I recently went one on one with Dr. Christopher Marquis. Christiopher is the Samuel C. Johnson Professor in Sustainable Global Enterprise at Cornell University and author of the new book BETTER BUSINESS: How the B Corp Movement Is Remaking Capitalism. Christopher’s research and writing center around how businesses are creating a more resilient and sustainable capitalism by focusing on the triple bottom line of environmental, social and financial performance. Christopher has authored more than 50 Harvard business cases on topics related to sustainable business, and prior to joining Cornell, he worked for ten years at Harvard Business School, where he developed an award-winning course on social entrepreneurship.

Adam: Thanks again for taking the time to share your expertise and advice. First things first, though, I am sure readers would love to learn more about you. How did you get here? What experiences, failures, setback or challenges have been most instrumental to your growth?

Christopher: Sure, and thanks so much for the interview! I am a professor at Cornell in the Business School and my research and teaching are in two areas. First is how businesses can be more sustainable and resilient. For example, I study topics like social business such as B Corps which are the focus of my forthcoming book, and environmentally sustainable initiatives of large companies. I also teach a course at Cornell each year on social entrepreneurship. 

A second line of related work is on sustainability and social responsibility issues in China, and entrepreneurship there more generally. Until COVID I spent 2 months a year in China researching the work that companies and governments are doing to address China’s extensive environmental issues. In addition to teaching a Cornell class on Doing Business in China, I also lead a student group trip to China each year. 

I have a bit of a unique background for an academic, even for a business school professor in that I worked in the corporate world for 6 years in financial services before going back to school get a PhD (at the University of Michigan, in Sociology and Business Administration). This real-life experience has fundamentally shaped my work, from the questions I research, to how I then understand and present the results. I also have taught for over 10 years at Harvard, both the Business School and Kennedy School which also shaped my thinking to have more of a “real-life” slant.

Regarding failures, setbacks or challenges, it is hard to identify just one since there have been so many! Being a successful academic requires one to be able to deal with frequent failures. For instance, the main academic journals I try to publish in have over 90% rejection rates, and the rejection letters can be very cutting. What I have learned by repeatedly going through this process is not to take rejection personally, and to use criticism to make oneself and one’s work better. While failure and tough critique certainly hurts, if one does not use that experience to learn and grow, that is even worse. 

Adam: For readers unfamiliar with the subject, what is a B Corporation? And what drove you to write a book about B Corporations?

Christopher: A “B Corp” is a company whose social and environmental performance has been certified by the non-profit B Lab. While many existing certifications like Fair Trade, Organic and LEED assess specific types of products, the B Corp certification is the only one that holistically assesses a company’s operations. To become a B Corp, a company must attain over 80 points on a demanding audit of its operations called the B Impact Assessment [BIA] in the areas of workers, customers, community, environment, and governance. Once certified, companies have to be re-certified every three years. 

I originally learned about B Corps when I was teaching a course at Harvard Business School on how companies could be more strategic in their corporate social responsibility (CSR) programs. The class covered mostly large US companies such as Goldman Sachs and IBM. One day, a student mentioned B Corps as an alternative model – i.e. not companies creating special socially responsible programs, but how social values can be fundamentally embedded in a company’s DNA. This was the first I had heard of this innovation, and I became especially intrigued when I learned many companies I knew and respected -- like Patagonia, Seventh Generation and Ben & Jerry’s -- were certified B Corporations. So, I set out to learn more and I got in touch with the founders of B Lab, the non-profit that certified companies, and in 2010 I published the first in-depth HBS case study of their work.

Since then, I have spent over a decade researching the movement. This has included another HBS case study on B Lab in 2015, and six other published Harvard case studies on a diverse set of B Corps, from Danone’s $6 Billion North American subsidiary to First Respond, the first B Corp in China. The thing that has kept me excited about studying the movement is how it has evolved to be about much more than B Corps, but about creating the tools and processes to fundamentally reorient capitalism away from a model where companies are only responsive to shareholders, to one where companies are focused on serving all stakeholders in a sustainable way.

What led me to write the book is that today, many influential actors such as the Business Roundtable and World Economic Forum are saying companies should be more stakeholder-oriented. But they don’t say how to actually make this change, and they run the risk of being seen as all talk and no action. The B Corp model provides a toolkit for companies to actually be more stakeholder-driven. 

Adam: What should leaders and entrepreneurs understand about B Corporations? What are the most important takeaways from your book and your research on the topic?

