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3. Literature Review 3.1. Traditional corporations
To understand better the new movement of « For-benefit » organizations, « Social Enterprises
» and B Corporations, we first need to have a look about how does the Literature defines « traditional corporations ». By understanding the traditional role of corporations and businesses, we will be able to understand what is so different with the new movement of « For-benefit » organizations, « Social Enterprises » and B Corporations.
The Traditional purpose of a corporation is known to be that of maximizing shareholder value (Alyssa Harriman, 2015). The first corporate form can be traced back to the Collegium under Ancient Rome. Indeed, the Collegia served as an « entity distinct from its owners for various business purposes ».
As explained by Alyssa Harriman, during the Middle Age, corporate form was used to provide hierarchy and organization, it was also a way to amass power and health (Alyssa Harriman, 2015).
Over the centuries, « the dominant view of business as a purely economic activity led to the subordination of other goals and values to the primary goal of creating economic value » (Alyssa Harriman, 2015).
A good example of the traditional role of business is an article entitled « The Social Responsibility of Business is to Increase its Profits » and written by Friedman in 1970 for the
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New York Times Magazine: « There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud » (Alyssa Harriman, 2015). So, if we take this statement, the only focus of business should be to make profits and maximize shareholder value.
In this Traditional definition of a corporation, we can see that business and society are totally separated: the purpose of business is profit-driven whereas the governments and civil society should be responsible for solving social and environmental issues, even those created by these traditional corporations (Alyssa Harriman, 2015).
3.2. A Social Responsibility Gap and a need for change
This traditional role of corporations has been highly criticised in the last years.
The gap between business and society has never stopped growing and can be seen for example in the economic scandals of the last decades. « Accused of human rights violations, causing environmental problems and engaging in tax avoidance schemes, corporations have seemingly lost touch with ethics and values » (Alyssa Harriman, 2015). As explained by Charles Handy, markets rely on rules and laws, but for these rules and laws to be followed, they need to be trusted and true. If truth is not anymore, and trust is lost, then « the game becomes so unreliable that no one will want to play » (Charles Handy, 2002). This means that if people are loosing faith in traditional corporations, there will be no economy anymore, and so there is a need for a new economy with new corporations.
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3.3. A new area: For-Benefit Enterprises and Social Enterprises
In 2007, during his speech at the Harvard University, Bill Gates asked the graduates to invent
« a more creative capitalism », where « we can stretch the reach of market forces so that more people can make a profit, or at least make a living, serving people who are suffering from the words inequities » (Steven J. Haymore, 2011). Indeed, for Steven J. Haymore, a certain number of entrepreneurs have been trying to make a more creative capitalism.
For Heerad Sabeti, the world and the economy is in a new area: « we will see the emergence of a fourth sector of the economy, interacting with but separate from governments, non-profits, and for-profit businesses » (Heerad Sabeti, 2011). This new sector will reshape the future of capitalism.
This new area is marked by the apparition of a « different model of enterprise, driven by entrepreneurs who are motivated by social aims » (Heerad Sabeti, 2011). This new model of enterprises is neither the traditional for-profit and capitalist companies, neither the non-profit traditional NGOs (Heerad Sabeti, 2011). Indeed, this new model has a hybrid approach, and they are often called « For-benefit ». « For-Benefit » organizations describe « organizations that generate earned income but give top priority to an explicit social mission » (Heerad Sabeti, 2011).
Moreover, this new area will also be marked by the apparition of « Social enterprises », a similar type of organizations as the « For-Benefit » organizations. Steven J. Haymore defines « Social enterprises », as companies that « measure value creation as a combination of profits and impact on people, the environment or both » (Steven J. Haymore, 2011). This means that « Social
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enterprises » are looking for having both a positive impact on the society and generate a profit.
These enterprises use the power of business to address social and environmental issues.
Even if some examples of « For-benefit » and « Social enterprises » appeared a long time ago, it was not before the late 1990s and 2000s that these kind of organizations obtained widespread acceptance (Steven J. Haymore, 2011). In 2007, David Gergen, a Harvard University Professor and a renowned commentator, described social entrepreneurship as « one of the hottest movements » among young people and young entrepreneurs in the United states, and « the most important movement since the Civil Rights movement » (Steven J. Haymore, 2011).
But these new organizations have many challenges to face (Steven J. Haymore, 2011; Heerad Sabeti, 2011).
3.4. The Challenges faced by For-Benefit Enterprises and Social Enterprises
Indeed, the main challenge both « For-benefit » organizations and « Social Enterprises » need to face is that the legislation is not adapted to their type or organization in a majority of countries.
As explained by Heerad Sabeti, when it comes to creating a legal entity, « For-benefit » organizations and « Social Enterprises » have to choose between being a for-profit organization or a non-profit organization. But the reality is that they are none of them, as they are a hybrid type of organization (Heerad Sabeti, 2011).
On one hand, if they form as a non-profit organization, they will be in the obligation to reinvest all profits in the organization, leaving them with no choice for venture capitalists or other for-profit investors to receive a return on their investment (Steven J. Haymore, 2011).
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On the other hand, if they form as for-profit entities, they will have an easier access to investors, but their social purpose might be difficult to achieve because of pressure to maximize financial returns (Steven J. Haymore, 2011).
