to create measurable social or environmental impact. The certification has had an influence for our business as it allows our investors, prospective investors and stakeholders to engage with our business and impact investment strategy in a more rigorous and meaningful way.

What needs to occur for the B Corp movement to expand in Australia?

As it is a movement, word will spread but will spread much more quickly if larger corporations are to gain the certification.  As I previously mentioned, customers are now no longer impressed by bolt-on CSR initiatives, and I believe that B Corp certification will provide that much needed kudos to larger companies.  This will also require education on the part of the customer, so a more general campaign (not just targeting company managers but also the general public) needs to be initiated.

Also, many employees now expect much more from the companies that they work for, and in particular the best graduates are attracted to companies that incorporate the best practices of a B Corp, over receiving the highest salary.  This will provide further pressure for them to seek accreditation.

Finally, it would also be effective if universities were to educate their students within the appropriate courses, about B Corp certification.  Personally, when I was doing a Masters in Business there was a unit called Managing for Organisational Sustainability which could easily have included a section on understanding B Corp certification.

The key takeaway?

It is exciting to be part of this burgeoning movement in Australia.  It is a great community that is being established and has a long way to go to being a part of mainstream business in this country – however, I believe it can and will happen.

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.

AJ Financial Planning | Net Balance | Whole Kids | Projection Room | The Henley Club | The Impact Investment Group | HITnet Innovations

Find out more about B Certification here.