Like lighthouses to lost ships — why good governance illuminates the path for purpose-driven business

Originally published at: Like lighthouses to lost ships — why good governance illuminates the path for purpose-driven business - B Lab Australia & New Zealand

In 1970, the New York Times published economist Milton Friedman’s essay titled: ‘The Social Responsibility of Business is to Increase its Profits’. It was polarising at the time, but in it he argues that, above all else, a company’s primary goal should be to maximise profits and shareholder value. Basically, ‘make as much money as possible’ without the need to trouble yourself with considering the broader impact of your business.

Half a century later, and there are 5,500+ businesses in the B Corp community, using the power of business to do far more.

You needn’t look far to see that the legacy of shareholder primacy and prioritising profits over all else is one of inequality, injustice, destruction, and fragmentation. And for a time, ‘profit’ had become synonymous with exploitation (at whose expense?). 

Gradually, we are seeing that generating profits isn’t all bad, and in fact, can be a key driver of positive social and environmental change. With that in mind, the B Corp movement was founded on the idea of stakeholder governance — a model that not only prioritises all stakeholders but that creates value and is valued by those same stakeholders over time.

With purpose at the centre, this model works to generate a ‘durable profitability’ that doesn’t cost people or the planet, and is instead designed to create a more prosperous, inclusive and equitable economy for all using the power of market forces.

Aiming to shift the scales of power and privilege, while still maintaining profit as a key enabler of change, Governance is one of B Lab’s five core impact areas and a cornerstone of the movement.

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The dawn of a new era of stakeholder governance

Referring to the system by which an organisation is controlled and operates, and the mechanisms or ‘rules’ by which it, and its people, are held to account, ‘governance’ encompasses everything from ethics to risk management frameworks to compliance and administration processes.

Alongside the other four impact areas on which B Corps are measured — Workers, Community, Environment, and Customers — while Governance might not sound the flashiest, in many ways, it might just be the unsung hero of purpose-driven business. 

Join us in taking a closer look at some of the movement’s top-scoring B Corps’ in the Governance impact area in our region and learn more about how they embed good business into their companies’ DNA.

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The unsung hero of the purpose-driven business movement

The Governance impact area evaluates a company’s overall mission, ethics, accountability, and transparency through topics such as integration of social and environmental goals in employees’ performance evaluation, impact reporting and transparency, stakeholder engagement, and more. 

In practice, that looks like measures such as:

  • Establishing a Board of Directors to improve a company’s accountability, credibility and strategic management; 
  • Carrying out regular independent reporting to monitor and improve impact; and 
  • Making information about a company and its performance publicly and freely available.

These are all recognised as markers of ‘doing good business’ in the B Impact Assessment (BIA) for their ability to positively contribute to a company’s social and environmental impact.

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Unpacking the ‘B Impact Score’ — what it is and why it matters

Mission locked and loaded

We have established that stakeholder governance is a fundamental part of being a B Corp; a commitment to operating a business with purpose at the centre and a focus on all stakeholders. And ever since 2012, B Lab has been exploring formal ways to embed stakeholder governance in businesses across the region.

Now, in order to certify as a B Corp, companies in Australia and Aotearoa New Zealand must meet the B Corp legal requirement, also known as the ‘Mission Locked’ Impact Business Model under the BIA. 

The ‘Mission Locked’ legal requirement is a commitment to consider the impact of decisions on all stakeholders — employees, customers, suppliers, the community, and the environment — in all that you do. 

By implementing the B Corp legal requirement, a company protects and codifies its social purpose alongside its commitment to profit, and against leadership changes, capital raises, or turbulent times. 

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No business without purpose

In our region, there are two clauses that a business must include in their Company Constitution in order to achieve and retain certification: a purpose statement and a stakeholder clause. 

These two clauses embed and formalise that a company’s greater purpose is explicitly taken into account in their formal decision-making processes, ensuring that they pursue positive social, ethical and/or environmental objectives at every turn. It also signals to all stakeholders (e.g. investors, shareholders, employees and directors) that there is no business without purpose and that they are willing to be held publicly accountable for it. 

Examples of how a company might devise their governance policies include:

  • How do you engage your stakeholders in your mission?
  • What ethics, policies and practices do you follow in service of your mission? 
  • What company information do you make publicly available for all stakeholders to access?

These types of questions help to evaluate the role of positive social and environmental impact within a company’s policies and practices. It ensures that a company’s purpose statement and stakeholder clause are more than posters on an office wall, but that they are the fundamental basis for managing, growing and governing the business and its operations. 