Christopher: The core argument of the book is not that there should be more B Corps, but that all companies can and should be more like B Corps. By using the accountability and governance tools and processes created by the B Corp movement, companies can be more socially responsible and be better managed. There are now about 3,500 B Corps in the world -- a relatively small number. Because the assessment is rigorous, the number of B Corps will always be limited. 

But the key thing is that BIA is highly useful for companies as a playbook for good corporate management and it is used by over 100,000 non-B Corps to manage their operations and many leading private equity and venture capital investors I have talked to now use it to assess investee companies. This is why the book is titled BETTER BUSINESS - because the tools and processes B Lab has developed are not just about a company being more socially responsible, but attending to all stakeholders is a better way to run your business. That is, measuring and achieving social and environmental goals also aids in achieving bottom-line benefits. 

Further, a key innovation was creating a new type of company, the “benefit corporation” that places the rights of workers, the community, and the environment on an equal footing with shareholders. In the USA, this innovation has been supported by both parties - and has achieved almost a 90% approval rate across the 35 US states that has passed the legislation. And similar legislation has been passed in Italy, Colombia, Ecuador and Canada (British Columbia), while under discussion in many other countries. 

In fact, many companies’ work for stakeholders has long come under critique because it is hard to tell if the company is actually having a positive effect on society or the environment or if they are just trying to burnish the company’s reputation. That is, it is easy for a company to say they will do something, but unless their actions are tracked and measured, it is just too easy to fall short. With such empty promises known as “greenwashing,” companies make themselves appear “green” while not actually pursuing environmental initiatives, many people don’t trust large corporations. The B Corp process filters out greenwashing because the assessment is rigorous and being certified requires meeting high standards in all the areas that are assessed. 

Adam: What do you believe is the future of CSR and ESG?

Christopher: I think we have turned an important corner on CSR and ESG, particularly from an investing perspective. A key marker in this is Larry Fink’s recent letters to CEOs. As CEO of investment giant Blackrock he has tremendous influence on the thinking and actions of CEO and investors around the world. He urges them to focus on sustainability and delivering value to all stakeholders, not just shareholders. Importantly, he emphasizes the need for companies to measure and be accountable for their ESG impacts saying that businesses needed to be responsible for “reporting sustainability information across a wide range of issues, from labor practices to data privacy to business ethics” and he specifically notes the Sustainability Accounting Standards Board (SASB) as providing a robust framework for companies reporting on material sustainability impacts to their businesses. 

Where I would push Fink further (and where I hope Joe Biden leads conversation if he is elected in November) is to push his ideas into the policy realm, as well. I think that if Mr. Fink’s actions were to truly match his words, he should explicitly voice support for replacing the legal foundation of shareholder primacy with a stakeholder governance model like benefit corporations described above. Due to a number of famous court decisions, corporate directors are legally bound to put shareholder interests above other stakeholders. While they “may” take care of other stakeholders if it is in the interest of the shareholders, new legal innovations such as the benefit corporation have shifted the framing from “may” to “shall”; that is it is the companies’ explicit legal responsibility is to be stakeholder-driven, not an option they may do if it is in the long term interests of shareholders. Unless the legal structure of the company and its stakeholder actions are in alignment, I think we will always have an underlying tension between how to best meet ESG objectives. 

Furthermore, Mr. Fink needs to go further on accountability, both beyond the mostly environmental factors he advocates companies track and report, to all stakeholders, and also I think he can be broader on the tools of accountability he recommends. While the SASB framework is focused on public companies, the B Corp movement provides another set of more comprehensive tools stem. The BIA is a holistic assessment of a company’s operations organized into five areas: governance, workers, community, environment, and consumers, and is customized depending on a company’s size, industry and geography. As noted, over 100,000 companies around the world already use this tool to manage their business and stakeholder relations as do many leading venture and private equity investors. 

I think Mr. Fink’s focus represents a key turning point on ESG issues, but he needs to go much further in a number of areas – particularly governance and accountability – that are essential to truly scale ESG work and give it some teeth to actually impact corporate management. 

Adam: What are your three best tips applicable to entrepreneurs, executives and civic leaders?

Christopher: What comes to mind sounds relatively simple, but so many companies fail on them. 

