I want to redefine success in business
Bart Houlahan (United States) is co-founder of the B Corp movement and a social, serial entrepreneur. Prior to B Lab, Houlahan was president of AND 1, a $250 million footwear company. He is a Henry Crown Fellow of the Aspen Institute and a recipient of both the 2014 Skoll Award for Social Entrepreneurship and the 2015 John P. McNulty Prize.
You might have heard about the B Corp movement. If not, that’s going to change soon. Currently, entrepreneur Bart Houlahan and his team are expanding across the globe with their message that we need to redefine success in business.
Bart, along with his partners Jay Coen Gilbert and Andrew Kassoy, co-founded B Lab. The organization behind the B Corp movement has certified more than 2000 leading sustainable businesses as certified B Corporations, and the B Lab impact management tools have been used by more than 60,000 companies across the globe.
I sat down and talked to Bart about his work with the movement and how we might be at a tipping point in the evolution of capitalism.
I’ve read that you see a big change in business culture and business purpose going on right now—on a number of different levels. Can you please explain more about these different levels?
I think we’re moving out of an economic model with an exclusive focus on shareholders to one that is more focused on stakeholders.
This is due to a number of global changes going on right now. For example, consumers have different expectations of companies than they used to have. A recent study showed that 88% of all consumers expect business leaders to balance the needs of their company with the needs of society in general. This is very different than just a few decades ago.
I also see a growing interest in investing capital in companies that focus on stakeholders and not just shareholders. Since 2008, the growth within sustainable investments has been substantial. It’s one of the fastest-growing trends right now in a number of countries and markets.
Finally, I think that we’re experiencing a cultural shift too. The next generation of employees expect more of their leaders and their jobs than they used to. They want more than money; they want a meaningful job, a job with purpose. It’s a very different expectation from what companies are delivering to their employees currently.
You describe this change as going on within consumers, investors, and workers. What about policymakers?
I think that we’re seeing governments on a global level expecting more from businesses as well. Both the left and the right agree that the private sector needs to get more involved in solving some of the world’s biggest problems.
Now, you explain some very positive trends, but how does the B Corp mindset and method fit into all this?
A B Corporation is a company that is both making money and making a difference. We’re focused on a for-profit model that creates shared value alongside shareholder value.
Our role is also very focused on delivering standards to differentiate a good company from just good marketing. There are more and more companies claiming to be purpose-driven, green, and socially responsible, but unless you have standards to back this up, it all becomes too blurry and meaningless.
One of the core focuses of our role as an organization is therefore to make these things tangible. Individually, B Corps meet the highest standards of verified social and environmental performance, public transparency, and legal accountability, and aspire to use the power of markets to solve social and environmental problems.
Collectively, B Corps lead a growing global movement of people using business as a force for good. Through the power of their collective voice, we hope that all companies will one day compete to be the best for the world, and society will enjoy a more shared and durable prosperity for all.
So B Corps is not really about you guys, B Lab?
No. We view ourselves as a service agency for leaders who are truly creating impact, our entrepreneurs. There’s a reason why you may not have seen a lot of articles about us or about the nonprofit B Lab. It’s quite intentional; we exist to serve entrepreneurs who are using businesses as a force for good. If we do not serve those entrepreneurs, we don’t create any impact. The real work is being done by the community of certified B Corporations who are creating completely innovative solutions for some of the world’s greatest challenges.
Are all B Corps then based on products that make the world a better place?
No. You should not confuse purpose with product. We cover more than 150 industries, and for us, purpose is a broader definition than just your service or product. It’s more about the impact that is being created—who you employ, how you source your products, your ownership structure, and so on.
We’re a very diverse community. We have B Corps that are multi-billion-dollar companies and we have small startups. We generally believe all types of business can be a force of good, as long as the intention of the business is broader than just creating private wealth for individuals.
Purpose is a very broad term that can mean basically anything within the business world. But you’re not really looking for more purpose-driven companies in the future then?
We love companies with a deep and meaningful purpose, but our focus is different. I believe that the shareholder primacy theory has to change. If the rule of the market is exclusively focused on a single beneficiary—the shareholder—it is difficult to see how a market solution can solve all the great challenges that we’re facing at the moment.
However, I’m not against capitalism. I’m skeptical toward the current perversion of the capitalist system. In my view, capitalism was not inherently built to exclusively build private wealth. Companies were originally intended to contribute to society more broadly and lift all boats.
If I understand you correctly, you’re advocating for businesses that are using the operations of their organization to lift all stakeholders. Correct?
Yes, and this can be done is a vast number of ways. As an example, many incredible B Corporations might not necessarily be contributing to the environment with their core product, but they still create positive change through their work with stakeholders.
I’m not looking to build a movement only consisting of social entrepreneurs. I’m in this to redefine success in business.
When you talk about redefining success in business, you’re also saying that we currently don’t measure what really matters. But isn’t this a subjective thing?
No. I believe that you can always build a better business—better for your workers, the community, and the environment. And “better” is not merely a subjective thing.
Our way of making this more objective is, among other things, to create an online assessment tool that will walk you through a series of questions to help you learn what it takes to make things better. We ask you questions related to government, workers, community, and the environment. Examples of these could be as follows:
• What portion of your management is evaluated in writing on their performance with regard to corporate, social, and environmental targets?
• Based on referenced compensation studies, how does your company’s compensation structure (excluding executive management) compare with the market?
• Which is the broadest community with whom your environmental reviews/audits are formally shared?
Early on, as we talked with hundreds of entrepreneurs, there was clarity that they wanted to be a positive alternative, that being defined by what they were not wasn’t a great way to build a movement. So on the impact assessment, you don’t earn any negative points. Instead, we’re offering a positive alternative for investors, consumers, and policymakers to support. I think it has served this movement well to position our core identity as being the positive alternative.
What is your final goal with this organization? To create a world full of certified B Corps?
No, we’re trying to create a leadership play that will influence mainstream business. We’re focusing on the top 10% in every geography and industry. We want to identify, support, and celebrate these B Corp leaders and hope they will inspire legions of other companies to follow. We want to leave a mark.