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How to meet the B Corporation legal requirement — Australia & Aotearoa New Zealand

The benefits of good stakeholder governance 

We know that workers are craving more purpose, flexibility, balance, and support in their jobs than ever before. We also know that consumers are putting enormous pressure on businesses to do and be better, demanding more from businesses they support, work for and invest in than ever before. And we know that businesses are using their power to address some of the world’s most critical issues, and doing it to great effect. 

But, how do they ensure that they continue to create and push for this positive impact, even during turbulent times? You guessed it: good stakeholder governance. 

“The steady application of good corporate governance policies and principles, among other things, intends to create a healthy, compliant, transparent, and accountable culture that is continuously reviewed and improved. This is a cornerstone for success, that enables the creation of opportunities for growth and a competitive advantage.”

CURA

Businesses now are expected to make transparency and accountability their ‘MO’, as well as refocusing their attention on long-term, ethical value creation for all stakeholders. 

More and more, a business’ long-term viability rests on its ability to meet the expectations of this growing cultural shift towards people, planet, and communities in practice. 

“Make no mistake, the fair pursuit of profit is still what animates markets; and long-term profitability is the measure by which markets will ultimately determine your company’s success. But putting your company’s purpose at the foundation of your relations with your stakeholders is critical to long-term success.”

Larry Fink, Chairperson and CEO of BlackRock, Inc.

B Corps enshrining impact through governance

Good governance practices and a robust mission make a significant difference to how people perceive companies from the get-go. For B Corps like AssuranceLab, they have been committed to and motivated by positive impact since the company’s inception. 

Building an information security and auditing practice from the ground up, AssuranceLab’s three Co-founders enshrine positive impact based on shared principles, ethics and values, and a commitment to measuring success beyond financial and growth metrics, for all stakeholders. Recognising that “positive impact and company success in other areas are not mutually exclusive, but complementary,” has been imperative for this new B Corp in living out its purpose to create a new and better way to do audits. 

Image: AssuranceLab

Another top-scoring B Corp in this area, Good Environmental Choice Australia (GECA), views its governance structures as their ‘North Star’, guiding their values of integrity, independence and impact. GECA’s commitment to stakeholder engagement, trust, and transparency translates across its entire supply chain, from growers and manufacturers to retailers, procurement professionals, community groups, government agencies, and individuals. 

“There’s never been a more crucial time for organisations to step up and embrace supply chain transparency. Invest in quality relationships across your whole supply chain by infusing your relationships with authentic dialogue, mutual respect and a spirit of inclusion.”

GECA

Then there’s B Corp Seated Massage who goes to great lengths to be as transparent as possible, both publicly facing and directly with clients and employees. They believe that every touchpoint must reflect the ‘good’ they are striving to do both in and for the world. Placing great value and importance on their Code of Ethics, purpose, social impact, carbon offsetting, and reduction, Seated Massage is ultimately able to provide meaningful work to more people. 

Image: Seated Massage

A round of applause for the Best for the World 2022: Governance

Representing the top five per cent of scores in overall mission, ethics, accountability, and transparency worldwide, this list of 13 B Corps from Australia and Aotearoa New Zealand build their vision and values into their DNA, and embody exactly what it means to use business as a force for good.

23 Degrees Coffee Roasters | Governance impact area: 22.4 | B Impact Score: 112.7

A wholesale specialty coffee roaster, 23 Degrees challenges themselves daily to find new and more meaningful ways of doing business. Their Impact, Environmental, Customer Protection, and other corporate policies are publicly available on their website. They are passionate about building a more equitable and sustainable coffee supply chain, and they put this into practice by sourcing at least 50 per cent of their coffee beans from woman-owned coffee growing businesses. 

AssuranceLab | Governance impact area: 22.3 | B Impact Score: 89

Audits build trust, and that trust is critical to company success. But AssuranceLab often sees these benefits being hindered or obscured by the burden of legacy audit practices. Helping businesses to reach new opportunities and grow internationally by meeting regulatory requirements and providing assurance services, they aim to democratise knowledge for the benefit of everyone. 

Anywise Consulting | Governance impact area: 20.3 | B Impact Score: 102.6

Born from a dissatisfaction with how multinational companies operated, Anywise Consulting goes after challenging projects that deliver rewarding work. Their culture rests on a commitment to ethical transparency — investing in their people and supporting causes that align with the passions of their employees.

Athena Financial | Governance impact area: 19.7 | B Impact Score: 91.1

Athena Financial was established to lighten the load for property owners by radically changing the mortgage game. Their mission is to help clients get a great home loan, and to help them to get rid of it as quickly and painlessly as possible. As a result, they help Aussies to take control of their financial lives and rewrite their future stories — because they believe that life’s too short for a long home loan.   

