COVID-19 has been an unmitigated public health and economic tragedy for communities and businesses the world over – everyone, it seems, except for an elite group of executives whose net worth has collectively increased by over $1 trillion since the health crisis first engulfed Europe and North America this past March.
As a new analysis from the Institute for Policy Studies makes painfully clear, millions of essential workers at companies like Amazon, Walmart, and Tyson Foods have kept the American economy running at immense personal risk to themselves, but also to the immense benefit of their companies’ senior executives. CEOs at those firms have added tens of billions to their net worth, while failing to provide adequate personal protective equipment (PPE), sick leave, and safe workplaces.
While easy to pin blame on individual CEOs for neglecting workers’ needs, it is also important to remember these executives are acting according to the rules of our winner-take-all system of capitalism. A system that prioritizes corporate profits and shareholder value first and foremost, and answers to the needs of employees, customers, communities, and the environment only so far as the law requires – which, of course, incentivizes corporations to invest heavily in shaping those laws, even at a moment of deep crisis for the economy as a whole.
Fortunately, a select group of businesses are challenging this system. Through initiatives such as B Corporation, these companies are actively reshaping themselves as responsible actors, focusing on people and the planet alongside profits since well before COVID-19.
A different sense of corporate purpose
It is important to remember many companies are responding to this crisis in a way that contrasts sharply with the cliché of corporate greed, even as the millennial and Gen Z generations lose faith in the capitalist system entirely. As Harvard Business School’s George Serafeim puts it, these companies have moved beyond the “compliance” stage of corporate social responsibility – in which they are simply focused on obeying laws – and the “efficiency” stage – in which they prioritize cutting costs and managing risks – to an “innovation” stage, where they are equipped for systems-level thinking that unlocks new markets and solutions.
In seeking to establish what Serafeim calls “corporate purpose,” many of these companies have sought to define themselves as B Corporations, voluntarily embracing high standards of conduct towards employees, local communities, and the environment set by the non-profit B Lab. Nor is B Corp the only initiative seeking to inculcate good corporate citizenship. In line with a call by Pope Francis for “inclusive capitalism,” the Council for Inclusive Capitalism has secured commitments on climate stewardship, community investment, and employee wellbeing from global firms such as Dupont, Johnson & Johnson, and Merck.
Precisely because these certifications are so rigorous, many major multinationals are reticent to seek them out. As a result, the vast majority of companies certified by B Corp are smaller, more locally oriented businesses. A few major CEOs, however, have embraced the challenge of convincing reluctant board members and investors to undertake the rethink of organizational priorities that certifications like B Corp entail, with the most prominent example being the French food and beverage giant Danone under CEO Emmanuel Faber.
Danone and the perils of being a pioneer
Since 2015, when Danone first began turning itself into a B Corporation under Faber, the company’s initiatives have faced resistance from executives who think them too disruptive and investors who fear Danone is “distracting itself from more profitable business.” In favor, however, were many of Danone’s 100,000 employees, who responded enthusiastically to the CEO’s invitation to take a more active role in the direction of the company and who has been the driving force in realizing its B Corp aspirations.
Helped by that groundswell of support, Danone’s $6 billion North American division became the largest B Corp in the world in 2018. This past June, Emmanuel Faber convinced 99% of Danone’s shareholders to vote in favor of adopting a new legal status of entreprise à mission or “purpose-driven company,” defined by French law as requiring Danone to both generate profits and benefit consumer health and the environment.
Unfortunately, being “purpose-driven” does not make Danone immune to the economic impacts of COVID-19. Faber’s announcement that the company will have to cut 2,000 jobs worldwide has offered critics of his focus on B Corp certification an opportunity to question his strategy. However, in response to that criticism, Danone’s CEO has made it clear the company will be staying the course.
The exception needs to become the rule
In advocating vocally for this brand of capitalism, Danone may actually be allowing other multinationals to undertake the same shift with less public pushback. Danone’s competitor Unilever, for example, has its own B Corp-certified brands, including the famously activist Ben & Jerry’s ice cream. While Ben & Jerry’s established its “social mission” in the late 1980s, it only became a B Corp in 2012, after Unilever bought the company.
The most prominent multinational B Corp of all is likely Patagonia, which secured the certification in 2012 and was named a “Champion of the Earth” by the UN in 2019. That award is partly a result of the voluntary “earth tax” Patagonia has imposed on itself, through which it donates 1% of all profits to environmental groups. Since the 1980s, those donations have added up to over $100 million.
While initiatives like B Corp set important standards, the principles and commitments underlying them ultimately matter more than any individual certification itself. Restoring public faith in capitalism will require corporations to become better actors, prioritizing sustainability and shifting their relationships with the communities driving their profits to one of compassion and empathy. While COVID-19 makes this transition seem even more daunting, it is also an opportunity for companies and executives to demonstrate a level of leadership that will define their public reputations for years to come; now more than ever, good corporate citizenship needs to become the norm rather than the exception.