Why Become a Benefit Corporation: The Revealing Business Case
“Companies need to do more than make a profit. They need to contribute to society as well if they want to receive the support and backing of BlackRock.”
- Larry Fink, Founder & CEO, BlackRock
Certification as a Benefit Corporation business is what Fair Trade certification is to coffee or USDA Organic certification is to milk or LEEDs certification is to buildings. Benefit Companies and Benefit Corporations are for-profit companies certified around standards of social and environmental performance, accountability, and transparency. In an era of ‘greenwashing’ and misleading labels, Certified Benefit Corporations help consumers and prospective employees identify values-driven companies they can trust and rely on.
How Certified Benefit Corporations Succeed
In poring over research, we have discovered 6 key ways becoming and certifying as a benefit corporation helps enhance the viability and credibility of a business.
The ability to create relationships with customers around similar values e.g. sustainability, social justice or healthy communities. This provides a foundation of trust and leads to sales. 68 percent of global consumers would remain loyal to a brand if the organization practiced social responsibility. The key is to be authentic with messaging and branding.
A company that truly is socially and environmentally responsible gains an edge in recruitment and retention. Living the principles of the Triple Bottom Line of People, Planet, Profit enhances morale. Millennials, who are aligned with these values, want to work for these companies. It gives them a sense of purpose, pride and camaraderie.
Social and environmental responsibility leads to more credibility and differentiates the company. For many midsize and smaller companies, it is hard to create unique branding that provides a competitive edge. Identifying as a certified Benefit Corporation committed to the Triple Bottom Line of People, Planet and Profit is a powerful message that resonates with today’s demanding consumers and makes the company stand out.
Investors are increasingly looking for social and environmental responsibility within a business’s core mission. Many potential and current shareholders view efforts around social good, e.g. sustainability, as a sign of company health and future profitability. In fact, once a startup goes public, social responsibility initiatives can improve the company’s stock price by getting listed in indices like FTSE4Good and Dow Jones Sustainability.
Enhance brand equity. Differentiating your company, not just its products, through third party validation demonstrates your company has met higher performance and legal standards. The clearest differentiation – and most sustainable competitive advantage – against larger competitors with bigger marketing budgets, is your company, not your products. Certification also helps generate positive press and add value in a potential capital raising or sale by mitigating brand risk.
Maintain mission in up and down markets, now and post-succession. As a Benefit Corporation, founders and other mission-driven minority shareholders can hold directors accountable to consider the impact of operating and liquidity decisions not only on shareholders, but on all stakeholders.
The Data Reveals the Difference
Looking at some metrics reveal an even stronger case for becoming a benefit corporation.
Brand Rank Evaluation of a company’s brand score (strength, reach, growth, and intensity) is higher relative to other companies in the same industry. The average brand rank across consumer companies is 5, but 75% of benefit companies scored a 9 or 10 on brand rank.
Sales Momentum Data from Nielsen analyzed the monthly sales of B Corps and found that sales over the past 5 years saw 49% growth in sales, compared to 15% of the category cohort – 3X the sales!
Consumer Preference Multiple studies on consumer purchasing reveal that 68% of consumers are willing to buy services and products from companies who state they are cause-driven and are authentic about this claim via certification.
To learn more about how to become a certified Benefit Corporation for Good, read our blog post on the 6 simple steps you take to be a business committed to the Triple Bottom Line.