The Paradox of Growing as a Values-Driven Company

When it comes to sustainability, many business leaders are increasingly recognizing that incremental change just won’t cut it. Instead, innovators around the world have begun attempting to create organizations and offer products built on entirely new value systems, explicitly prioritizing social responsibility over profits. Researchers call these movements market alternatives: products and organizational structures such as microbreweries, organic farms, fair-trade certified distributors, low-power radio stations, and other initiatives that are intentionally socially motivated. Unfortunately, while some of these alternatives manage to create lucrative market niches, they almost always face a catch-22 as they grow: to maximize impact, their leaders generally want to expand and include as many other organizations in their movement as possible — but to remain authentic to their core values and avoid becoming coopted and diluted, it’s often necessary to exclude larger incumbents. As a result, market alternatives often end up failing to effectively strike this balance, thus limiting their effectiveness and potential for social impact. For example, as the organic and fair-trade certification movements expanded in the ‘90s and ‘00s respectively to include multinational corporations like Nestle and Starbucks, they began to lose their progressive edge, becoming coopted by conventional producers as yet another a marketing tool. As a result, even socially or environmentally conscious consumers now often struggle to distinguish market alternatives from mass-produced products, leading the original producers of these market alternatives to lose control over their niche and, potentially, their competitive advantage in the long run. On the flip side, other market alternatives adamantly remain true to their original values by successfully excluding incumbents, but this can cause these alternatives to remain marginalized, thus limiting their long-term impact. For example, while the initial microbrewery movement and low-power radio stations largely staved off intrusion by corporate producers, they were also confined to relatively small niches that offered limited growth potential. So, what does it take to ensure a movement stays true to its values while still allowing it room to grow and expand its impact? How the B Corp Movement Did It To explore this question, we conducted a comprehensive analysis of one of the few movements that has managed to strike this balance: the B Corp movement. Launched in 2007 by the nonprofit B Lab, this certification system provides third-party authentication of a business’s social and environmental performance. Applying businesses can become a B Corp if their performance on five dimensions — governance, workers, community, the environment, and customers — exceeds a certain threshold and they adopt a legal structure that mandates stakeholder considerations, such as the Benefit Corporation form. The B Corp movement has achieved explosive growth since, with a total of nearly 8,000 participating companies across 160 industries in 93 countries, all while successfully maintaining its socially conscious values. Through a qualitative analysis of nearly 1,000 official documents, blog posts, news articles, and books published from 2007 to 2019 as well as quantitative analysis of industry contexts that encourage B Corp emergence, we identified two key factors driving B Lab’s success. First, we found that the B Corp movement is composed of members with two distinct motives: some joined the movement to transform capitalism against profit-maximizing corporations, thus placing an emphasis on the movement’s rapid expansion, while others chose to become certified to prove their authenticity as a responsible business, and thus emphasized keeping the movement close to its original mission. Second, because of these heterogeneous views, the B Corp movement has taken a distinctive approach of pursuing both expansion and purity. Rather than focusing solely on either, the movement has instead viewed the two as a paradox — contradictory, but mutually constitutive priorities. Like yin and yang, the B Corp movement regards expansion and purity as opposing forces, but at the same time, as indispensable halves that constitute the whole. How did this unique view lead the movement to grow and scale without diluting its rigorous, values-focused identity? Our research points to three critical strategies that have underpinned B Lab’s approach to navigating this tension. Relax Yet Strengthen Standards The first important balance that the B Corp movement has consistently struck is with respect to the rigor and practicality of its certification standards. Whether implicitly or explicitly, all market alternatives involve some form of standards that distinguish their alternative offerings from conventional ones. Expansion-focused market alternatives typically dilute their standards over time, while purity-focused movements tend to keep their standards strong, ensuring high barriers to entry. However, the B Corp movement has oscillated between these two approaches. In some cases, it has relaxed its standards, enabling large, multinational firms to participate. For example, amending its rule for certification, B Lab permitted subsidiaries of multinational firms to be individually certified even when their parent company is not a B Corp. In other cases, it has introduced new requirements, such as reporting supply chain impacts and political contributions, to enhance the rigor with which multinational corporations’ social and environmental performance is evaluated. As a result of this strategy, for example, 74.2% of multinational food producer Danone’s global sales is covered by entities that are certified as B Corps, as of February 2024. In addition, multinational consumer goods company Unilever’s entire Australia and New Zealand operation was certified as a B Corp in 2022, along with several other subsidiaries around the world. B Lab has made no secret of this mixed