Australian Ethical Investment | Governance impact area: 19.7 | B Impact Score: 156.4

Australian Ethical Investment only invests in a way that creates financial security for clients and positive change for society and the environment. Their investments are aligned to global trends and growth industries such as addressing climate change and social connectivity through technology and public health. By investing in renewables and energy efficiency, healthcare and medical breakthroughs, and sustainability solutions, Australian Ethical is ensuring that their clients money is used as a force for good.

Image: Australian Ethical

Australian Mutual Bank | Governance impact area: 22.5 | B Impact Score: 90.9

Australian Mutual Bank was established in 1953, and since then, their purpose has been to provide Australians with ethical financial services through quality banking, loans and investments that align with their members’ values. Recognising that good governance is essential to fairness and transparency in the financial industry, they created a Governance and Risk Framework to ensure that the bank is controlled and managed in a sound and responsible manner by an elected Board of Directors. 

AWA Alliance Bank | Governance impact area: 21.8 | B Impact Score: 104.6

AWA Alliance Bank is a member-owned bank that channels its profits back to clients by providing lower loan interest rates and competitive rates on deposits. With their members front of mind in everything they do, AWA’s purpose is to significantly contribute to an improved and sustainable future for members and local communities by empowering them to improve their financial wellbeing. 

Good Environmental Choice Australia | Governance impact area: 21.7 | B Impact Score: 87.3

GECA is an independent, multi-sector eco-labelling program and advisory. Achieving its mission of driving sustainable consumption and production, they certify products with a low environmental impact that are better for human health in industries such as building and interior design, cleaning and personal care, and recycled products.

Intrepid Travel | Governance impact area: 21 | B Impact Score: 91.2

Intrepid Travel creates positive change through the joy of travel by curating experiences that benefit people and the planet. Their focus is on creating sustainable, experience-rich travel opportunities for people, following the mantra of ‘think globally, act locally, and engage personally.’ They understand the great responsibility that comes with travel, and are committed to not just treading lightly on the earth, but to incorporating sustainable travel and development into their operations. 

Image by Shaun Busuttil (Intrepid: Nepal Annapurna Basecamp)

Moodle | Governance impact area: 19.8 | B Impact Score: 81.6

Moodle is a customisable and trusted eLearning solution that empowers educators to improve our world. They believe that free and open access to education technology is fundamental to creating a more equitable world where everyone can pursue a quality education. Offering an open source, free learning management system, Moodle unites a community of developers, system administrators, educators, and learners. 

Seated Massage | Governance impact area: 21.9 | B Impact Score: 93

Seated Massage connects Australia’s brightest corporate massage practitioners with businesses of all shapes and sizes to put workplace wellbeing in the spotlight. Promoting positive workplace cultures, and showing what it means to be a business that puts people above profit, their mission is to inspire organisations to invest in the wellbeing of their people and facilitate positive social connection through office massages. 

SilverChef | Governance impact area: 21.3 | B Impact Score: 86.8

SilverChef provides flexible equipment finance for hospitality businesses, helping hospitality entrepreneurs to start or grow the business of their dreams. They have helped more than 50,000 hospitality businesses to achieve their goals across Australia, Aotearoa New Zealand and Canada, and their Rent-Try-BuyTM program enables customers to rent hospitality equipment before purchasing, to ensure it meets their needs (and their wallets).

Tax Traders | Governance impact area: 20.4 | B Impact Score: 85.8

Tax Traders provides businesses with a better way to pay their tax by unlocking flexibility, new sources of funding, smart technology tax tools, and software solutions. They are inspired by a vision to see businesses flourish, grow and contribute well to the social fabric of Aotearoa New Zealand.

We’re so proud of the 13 B Corps from our region who have been recognised as Best for the World 2022 for their stakeholder governance practices, leading the way and showing that all stakeholders can, and should, be a priority. 

Image by Olga_Gavrilova from Getty Images

Looking to improve your governance?

By enabling companies to take a more holistic approach to their overall social/environmental impact, ethics, and transparency, governance structures are like lighthouses to lost ships — leading a business where it needs to go and shining a light on what matters; simultaneously illuminates the path forward and keeps them accountable for every business decision made.   

So, we couldn’t let our top scorers go without offering up some advice for businesses and B Corps looking to improve their governance practices. Here is what the folks at Seated Massage had to say: 

“Start with a public facing code of ethics. Ask yourselves, ‘why are we in business?’ This will be the driver for your decision-making for your business and people.”

— Seated Massage


Want to learn more and get inspired by this year’s top-scoring B Corps? You can now search the B Corp Directory by Best for the World! 

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