1. Have a purpose. I talk to scores of executives each year, and even from traditional companies I hear phrases like “smart companies have a purpose”, and “having a purpose is table stakes nowadays.” And Mr. Fink’s letter also emphasizes the importance of this. Part of the rationale for all of these statements are demographic. There is a lot of evidence that Millennials and Generation Z that want to use their dollars and talents for good. Retention rates at the B Corps I have studied are through the roof, much higher than comparable firms without a purpose. One entrepreneur I recently interviewed said that when people ask her about the main benefit of being a B Corp, she says that it is she never has to look for people. One part of this is retention, but also there is a long line of people wanting to work at her firm. Many B Corps report to me that prospective employees list that the company is a B Corp as the main reason why they applied to the firm. Such processes also have a positive effect on company culture and further there is also significant research showing that Millennials and Generation Z are engaged consumers who care about topics such as equity and sustainability and that they willing to pay extra for products they believe are sustainable and that come from businesses focused on doing good.

2. Measure what matters. You can never get better without understanding the key elements of your business. Above I discussed a lot about the B Impact Assessment as an important management tool for all companies. So many companies have told me that when they started measuring and tracking different parts of their business they were very surprised at how the measurement is out of synch with their assumptions. That is, they frequently thought they were doing better on things than they actually were. This is a natural human tendency and why detailed evidence is so important. And as noted, the importance of using these measurement tools is why the book is titled BETTER BUSINESS - measuring and achieving social and environmental goals also aids in achieving bottom-line benefits. 

3. Align your organization. What I mean by this is the need to be consistent in talk and walk and also consistency in the different processes and structures within the company. This includes carefully looking at the formal and informal processes alike; the organization chart and pay and incentives, and who you hire and who you retain. Organizations are living systems and unless they are consciously kept in balance it is easy to drift away from one’s mission. For B Corps, having to do the BIA every three years is one way to help with this. And also why I think having stakeholder-focused governance, the legal foundation found in benefit corporations, is essential to align the organization on stakeholder principles. 

Adam: What are trends you have observed among your business school students that would be interesting to business leaders?

Christopher: They have had a tremendous influence on my decision to write this book, so one thing is that there is a clear message from them that sustainability and purpose are critical for businesses today. 

This extends then to the places they want to work, as well as products they buy. For instance, one report found that 73% of Millennials are willing to pay extra for products they believe are sustainable, and that come from businesses focused on doing good. And Research on Fair Trade certification has found that 50% of Millennials look for proof when a company claims a social or environmental mission. For example, Ben & Jerry’s conducted a study to better understand existing consumer resonance and loyalty. It discovered that its customers are two and a half times more loyal to its brand than other ice cream consumers. The study revealed that consumer loyalty is high because the consumers believe the company stands for something and is authentic about it. And as Mr. Fink and others have noted, the power of these generations as investors will also be felt soon, as they are inline to inherit between 30 to 40 trillion in the coming decades. 

Adam: What is the single best piece of advice you have ever received?

Christopher: What a great question. I think is likely that “everyone should think hard about why you don’t like something.” What that means is that when things or events create negative emotions for us, it likely has something to do not just with that specific thing or event, but also has something to do with how it challenges our underlying assumptions or ideas. 

Things that challenge our underlying ideas and cognition make us feel uncomfortable. Sometimes that makes sense, but sometimes we may be missing something important. So it is important to consider why certain things make us uncomfortable. For example, when I was entering college, I had a very negative reaction to there being a foreign language requirement. I think likely I was steeped in the traditional egocentric American idea that everyone should speak English. But later, as an adult, I went on to learn and be pretty proficient in Chinese. I found that actually I really enjoy studying foreign languages. I wish that I did not have the mental block earlier in life because it probably would have been easier and more fruitful to learn languages in my teens and twenties as opposed to my forties. 

I think this also applies to some knee-jerk negative reactions to the B Corp movement and stakeholder management I have experienced from people who are deeply steeped in the free market ideology that pervades the USA. Sometimes when I talk to sceptics, they act as if it is some crazy leftist or socialist idea. They can’t see that what I am advocating is a system to hold companies accountable and make business perform better overall across a wide array of dimensions. So they are then sometimes shocked when I show them that these ideas of focusing on stakeholders are supported by people of all political persuasions. For instance, in addition to executives from the BRT supporting it, and investors like Larry Fink, even Republican Senator Marco Rubio has written a report on “American Investment in the 21st Century,” in which he also implicates shareholder primacy theory as the primary reason for many problems in America, and that the “theory tilts business decision-making towards returning money quickly and predictably to investors rather than building long-term corporate capabilities, reduces investment in research and innovation, and undervalues American workers’ contribution to production.” I was giving a talk once and about ten minutes after I described Rubio’s agreement on this, a skeptical audience member blurted out with a surprised tone ‘You are right!” Not believing me, I guess they had looked up the report on their phone and fact-checked me on the spot. I hope this in some way changed his thinking about the applicability of stakeholder management ideas to solve some of our world’s key challenges.