Rise of the B Corps: Sustainability more important than short term profits for Australians
A recent report from KPMG shows that 91% of millennials and 92% of over-75s are now prepared to pay more for an ethically produced product, compared with just 40% before Covid-19.
The question is how do you tell genuine good practice apart from clever marketing? How do you weed out greenwashing?
This is where independent certifying bodies, such as B Lab come in. Let's learn more about the appeal of B Corps.
First, what is B Corp? It's more than GDP
A B Corp certification is a private certification administered by not-for-profit organisation B Lab. The certification is designed to thoroughly assess and mark businesses on their environmental, social and governance impact - factors that many of us are all increasingly aware of.
We spoke with B Lab's Australia, New Zealand chief executive and chief executives from B Corp certified businesses Sendle and Future Super to expand on this. We wanted to know how certifications like B Corp can hold private companies to account and accelerate the move to an economy based on more than GDP.
Short term profits, short-sighted
For a business to think only about short-term profits is in itself short-sighted, say B Lab chief executive Andrew Davies and Sendle chief executive James Chin Moody.
Davies says, "A business cannot provide long-term returns to shareholders without a lens on impact."
Chin Moody adds, "For me, businesses that are built in the long term are the ones that can align the positive social and environmental impact they want to have with their business model."
As an example of this, Chin Moody says that as a carbon neutral delivery service, Sendle is not exposed to a potential future price on carbon.
Davies adds that managing impact is a long term risk for any business. He says, "The evidence is increasingly pointing to the fact that purpose is a profit driver. Any business needs loyal customers and engaged employees. Certified B Corporations outperform on both these crucial measures."
The statistics hold up, too. In Ethisphere's 2021 Ethics Index it was found that the 'World's Most Ethical Companies' have outperformed comparable companies by 7.1 percentage points for the past five years.
Seeing the value in ethics
Businesses are seeing the correlation between good governance and better performance too. In 2020 alone, B Corp applications in Australia and New Zealand rose by 12%. A number of banks have even successfully achieved the B Corp certification in the past few years.
"The Royal Commission highlighted areas of poor performance in the sector, and many existing firms have looked to differentiate themselves. A certification is a great way to do that," Davies says.
Some B Corp certified banks in Australia and New Zealand include Beyond Bank, Bank Australia, BankVic, AWA Alliance Bank and The Co-Op Bank.
Future Super chief executive Simon Sheikh says, "Aussies are looking for ethical finance options at a time when governments around Australia and the world seem to be stalling on climate change." Sheikh adds that the devastating bushfire season drove people to Future Super, leading to the superannuation fund doubling its member base in the space of one year.
Passing on good business practices
The good doesn't stop there though, as more ethically-minded businesses also have the opportunity to pass on that good to their customers, members and investors. So, for instance, Chin Moody says Sendle's purpose is to help small businesses thrive by making carbon neutral parcel deliveries. He describes this as, "Shipping that's good for the world."
He adds that not only is being carbon neutral the right thing to do, but it also helps merchants who use Sendle sell more.
Chin Moody says that by reducing the carbon impact of the delivery, the distance takes on less of a meaning, giving small businesses or even people with side hustles access to bigger markets.
Future risk and better investment
On the flipside of that, businesses can in a way insure themselves against future risk by not investing in carbon-intensive industries. This includes the possibility of future stranded assets.
Sheikh from Future Super says, "We have zero exposure to fossil fuels, negative carbon footprints and direct our investments into clean energy projects."
Davies says, "Human nature can make change harder; overcoming the 'we've always done things this way' mentality is of course important. However, a business with a culture of constant improvement, an openness to new ideas, will do well."
Where does this leave us?
After looking at all the evidence, it's no wonder more and more businesses are looking to become B Corp certified. It would seem that not only are Aussies more interested in supporting more mindful businesses, but also that these types of companies have the potential to do well in the future.
Want to read more articles like this? Head to Mozo's life and money hub to read about everything from the carbon footprint of different payment types to how the Year of the Ox might impact your finances in 2021.