By Thomas Kostigen
Investors are looking at new matrixes for performance—and B Corporations may have what they are looking for.
There is a movement afoot to look beyond even the environmental, social, and governance (ESG) attributes of a company to discover better corporate behavior.
“To call a company just, it is essential to understand the company’s fundamental business, and the effects of that business on the world,” Fortune magazine wrote last week in an article. “Fortunately, there are better methods for assessing corporate accountability. The model spearheaded by the American nonprofit B Lab, for example, includes a rigorous evaluation of stakeholder orientation—the B Impact Assessment—that comprehensively assesses companies’ impact on the world, including effects of its business model.”
In short, Fortune — rightly so— says that a company’s overarching behavior needs to be evaluated in order to refine exactly what constitutes “good” performance, both quantitatively and qualitatively.
For example, if a tech company checks all the boxes on the ESG checklist, but uses its influence to dominate an industry and disenfranchise smaller business competitors through unfair trade practices, should it not be held to account on those measures, too?
“B Corporations can’t greenwash because they are legally obliged to put stakeholder principles at their core. The B Impact Assessment is designed by an independent committee of international experts and focused on facts and data, not PR and selective self-reporting. B Corps aim to provide social and environmental impact, not just deliver profits to investors,” Fortune writes.
Still, B Corps deliver profits, too.
According to the Yale Center for Business and the Environment certified B Corps demonstrated a greater revenue growth rate than public firms of comparable size, including—perhaps especially—during market downturns. It’s believed that through emphasizing and managing external impacts, a B Corp has a greater handle on risk factors and can better navigate challenging business environments.
“Through greater appreciation of the real motives that drive and excite people, B Corporations provide a significant new opportunity for investors. I think they could make more profits than any other types of companies,” says Robert Shiller, Sterling Professor of Economics at Yale and 2013 Nobel laureate.
An anecdotal review of B Corps’ performance shows they have an exceedingly good chance of being acquired by larger companies at a premium—and continuing growth. Ben & Jerry’s was acquired by Unilever 20 years ago and is now the leading ice cream brand in the United States with revenue topping $6 billion. Sundial, the beauty brand, was also sold to Unilever (in 2017 for $1.6 billion) and has shown growth, as has New Chapter, the vitamin company that sold (in 2012) to Procter & Gamble. Meanwhile, stand-alone public companies such as Laureate Education trade mixed. Laureate’s stock price has swung between 7.30 and 21.66 during its 52-week range. Other individual B Corps stock prices have, of course, moved sporadically due to market conditions, as well.
A financial advisor can conduct a proper—and professional—peer group analysis of B Corps to determine if any are a fit for your portfolio. As more analysts and observers began to investigate the promises of B Corps, expect more companies to adopt and/or promote their B Corp shares. There’s investor appetite for them.
Thomas Kostigen is a contributing writer to MyPerfectFinancialAdvisor, the premier matchmaker between investors and advisors. Thomas is a best-selling author and longtime journalist who writes about environmental, social, and governance issues.