A Beneficial Threat on the Horizon

Many publicly traded companies have been trying to polish up their images through corporate social responsibility initiatives. But they may soon have a harder time burnishing their halos. The emerging threat of B corporations could make rivals and their products look more tarnished and less compelling.

B is for "benefit," and maybe even "better"
Berwyn, Pa.-based B Labs recently announced its first national advertising campaign to spread the word about B, or Benefit, corporations. It has crafted compelling ads as part of the push, with tag lines such as, "Better Companies Make Better Products; B Corporations are Better Companies." These ads will run in major sustainability publications.

B Labs has certified more than 350 companies as B corporations. According to B Labs, these businesses solve social and environmental problems through entrepreneurship. They stand apart from other "responsible businesses" because they must meet "comprehensive and transparent social and environmental performance standards."

These companies also "institutionalize stakeholder interests," echoing the philosophy varyingly described as conscious capitalism or stakeholder capitalism. B corporations must change their articles of incorporation to reflect their focus on all stakeholders.

The B-Bomb
B Labs' national ad campaign is an interesting development that investors should pay attention to. Even though this is a small, nascent group, it still represents a threat to publicly traded companies, should enough consumers find B corporations' products -- and sense of purpose -- compelling.

Some of the best-known B corporations include well-known brands such as Method and Seventh Generation, which are distributed through major retailers like Whole Foods Market and Wal-Mart (NYSE: WMT  ) . These vendors' green or sustainable household and cleaning products compete with similar offerings from companies such as Clorox and Procter & Gamble (NYSE: PG  ) .

According to B Labs, research shows that 90% of consumers who are exposed to these ads are more likely to look for the featured brands, or at the very least want more information about them.

Better believe in beneficial change
It's no wonder that many old-school publicly traded companies are trying to step up their own ability to pursue sustainable practices, or at least appear "beneficial," these days. Procter & Gamble has initiated a big push for sustainability measures, and Unilever (NYSE: UL  ) recently announced its own aggressive campaign. Wal-Mart has attempted to prove it can be environmentally friendly on a mass scale, including its drive to create a sustainability scorecard for its suppliers. Some companies have even built social responsibility into their missions, including Whole Foods Market and Timberland.

The B corporation push represents a wonderful and inspiring force in our marketplace: the ability to innovate toward the future, instead of wallowing in the wasteful or hazardous practices of the past. These do-gooder upstarts that could pose a major threat to many publicly traded companies' sales and brands -- and drive many of those rivals to pursue their own businesses in a far more socially responsible manner than ever before.

Could such a competitive force be beneficial for all of us? You better believe it.

Check back at Fool.com every Wednesday and Friday for Alyce Lomax's columns on corporate governance.

Wal-Mart Stores is a Motley Fool Inside Value selection. Timberland and Whole Foods Market are Motley Fool Stock Advisor recommendations. Unilever and Wal-Mart Stores are Motley Fool Global Gains picks. Procter & Gamble and Unilever are Motley Fool Income Investor picks. The Fool owns shares of and has written covered calls on Procter & Gamble. The Fool owns shares of Timberland, and Wal-Mart. Try any of our Foolish newsletter services free for 30 days.

Alyce Lomax owns shares of Whole Foods Market. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (3) | Recommend This Article (13)

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  • Report this Comment On December 03, 2010, at 5:13 PM, TheFoolishEdge wrote:

    Thanks for the article.

  • Report this Comment On December 03, 2010, at 5:40 PM, TheFoolishEdge wrote:

    A great book on sustainability is:

    Making Sustainability Work by Marc Epstein

    Again, Good article. Thanks.

  • Report this Comment On December 06, 2010, at 6:25 PM, TMFLomax wrote:

    Thanks so much for the book recommendation, TheFoolishEdge! Sounds like it's right up my alley! And thanks for reading the article!

    Best, Alyce

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