In an era when ethical and environmental considerations influence a majority of shoppers and investors, building a brand with a sustainable, impactful ethos is a key factor in ensuring a brand’s success.
Earth Day represents an opportunity for CMOs to think about ways they can make sustainability a core part of their strategy and, in doing so, both protect the environment and tap into the growing demand for sustainable products and services. A new type of corporation—the benefit corporation—can help companies to achieve these goals.
The benefit corporation model requires companies to create a “material positive impact on society and the environment,” and provides the legal freedom to help businesses do so. Method, Plum Organics, and Patagonia are all examples of successful American benefit corporations.
So-called “B Corps” can help CMOs and other business leaders think through how to ingrain sustainable practices into their business model. It can also provide a powerful tool to communicate a company’s values both to customers and investors. For example, Etsy’s focus on social responsibility and its B Corp status were a central theme in the press coverage of the company’s recent IPO.
Benefit corporation status can attract customers and impact internal culture, recruiting, and retention. A 2012 Nielsen survey revealed that two-thirds of consumers around the world say they prefer to buy products and services from companies that have implemented programs to give back to society. The survey also revealed that people prefer to work for socially responsible companies (62%) and also invest in these companies (59%).
The Millennial generation (born between 1976 and 2001), in particular, identifies with brands that have a positive impact on the world, studies show—an important point for companies concerned with attracting a new generation of customers and brand devotees. By 2025, it is estimated that Millennials will make up 75% of the American workforce.
What The Model Entails
Benefit corporations are unique because they balance shareholder profits with social responsibility. They must meet higher standards of corporate purpose, accountability, and transparency than a regular corporation, in addition to meeting their states’ traditional law and tax obligations.
The ability of benefit corporations to combine individual profits with public benefits is a model that is gaining in popularity. The total number of B Corps nationwide is approaching 2,000, up from roughly 500 in 2012. Twenty-nine states have passed laws to pave the way for benefit corporations, and we expect more states to pass laws this year. To date, according to MIT Sloan’s latest “Sustainability and Innovation Report,” the number of companies that have adopted sustainability as a key item on their management agendas jumped from 46% in 2010 to 65% in 2014, and the number is set to increase further in 2015.
Any type of company in any industry can adopt these higher standards, even if it is not a state-recognized benefit corporation. Several nonprofit organizations provide separate or additional certification for companies looking to cement their sustainable credentials without having to officially incorporate or reincorporate. B Lab, for example, is the largest nonprofit to offer free B Corp certification, and has so far certified more than 1,200 companies across the United States, including Etsy.
The ways in which benefit corporations address environmental issues vary from business to business and depend on the company’s mission. Several benefit corporations are carbon-neutral, for example. Some focus on planting trees, while others focus on recycling or leveraging renewable energy resources.
Data from B Lab’s Impact Assessment Tool reveals that B Corps that identify reducing or offsetting emissions as a core business model last year saved or offset a total of 17,626,084 metric tons of CO2, and B Corps that identify reducing landfill waste as a core business model diverted 828,362 metric tons of waste.
The bottom line? These entities are having a positive impact on the environment.
Making Benefit Corporation Status A Priority
The theme of this year’s Earth Day—“It’s Our Turn to Lead”— underscores the power businesses have to impact environmental change if they choose to, and plenty of indications show they are doing exactly that.
A growing number of studies show that consumers and businesses are making sustainability a priority; these provide proof points for CMOs who want their companies to embrace sustainability, and underscore that sustainability is no fleeting trend.
Benefit corporations are an increasingly attractive option for companies that want to make social responsibility a core business value while, at the same time, differentiate their brands and products in the marketplace.