Can Benefit Corporations Fix What’s Wrong with Business and Human Rights?
Despite all the progress made since the UN Human Rights Council unanimously adopted the landmark UN Guiding Principles on Business and Human Rights (UNGPs) eight years ago, the business and human rights (BHR) movement remains over-reliant on “the business case” to persuade business leaders that respecting human rights is good for its bottom line. That’s why the benefit corporation form, a new legal entity, and the certified B Corp, a standard developed by the non-profit B Lab, present such an interesting contrast. The aim of the B Corp movement, which advocates for both the legal entity and certification standard, is to build positive social impact into corporate purpose, thereby eliminating a key issue the BHR movement struggles with: the intrinsic valuation of a social good.
In 2015 we embarked on a research project to see if, in fact, the B Corp movement holds the key to this problem. After all, the B Corp movement appears to share several goals with the BHR movement: getting corporations to respect human rights; maintaining a “wide aperture” so that all company impacts on people and communities are understood and addressed; and creating solid standards of conduct, transparency, and accountability.
Curiously, we discovered that the two movements are traveling along parallel tracks. Few within the B Corp movement seemed to be aware of the UNGPs. And the BHR movement rarely acknowledged the standards developed by the B Corp movement under its B Corp certification scheme, or the significance of benefit corporation legislation. Not much has changed in the nearly four years since then.
We spent over 18 months probing both benefit corporations and B Corporations. We studied the literature on benefit corporation legislation and certified B Corps and statements of the B Lab executives driving the B Corp movement. We conducted interviews with social enterprise leaders, including B Lab staff and members of the B Corp movement. We also tested the B Impact Assessment certification standard by creating hypothetical companies of different sizes and degrees of human rights risk — from medium to high — and running those companies through two versions (2013 and 2016) of the assessment to see whether our answers would trigger questions with specific human rights content.
We found that the impact assessment only weakly captures human rights impact. In fact, we did not find the term “human rights” in either version of the assessment. The section on “community” does not contain meaningful measures of human rights harms that BHR advocates would expect to see, such as information on land grabbing or violence by police or private security companies in connection with the company’s operations. Instead, the questions emphasize charitable giving and civic engagement. To the limited extent that the assessment picks up human rights harms, such findings do not necessarily preclude certification. A company can reach the required minimum score of 80 (out of 200) without, for example, ensuring a core labor right like freedom of association and collective bargaining, or without conducting a human rights impact assessment, which is the bedrock of corporate responsibility for the BHR movement.
As for benefit corporations — the legal entity — our review of the state-by-state listing of legally registered benefit corporations on the Benefit Corporation Information Center’s website turned up some puzzling data. For example, Nevada has almost 500 legally registered benefit corporations, higher than any other state at the time of our research. These include trucking and contracting companies, gaming companies, exploration and production companies (presumably oil), and even a taco grill. Many of the businesses listed have no websites. At the time of research, none was certified by B Lab. After checking back in 2017, the number of registered benefit corporations had dropped to 220 – and the Nevada Secretary of State’s office could not explain why.
“Do Benefit Corporations Respect Human Rights?” — published as the cover article in the fall 2017 issue of Stanford Social Innovation Review — provides a human rights evaluation of certified B Corps. It also considers how the B Impact Assessment needs to change to ensure that certified B Corps meet their stated goal of providing “general benefit” that does not overlook human rights harms. The article begins by arguing for an examination of B Corps through a human rights lens, since B Corps provide the potential to value human rights intrinsically, rather than depending upon a “business case” rationale. It lays out the impetus for each corporate responsibility movement and reflects on how the B Corp movement — both certified B Corps and benefit corporations — might embed human rights considerations through governance, mission, and process.
We then drill down into the certification standard to understand the extent to which it captures an applicant company’s human rights performance. We conclude that the potential for the B Lab standard to advance the cause of human rights and hold companies accountable for their human rights impacts remains unrealized. The final section of the article interrogates B Lab’s ambition to see certified B Corps (and benefit corporations) scale up unbounded.
Pointing to the experience of the BHR movement’s efforts to reform mega corporations and to B Corps’ own experience, we question whether a company can be “too big” to respect human rights. We conclude with a brief look at how the two movements might cross-fertilize to strengthen the common goal of corporate accountability for impacts on society and human rights.
“Do Benefit Corporations Respect Human Rights?” is available online by subscription only at Stanford Social Innovation Review. Following publication of the article, B Lab submitted a response. We then issued this rejoinder. Both the B Lab response and our rejoinder were originally posted as comments to the online version of the SSIR article.
Photo by Ivan Bandura on Unsplash