How difficult is it to balance purpose with profit? Know it from Singapore’s B Corps

Paradoxically, in today’s times of increased sensitivity to environmental issues, businesses with clear loyalty to sustainability are subject to more scepticism than ordinary corporations. A study by ACI surveyed 12 (out of 19) B corporations in Singapore to understand the challenges faced by these companies, and strategies employed to cope with them. The Certified B Corporation accreditation is granted by the B Lab to nurture and promote companies that consciously choose to balance profit with purpose.

B corps are governed by two types of logic – market logic and social welfare logic. They are meant to be socially obligated for-profit business ventures. In other words, what sets them apart from ordinary ventures is that “they are rooted in a field with competing social welfare and market logics”. In fact, some B corps don’t shy away from calling themselves “social enterprises seeking to solve social problems through business ventures”.

The study conducted by ACI revealed an ever-present tension between being governed by social welfare logic and  having a viable sustainable business. The interview sample comprised both young and old companies from a variety of industries (summarized in Table 1). The interviewees were mostly from the top management. The challenges the B corps face are manifold and allude to the purpose-profit dilemma. First, the B Corp label lends a ‘solely social enterprise’ image to the companies, which encourages the stereotype that social enterprises don’t make money. This leads to difficulties in procuring funds for the businesses. Second, often dubbed as mere charities, the B Corps fight a common misconception that their products and/or services are substandard. This stems from a lack of awareness among the stakeholders such as suppliers and investors on the nature of the B Corp certification. Third, convincing customers that environment-friendly products come at a higher cost proved difficult for certain products. For example, for certain lifestyle products like food and beverages, consumers don’t mind forking out extra money to be socially responsible. On the other hand, for something staple and traditional like rice, customers usually don’t buy into “all this marketing [spiel]…the sustainability angle”. Lastly, even among the employees, there is perpetual tension on balancing purpose with profit. As some interviewees noted, the key thing is to “create a culture and a team of people who also understand [that sometimes the purpose aspects are non-negotiable]”. Further, the B Corps acknowledge the importance of taking on like-minded partners who are also interested in promoting sustainability. They realize that they need to take these challenges in their strides and take a stand to serve the greater public good.

Understanding the challenges faced by the B Corps begets an obvious question. If these certified B corps explicitly address environmental problems, why are they fighting to establish legitimacy in the current era of green bonds, ESG mania, and green financing obsession? This has a lot to do with the evolution of the concept of ‘businesses’ in general. Many stakeholders believe that the challenges the B Corps aspire to address may be too complex and fall under the purview of the government. This hampers the responsibility-assuming position of market entities, including consumers. Civil society and the government, however, could step in and show how to assume welfare moral duties and encourage greater corporate social responsibility.

By Shubhangi GUPTA

Researchers: Dawn CHOW

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