B the Change: The Resilience of Responsible Business

(5.35) 
Chris: 
The next level out is the movement bit, which is how can we, as a collective and aggregate, do more to shift the culture around business? What is good business? What is success? What is growth? And start trying to infiltrate the mainstream with these notions of good and responsible business. So that's what our mission ultimately is: to shift that mainstream. It's that piece about, ‘how can we make sure that ultimately this becomes the norm?’ Business being responsible for the communities upon which they rely and the environment within which they flourish. How can businesses ultimately, without exception, look after those stakeholders alongside the bottom line?

Kresse: 
The simplified version for us of a responsible business is it cannot void or involve degradation of the environment, or exploitation of people. So you have to structure your business so that other people's grandchildren will be proud of what you've achieved. Instead of feeling like you've stolen their future from them. If there's any collateral damage, you are not a responsible business. So actually, it's an incredibly difficult thing to be. Most B Corps (we're one of the first in the UK) are on a journey to become responsible. Some of us are further along in that journey than others but yeah, that's where we sit with it.

Nick:
Yes I always think about this and, to me, being a responsible business is really about awareness and consideration of what we're doing and why we're doing it. 

In the last 30-40 years there's been so much focus on working hard to make money. That's been often the sole ambition. It's often too easy to lose sight of the effect this can have on people's lives, both staff and local communities and the environment. But by taking the time to think about and become more aware of our individual impact at work plus the broader impact of the companies we work for. We can quite often say this, there are some simple changes we can make, which will improve things, hopefully substantially on that journey that Kresse talks about to become a responsible business. It is a journey. 

Obviously, there are lots of more difficult changes to make, which can present big challenges to an organization, which will take more time, investment, and effort. But being transparent about those challenges and honest about what it will take to make the change, that's also a sign that businesses are taking seriously their responsibilities to society and all their stakeholders.  

(9:27) 

Josie: 
All three of you talked about a rising awareness around the concept of responsible business and what it actually means. One of the things that we're also witnessing kind of in tandem with that is, perhaps an increased scrutiny in this idea of shareholder primacy. I think it's the 50th anniversary this year of Milton Friedman writing his article in The New York Times, positing that the sole purpose of business should be to make profit. We've clearly come a long way from that. But I'd love to delve a little deeper into this subject of shareholder primacy and hear your thoughts on where we stand on that, whether you think it still kind of creates a bit of a challenge and a bit of a hurdle for businesses wanting to be truly responsible, particularly business businesses that do have external investors and shareholders. So Chris, I'm gonna throw it to you again. What are your thoughts on shareholder primacy?

Chris: 
I hate it. it is hard not to be too reductive about it, I suppose because I think yes, it is, you know, fundamentally it fails to establish any of the frameworks from a governance perspective, any of the frameworks within which you might you would have expected business to, first of all, be held to account for negative impacts, and for doing the kind of harm that Kresse says. We should be avoiding and considering when we think about the generations to come. But of course, what that also has therefore done is fail to create any of the incentives by which businesses would then be able to measure their positive impacts, which is a key key piece of the puzzle, obviously. So, yes, it's our it's our kind of tragedy really. The kind of orthodoxy of shareholder primacy has coincided with these crises of our time, which are so profound in terms of the climate emergency and the crisis of inequality. Without being too dramatic, when you place blame at the door of business for exacerbating those challenges, I think you can trace a lot of that to that orthodoxy and that shareholder primacy for not creating the right incentives or holding businesses to account for doing better.

Josie: 
Perhaps if we manage to change the incentive base of the investor, be that pressure from other shareholders to create more ESG viable businesses and investment opportunities, that's something that could shift that dynamic, I suppose.

Chris: 
Yeah, that's exactly right. The investor perspective is crucial to this. Again, that's where we’re seeing such a deficit in terms of now ESG metrics becoming something which mainstream investors are adopting and building ESG portfolios, but also mapping those metrics against their whole portfolio. That's happening.

But you talk to investors, and there's no standard measures. They've all got their own. There isn't that equivalence, which is clearly a challenge for investors. And obviously, you've also got the kind of long term short term dynamic within the investment piece.

(13.24)
Josie:
Kresse, you don't have external investors, as far as I know. What are your thoughts on the concept of shareholder primacy? And how do you think that, if you had external investors, your pursuit of being a truly responsible business might be challenged?

Kresse:
Some shareholders are institutions, but behind those institutions are people.

