Do-Good Companies Brighten a Dismal Economy
Jul 12th 2011 2:30PM
Updated Jul 13th 2011 9:48AM
Do you get a warm fuzzy feeling when you open your cupboards? If you use products made by companies like Method, King Arthur Flour Company, and Seventh Generation, you're doing more than just washing dishes, baking food or cleaning up spills: You're supporting businesses officially certified as do-good corporations.
Companies like these represent the leading edge of a dynamic movement that's brightening our dismal economy. They defy traditional expectations that corporations should exist only to maximize profits for shareholders. Shareholders certainly matter to the people who run these businesses, but as certified B Corporations -- the "B" stands for "benefit" -- they honor allegiances to their employees, their communities, and other stakeholders as well.
To become certified B Corporations, businesses must meet the nonprofit B Lab's standards for worker treatment and environmental and community impact. These companies also must get shareholder approval to change their bylaws to allow functioning with all those stakeholders in mind.
There are currently 422 B Corporations in 54 industries, collectively racking up $1.94 billion in revenue. According to the B Corp website, these companies are "using the power of business to solve social and environmental problems." That's where the benefits come in.
The perils of traditional bottom-line thinking
Corporate entities that can and should seek to do the right thing for the long haul -- not simply the most profitable thing for the short term – represent a long-overdue shift in corporate thinking.
We saw the flip side of such thinking all too well during the financial crisis. Businesses' poor decisions and ruthless pursuit of short-term profits left innocent shareholders suffering, and taxpayers footing the cleanup bill.
Many traditionally minded investors may balk at the idea of a company that isn't solely concerned with bottom-line profitability, and takes its hybrid purpose seriously enough to legally change its bylaws. But there's more to this story than simple big-heartedness.
B Corporations' commitment to their workers, their communities, and the environment has far-reaching benefits. After all, those very same stakeholders are the life's blood of commerce. They're customers, employees, and citizens; their well-being, financial and otherwise, helps build a healthier, more sustainable economy for businesses.
Doing good goes mainstream
What sounds like an interesting but minor niche is actually making headway into the mainstream. Products from Method, King Arthur Flour, and Seventh Generation command shelf space in major U.S. retailers like Whole Foods Market (WFM), Target (TGT), Safeway (SWY), and Wal-Mart (WMT).
Alongside their products' mainstream appeal with shoppers, B Corporations are becoming more accepted in the business landscape, too. Vermont, Maryland, Virginia, and New Jersey have been the earliest supporters of this innovative new model, passing laws that codify B Corporations' embrace of multiple stakeholders.
How to support corporate good
Unfortunately, we investors can't invest in any B Corporations; right now, they're still all privately held. However, we can vote for better corporate citizenship with our investing and purchasing dollars.
Even without B Corporation status, many companies already operate in admirably responsible ways. Publicly traded companies with major social or sustainability initiatives built into their corporate DNA include Whole Foods Market, Google (GOOG), and Chipotle (CMG).
And of course, many traditional businesses bring plenty of social good to the world in different ways. Adding jobs, and bringing better, more affordable products to the marketplace, generally benefits society, as long as they don't stem from any harm the company's doing elsewhere.
Who knows what the future holds, though? Increasing numbers of investors may realize this mind-set actually benefits the traditional bottom line -- even if it doesn't focus on it.
Motley Fool analyst Alyce Lomax owns shares of Whole Foods Market. The Motley Fool owns shares of Chipotle Mexican Grill, Wal-Mart Stores, Google, and Whole Foods Market.