Vanderburgh House

A common misconception about the business world is that “for-profit” is synonymous with the words “greedy” and “extractive”. While many companies prioritize their earnings over the greater good, hundreds of other for-profit companies prioritize the greater good over their earnings. These companies are called B Corporations. B Corporations choose to operate on a for-profit business model in order to better serve the community and the world, and, as B Lab’s mission statement affirms, “use the power of business to solve social and environmental problems.”

Unlike non-profit companies, who often have to rely on donations, grants, and government support, B Corps have access to more competitive funding because they are able to offer returns to investors. Donations can be inconsistent, and if a company cannot operate without the funding provided by these donations, its ability to positively impact the world is weakened. B Corps can use their for-profit status to sustain themselves so that they can consistently make a difference.

Take for example the B Corporation Warby Parker Eyewear. Through their “Buy A Pair, Give A Pair” program, Warby Parker commits itself to ensuring that, for every pair of glasses they sell to consumers, a pair of glasses is distributed to a person in need. Through the program, Warby Parker has been able to make a dent in providing eyewear to the 2.5 billion people around the world who are in need of glasses, but don’t have access to a pair. This operation would simply not be possible if the company operated on a non-profit model. In order to commit to the promise of the “Buy A Pair, Give A Pair” program, Warby Parker needs consistent outside funding from investors, and in order to maintain a steady stream of competitive outside funding, the company needs to be able to offer returns.

Warby Parker’s priority is to alleviate suffering caused by visual impairment around the world, not to accumulate wealth for its stakeholders. However, the ability to pay employees what a company feels they deserve allows firms like Warby Parker to hold on to talented and qualified workers. Non-profit companies are mandated by the government not to pay employees more competitive salaries than other companies and organizations that operate in similar fields. This restriction makes it difficult for non-profit companies to incentivize high-achieving workers to stay with the company. If these people get better offers to work elsewhere, they will likely leave to seek higher earnings. B Corps don’t have this restriction, and can sustain increased salaries to attract and retain talent. The ability to maintain high quality, talented workers allows B Corps to better serve the world, and people in need.

This is not to say that non-profit companies are less effective or productive than their B Corporation counterparts. Non-profit firms can have enormous impacts on world and environmental issues. However, this model is simply not right for all organizations focused on making a difference. Some projects need funding that cannot be achieved through the non-profit model. Other projects require competitive, highly educated employees who need financial incentive to stay with the firm. Thus, operating for profit doesn’t make a company selfish or greedy. It is simply a reflection of their needs.

Michael Porter, the founder of the Shared Value Initiative, argues that “the purpose of the corporation must be redefined as creating shared value, not just profit,” and that businesses that take this ideal to heart “will drive the next wave of innovation and productivity growth in the global economy.” B Corps are committed to this idea of creating shared value in order to make the world a better place. If a B Corp company turns out not to take this commitment seriously, their certification is revoked. B Corp certified companies are not focused on making money off of disadvantaged or vulnerable people. They are focused on utilizing the for-profit business model to serve the environment and those in need around the world.

Sources:

  1. https://www.bcorporation.net
  2. http://nonprofithub.org/starting-a-nonprofit/nonprofit-isnt-option-benefit-corporations-b-corps/
  3. http://nonprofithub.org/starting-a-nonprofit/differences-501c3-501c4-tax-exemptions/
  4. https://www.boardeffect.com/blog/government-regulations-nonprofit-organizations/
  5. https://www.warbyparker.com
  6. https://www.sharedvalue.org/partners/thought-leaders/michael-e-porter

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