I'm a shareholder, in Elvis and Kresse and Elvis is a shareholder in Elvis and Kresse. But at the human level, we have to operate in a way that would allow us to sleep at night. And if we were destroying the environment, or exploiting its people...that's the behavior of a psychopath. So, ask people "do you think shareholders are more important than the environment or its people - on a human level?" The only people that will put up their hand and say, "yes, the shareholder is more important," are psychopaths. So I think we sometimes need to back away from the institutional frameworks and back away from Friedman. I'm thinking of having ‘I don't like Friedman’ t shirts made or something.

We need to embrace the donut economics vision of the future where we value the environment that is our only home. We need to accept the fact that we human beings are a subsidiary; that the economy is a subsidiary of the natural world. And we need to embrace that and be creative within that. So I always just thought that the ordinary Friedman esque economics is just really reductive. It doesn't allow us to be creative and ingenious within the limits that we have, you know, exploitation is easy, and it's dull and it's boring and it's old school and it's got to go.

Josie:
At a very basic level, and I suppose this is something that is particularly relevant in an industry like yours, where creativity really is the beating heart of the business, that is so human on so many levels. It's not It's not about the revenue and profits and automation or all kinds of economic theory, it is really about the innovation and the humanity behind the business, isn't it?

Yeah, and that's what makes it a wonderful thing to do and not destructive, you know?

To be creative is to be creative. If I was destroying; if there was a path of destruction behind what we did, I would want people to strip me of that title of an innovator and a creator. I would want people to see me for who I actually was, which would be a destructor. I don't want to be known as that. And then you asked about what would we do with investors? Well, you know, you'd sign them; they'd have to sign up to the Elvis and Kresse way of thinking. It's a two way street. I think people think that you "oh its money, and we have to bow down to the investor." No, no, no. it's a two way street. It's a marriage, and you're wedded to them for an awfully long time. They better be an awesome and amazing person to be wedded to.

(16.58)
Josie:
Let's think about the global pandemic and how it's changing or how it will change businesses. I'd be interested in hearing from both of you whether you think the pandemic, COVID-19, has had an impact on the on the concept of trust - consumer or employee trust in business - and if so, how has that materialized and how do you think businesses have been forced to respond to it? I don't know who wants to go first, Chris?

Chris:
there's so many different ways of looking at this, and obviously we're all still muddling our way through it to a certain extent. if I link it directly back to something that Kresse was just saying about investors, for example, and that being a kind of, you know, a two way street. We're seeing a lot of admiration for businesses which are fundamentally rooted in strong relationships. Strong relationships with the people who work there, where they have invested in developing those people, and they've got flexible ways of working and flexible roles.

They have a strong culture, and those relationships are strong, and those businesses are benefiting from those relationships with their people and between their people. And then in a similar vein, we're also seeing businesses benefit where they have strong the kinds of relationships Kresse is describing with investors. Those investors are taking the long term view and they've got a two way street going.

We're also seeing businesses benefiting where they have strong relationships through their value chains and supply chains, particularly where they have chains rooted in local businesses. Even in some of our biggest B Corps, we've seen them step in to support smaller businesses in their value chains through the crisis.

At the heart of a B Corp is a recognition that a business cannot survive without those relationships. And when a crisis like this pandemic hits, you rely on the people around you. You can translate it to the individual: you rely on the people around you for the support just as a business relies on all of their stakeholders, helps where it can help and relies where it needs to rely on for help. The huge other piece of the puzzle is obviously the customer and the consumer and what's going on there throughout this pandemic. This could be a whole other conversation, but from that perspective to keep it super brief, I think what you are seeing is the pandemic forming a kind of prism or a lens through which the public can very quickly identify the goodies and the baddies.

The businesses whose reflex has been to step up and support and help and innovate. And the businesses whose reflex has been to do the opposite and look straight to that bottom line.

(20:34)
Josie:
Yeah, and actually, that's kind of the irony of it in a way, isn't it? Because we've just been talking about shareholder primacy and how that's a really outdated model that does not lend itself to the modern way a business should operate. But they're not mutually exclusive. If you are a responsible business, that is something that the bottom line will benefit from, and I think that transmission is something that people need to understand. And that is perhaps the incentive that we keep talking about, for creating a more responsible business. But Kresse, trust the concept of trust. What are your kind of thoughts on that through the lens of the pandemic?

