What’s your bottom line?

Two weeks ago, something quite interesting happened in corporate America.

B Corp, a group of around 30 CEOs from leading US and international corporations (including Ben & Jerry’s, Danone and Patagonia) took out a full page ad in the New York Times, urging their peers to commit to a more ethical way of doing business.

The ad was in the form of an open letter from the group to members of the influential Business Round Table, which is made up of 181 of the most prominent CEOs in America, including Amazon’s Jeff Bezos and Apple’s Tim Cook.

B Corp describes itself as ‘a fair trade label for companies – a global movement of people using business as a force for good’.

Their underlying idea is to shift from a culture that prioritises shareholder profits above everything else, to one where employees and the environment get equal billing: a ‘triple bottom line’.

B Corp argues that this encourages longer term thinking. Which, as well as making for fairer and more socially-useful businesses, ultimately delivers more sustainable long-term value to shareholders.

It’s hardly a new idea. In fact, just a week earlier, the Round Table had issued its own statement, re-defining the ‘purpose of a corporation’ to give equal weight to social and environmental interests. In other words, the same triple bottom line.

Jamie Dimon, the CEO of JP Morgan and the Round Table’s Chairman, said he hoped the statement would ‘help to set a new standard for corporate leadership.’

So why did B Corp feel the need to press for a firmer commitment?

Perhaps because the Round Table hasn’t always been consistent in its thinking.

Through the 1980s and early 1990s, when the US economy was booming, they promoted a similarly inclusive definition of a corporation’s purpose.

But, in 1997, when the global economy started to look a little more challenging, they rowed back on this progressive thinking and defined corporate purpose in much narrower, shareholder-first terms – and that’s where they’ve stayed ever since, until last month’s statement.

Which is why the B Corp open letter is so interesting.

They’re essentially challenging America’s biggest businesses to put their money where their mouth is.

Don’t just talk about a better model of business, they’re saying.

Commit to it.

Sign up.

Become a B Corp member.

It’s an interesting challenge because, if you do sign up, you’re changing the way decisions are made in your business.

For instance, using tricky loopholes to get round inconvenient tax rules (good for shareholder returns) would no longer be something you could justify (bad for the wider community).

And what happens when the global economy goes through another downturn – as economic indicators seem to suggest may happen soon?

Will your shareholders accept lower profits and smaller dividends, while you reinvest to protect your workforce and make your business more sustainable in the long term?

Or will they fire you?

As Bill Bernbach used to say, a principle isn’t a principle until it costs you money.

Let’s see if the Business Round Table are really willing to live up to the bold words in their statement.

 

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