The B Corp Trend

When we were discussing the future of work in Italy at the G7, we discussed B corporations. Here is a link to learn more about them.  They have been around for a number of years.  Some startups like Kickstarter have transitioned into a B Corporation.  For them, it fits their culture.

Non-scalable consulting type firms also have become B’s.  Venture capital firm Foundry Group is a B Corp.

I have invested in one B Corp.  It didn’t end well.  B wound up standing for bankruptcy.  I don’t think you can chalk it up to being a B corp although their labor costs got way out of line.

At our G7 discussion, we acknowledged the worldwide trend.  However, I asked this question.

In a regular business, I know if the business is successful by looking at it through the lens of GAAP accounting.  If there is a net profit to reinvest back in the business, post to equity on the balance sheet, or redistribute to shareholders in the form of dividends, I have a hard and fast metric to go by.

I can also look at a business through economic costs.  I can look at costs/opportunity costs and make decisions.  Economic costs are not as hard and fast as accounting costs.  They are more subjective.  But, at least there are some traditional math functions that one can use to analyze problems and opportunities.  For example, we know that you always try to produce where marginal revenue equals marginal costs.

I don’t discount what B corporations are trying to do.  However, there is simply no way to objectively measure anything a B corp is about.  How do I compare Kickstarter to another startup firm that’s a B corp?

It all feels very very subjective to me.  It’s why normative economics never works, and positive economics is the way to look at a problem.

I could make a case that an oil company is one of the best B corps providing the most social good.  But, clearly, advocates of B corporations would never see an oil company as a company that provides a lot of social good.  Although, you might have a hard time convincing someone struck by a hurricane that needs a lot of diesel fuel.

So, what are objective measurements for the success or failure of a B corp and how are those benefits returned to the stakeholders of the company in the form of ROI?  Because if there is no ROI, it’s charity.