Kresse:
Well, I think it takes a lifetime to build and a moment to destroy. We didn't earn the trust that we have now overnight. But there's a fantastic example, if you look through the lens of our key stakeholder. We've been collecting fire hose from day one from the London fire brigade, and we've been making donations to the firefighters charity. We've been doing that for 15 years. And then in our time of the year when we give our donations, which is the best day of the year because you just get to give money away, is typically at the end of March or early April. And you would think that in a year like this, that maybe we would retrench on the donations because oh, we're worried about - no, no, no. We happily sent the biggest donation we've ever sent to the firefighters charity.

The flip side of that, is that there are 66,000 Fire Service personnel in the UK. There's people all over the world that love the fire service community. And the fact that, despite the pandemic, despite everything, business as usual for Elvis and Kresse means giving a lot of money away and ensuring that that community is looked after. It meant that we had so much all the way through April and into May, we had advocacy from fire service personnel across the country. They are a stakeholder in the business. We do open book accounting with both of those organizations so that they know where these funds come from.

And so I just think this idea of stakeholders is actually very intimate. They really are a part of your business. It can't just be something you casually say. It's a relationship that's built over a long time. And it does make you resilient, and it does mean that in a time of crisis, people pull together around the mission that you all share, rather than running for the hills.

Josie:
Yeah. And it's that community, isn't it? It's an investment in that community that ultimately pays off when the tide goes out, so to speak. So in the interest of time, I do have a couple of questions from the audience. So thank you very much for those. Chris, I think this one is definitely for you. What do you think the one biggest challenge is for existing organizations to become B Corp organizations?

(23.46)
Chris: 
I guess it is for me, but I think it would be interesting to hear from someone who's mid process and hear it straight from there. But I don't think there is one biggest challenge because, and this is something that we deal with every day at B Lab, literally any business can become a B Corp.It's open to all for profit businesses. We're working with businesses from every sector, in over 50 countries around the world now. So every business gets to their assessment score in a different way through having an impact in a different way. They've all got different business models, so there is no biggest challenge. 

A very broad answer to the question in terms of the biggest challenge is probably the rigor. It’s probably the depth into which you know, we look at the business, which means for a big business, that's a lot of information. They have to gather from a lot of different places and then obviously a kind of heavy lift in terms of impact improvement in order to certify. For small businesses, it feels like a lot. If you're a few people, then I imagine that feels like a lot of governance.

Josie:
Nick, as somebody who's experiencing first hand what that process feels like, would you echo Chris's comments?

Nick: 
Definitely. A lot of questions need a lot of rigor, that's for sure. I would say as you get into the size of Kin + Carta now - about 1500 people across a few different specialisms. I think one of the challenges is that historically we would call it apretty standard profit making business; a successful business. 

And now we're looking to, in a sense, retrofit it in certain aspects to improve. We're very good in certain parts of the B Corp assessment. We’re a people business; we treat people pretty well, but in other aspects, it's quite new, quite novel, and the communication of that to a lot of people across a lot of different geographies, different historic businesses, is a challenge. And getting everyone on board, you know, the concept is reasonably easy to pick up and, using business as a force for good. But the devil is in the detail as ever. And to currently be able to make those changes to reflect that across the size of our organization, that's probably the biggest challenge that we face. When you get in front of people and talk to them, it makes sense, and people want to go on that journey. But doing it across that size organization is probably the biggest challenge I face I'd say.

(26.38) 
Josie: 
So I'd love to take one more question from the audience, and I like this question because it's really actionable. We've spent the last half hour talking about responsible business. But this question, I don't know who submitted it, but thank you. The question is, with sustainability and consumer products becoming more widespread, what do you think are the key challenges individuals face when trying to spend ethically with their wallets? So how can all of us basically contribute to businesses, the business environment being more responsible? Kresse, what do you think?

Kresse: 
Well, I have to say I would buy from a B Corp or buy from a certified social enterprise. There are a lot of organizations with a lot of greenwash. But what I love about the B Corp movement is that you have to walk the talk, you cannot be a B Corp if it's greenwash. They will find you out. And it's not like you're limited to a few choices. There's B Corp wine, there's B Corp lawyers, there's B Corp graphic designers, there's B Corp architects. There is no aspect of your commercial or consumer life that would leave you out. And I just think it's kind of an adventure to try these products. Actually, it makes my life a lot easier. Do you know how many wine varieties there are? Now I've got five or six brands to choose from. There's just toast ale, for example. Life is a lot easier when your choices are simplified by someone who's already done all the due diligence on your behalf.