approach. Its 2018 report, titled “Recommendations on B Corp Certification for Large Multinationals,” states that while B Lab recognized “the involvement of multinationals in the B Corp movement…may be controversial,” its goal has been to ensure that new standards and requirements for multinationals “do not dilute the rigor of the B Corp Certification.” This challenge was aptly summarized in a B Lab case study as striking a “balance between standards and flexibility.” This back-and-forth approach to redesigning its certification standards over time has enabled the movement to bring in numerous subsidiaries of multinational companies and thus significantly expand its reach, while still ensuring its values were not compromised. Mandate Yet Ease Identity Transitions Market alternatives aren’t just about technical adherence to a set of standards. They’re also about taking on a new, shared identity. However, as they expand, many growth-oriented market alternatives tend to loosen or lose the movement’s identity altogether as a requirement. For example, a case study of California Certified Organic Farmers reveals that although this movement began with small growers who were committed to ecologically-friendly agriculture, as it grew, the certifying organization allowed large agricultural businesses that didn’t necessarily share these alternative values to participate. This eventually crowded out original members, and the organic farming certification was no longer associated with the identity of an organic farmer. Conversely, purity-oriented market alternatives often tighten the coupling of alternative products and an alternative identity. An historical case study of the microbrewery movement shows that to enforce the mandate that “real” craft beers must be produced by a microbrewery, early networks of microbrewers ridiculed, boycotted, and sanctioned small-batch beers manufactured by industrial brewers as inauthentic and deceptive. In 2015, one man even filed a lawsuit against MillerCoors over Blue Moon’s “craft” designation. B Lab walks this tightrope by insisting that participants must embrace the B Corp identity, but also taking steps to make it as easy as possible for larger corporations to make this transition. Specifically, to fully embrace the B Corp identity and gain certification, organizations must adopt the Benefit Corporation legal form where available or an equivalent locally available alternative in other jurisdictions. While persisting with this strict identity requirement, B Lab also lobbies with regulators and investors to improve their perception of this alternative identity, which can be seen as a risky, new asset class. For example, thanks to these efforts, the Department of Labor instituted new ERISA guidelines in 2015 that permitted pension funds to invest in Benefit Corporations. By publicly demonstrating that adopting the new identity is safe and profitable, B Lab has been making it easier for incumbents to fully take on the alternative identity. Blur Yet Fortify Movement Boundaries Just as with its standards and identity, the B Corp movement also strikes a balance between blurring and fortifying its boundaries by creating multiple barriers to full entry. Expansion-focused market alternatives tend to make the boundaries of their movements more porous, which can end up diluting their values as more and more organizations are included. Conversely, purity-focused alternatives tend to strengthen the boundaries of their movements, making it harder for new organizations to join and thus limiting their growth potential. B Lab moves past this rigid dichotomy through a tiered membership system: its B Movement Builders program allows corporations to participate as supporters even if they are not yet prepared for full certification. This makes the movement more open to incumbents who share similar values and intend to eventually become B Corps while still ensuring that a clear, rigid boundary distinguishes fully certified B Corps from Movement Builder allies. Embrace Divergent Perspectives Ultimately, our research demonstrates that the critical factor underpinning B Lab’s ability to strike all three of these balances is its appreciation of the varying motives and visions of its own membership. While a successful movement requires unified effort, embracing diverse perspectives can help ensure that growth doesn’t come at the expense of values — or vice versa. If B Lab had attempted to force a consensus between these two priorities (for example, by expelling members that endorsed one position over the other), the movement may have fallen into the trap of either cooptation or marginalization. However, the movement remains to be an arena for ongoing debate among diverse perspectives, as exemplified by the recent open protest by 30 B Corps against the certification of multinational brand Nespresso in 2022. Only by proactively harnessing its members’ divergent viewpoints has the movement been able to remain consistently inconsistent between the competing goals of expansion and purity. To be sure, the B Corp movement is still growing and evolving, and as such it is still vulnerable to future threats of cooptation and marginalization. Indeed, some critics have argued that its increasing focus on multinational corporations may be excessively diluting its original mission, and B Lab’s continuing efforts to overhaul its certification system have also been met with some skepticism. While the movement has navigated these challenges fairly successfully thus far, it is certainly far from perfect — and there’s no guarantee that what’s worked in the past will continue to be effective. Nevertheless, by treating the tension between growth and authenticity as a paradox, and by working continuously to balance these seemingly irreconcilable goals, B Lab provides lessons that other leaders can creatively adapt to achieve scaling their innovative movements without sacrificing their fundamental values.

The Paradox of Growing as a Values-Driven Company

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