Capitalism Sapiens

In ‘Leviathan(1651), Thomas Hobbes, an English philosopher, declared that ‘no man giveth but with intention of good to himself; because gift is voluntary; and of all voluntary acts the object to every man is his own pleasure.’ There is no such thing as a good deed.

Even if it existed, none would be required to embrace stakeholderism through a B-Corp certification. Think of it as a ‘sustainable equity’ designation.

To qualify, a corporate must explicitly expand the scope of its fiduciary duties to all stakeholders. In 37 U.S. States, this can be formalized via incorporation as a Benefit Corporation. In addition, the corporate must meet stringent ESG criteria. Finally, it must disclose its score on the B-corp website to exhibit transparency.

The B-Corp movement is growing fast. Soon, established, large-cap companies will frequently deal with B-Corps suppliers, customers, and even competitors. They may contemplate the acquisition of B-Corps. They could seek the B-Corp accreditation for a subsidiary, like, as recently as this month, an espresso capsules manufacturer. And why not for the multi-billion group itself via the B Movement Builders program?

Any company can take a free B-impact assessment to determine how it scores against best-in-class practices. Achieving the certification does not need to be the prime objective. The process could be used as a management tool to build ESG consciousness, identify blind spots, and improve a sustainability profile over time. One hundred thousand firms globally seek to embed the highest quality standards into their business system using this technology.

The scope, subjectivity, and interpretability of B-Corps certification have been criticized. The most incisive rebuke relies upon the argument that B-Lab creates a dichotomy between B-Corps and ‘regular’ corporations by devilizing the latter, unfairly portraying them as entities single-mindedly focused on stakeholders. I found nothing that invalidates the idea that the B-Corp movement helps plan a journey towards more sustainable business models.

What about value creation? The sustainability of a company’s performance is best considered when making long-term financial assumptions to feed a discounted cash flow analysis.

Incremental expenses and capital expenditures towards an improved ESG profile would support a superior brand driving pricing power, gains in market share, higher productivity through employee engagement and talent acquisition, and supply chain resilience through crises. The perpetuity growth rate in the terminal value could be justifiably raised while the required return on capital would be revised down. Who said ESG is a value-destructive proposition?

There is no such thing as a good deed indeed. None is required to evolve into a sapient form of capitalism. The B-Corps movement deserves everyone’s attention.

Selected readings:

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