So, there is a need for an « ecosystem of specialized support – including public policy, financial markets, accounting standards, and professional services » (Heerad Sabeti, 2011).
Another problem these types of organizations were facing was the lack of proof of their social and environmental commitment (Suntae Kim, Matthew J. Karlesky, Christopher G. Myers, Todd Schifeling, 2016). Indeed, it was hard for « For-benefit » organizations and « Social Enterprises » to differentiate from for-profit and capitalistic companies claiming that they are doing something good for the society, when they are actually not doing so much (Suntae Kim, Matthew J. Karlesky, Christopher G. Myers, Todd Schifeling, 2016). They didn’t have any proof or any way to advertise about their real social and environmental commitment.
To answer these challenges, B Lab had the idea to create the B Corporation Certification.
3.5. An answer to the difficulties faced by For-Benefit Enterprises and Social Enterprises: the B Corporation Certification
« B Lab primarily set out to resolve these capital considerations and legal challenges by creating B Corporation » (Steven J. Haymore, 2011).
Indeed, becoming a B Corporation helps these organizations to raise capital. How? Because, as explained by Steven J. Haymore, the B Corporation Certification « signals to investors and
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consumers that an enterprise is purpose-driven and seeks simultaneously to benefit shareholders and stakeholders, including creditors, employees, consumers, the environment, and the community in which the corporation operates » (Steven J. Haymore, 2011). The article written by Suntae Kim, Matthew J. Karlesky, Christopher G. Myers and Todd Schifeling agrees with this point of view: « Identifying as a B Corporation is a way to publicly claim an identity as an organization interested in both shareholders and stakeholders’ success » (Suntae Kim, Matthew J. Karlesky, Christopher G. Myers, Todd Schifeling, 2016).
Becoming a B Corporation not only helps raise capital, but also has an important impact on customers. Having the clear identity of a B Corporation helps the firms to better communicate their values to their customers, and this is very beneficial for the organisations because it allows them to claim an identity that is different from the industry norm (Suntae Kim, Matthew J.
Karlesky, Christopher G. Myers, Todd Schifeling, 2016). Indeed, « an unconventional identity – such as a B Corporation – helps individuals clearly distinguish between traditional firms and those that are committed to a broader set of stakeholders values » (Suntae Kim, Matthew J.
Karlesky, Christopher G. Myers, Todd Schifeling, 2016).
3.6. Why B Corps matter?
But why do B Corps matter so much? The Book The B Corp Handbook, How to use Business as a Force for Good, written by Ryan Honeyman, explains very well why B Corps are so important. For Ryan Honeyman, there are 7 main reasons why B Corps matter so much.
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First of all, B Corps matter because « they accelerate the evolution of capitalism » (Ryan Honeyman, 2014). Indeed, B Corps are making capitalism evolve towards a new model that creates « shared and enduring prosperity for all stakeholders » (Ryan Honeyman, 2014). As explained by Ryan Honeyman, B Corps is accelerating this trend leading to this new model by
« creating, using, and promoting new legal structures that aim to create value for all stakeholders, and promoting new legal structures that aim to create value for all stakeholders».
The second reason why B Corps matter according to Ryan Honeyman is because they redefine success in business. The B Corp movement is creating a new way of doing business, using Business For Good, as explained earlier.
The third reason is that B Corps are concrete and measurable (Ryan Honeyman, 2014). Indeed, the B Corp certification « turns the ambiguous concepts of “being green” or “being a good corporate citizen” into something tangible and measurable that people can easily identify, trust, and support » (Ryan Honeyman, 2014). With B Corp, people can be sure that the company is having a good impact on the society and the environment.
Moreover, B Corps matter because they build a collective voice (Ryan Honeyman, 2014). Ryan Honeyman means by this that the B Corp movement gathers all businesses and individuals sharing the idea of doing business for good and amplifies their voice by unifying them under a common brand that advocates for a better way of doing business.
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B Corps also matter because they are better businesses (Ryan Honeyman, 2014). Indeed, Ryan Honeyman explained that the B Corp certification helped many businesses to improve and to become a better business.
Furthermore, B Corps are important because, according to Ryan Honeyman, they help us live to a higher purpose, the purpose of doing something good for our society and environment.
Finally, B Corps matter because they « stand for something, and not against anything » (Ryan Honeyman, 2014). The B Corp Movement is innovative and positive and it gives solutions to global current problems. The B Corp movement will allow people to « make progress toward alleviating poverty, building stronger communities, creating great places to work, and restoring the environment, for generations to come » (Ryan Honeyman, 2014).
3.7. A missing point in the Literature: a precise study on the Uniqueness of B Corps
As we showed in this Literature Review, many authors took interest in the B Corp movement and many interesting papers were written about the Topic. But the subjects of these papers are quite similar, they explain why the B Corp movement was needed and what are B Corps in general.
But the Literature is lacking a deep study into what makes these Corporations so unique, so different, so new. A general study of B Corps in their globality cannot answer this question about the uniqueness of these corporations. Only a deep study about one specific B Corp can
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allow us to understand what is so unique about B Corporations. This is what our study intends to do.
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4. Methodology
The Methodology used in this Study is a Qualitative methodology. Indeed, we were looking for quality more than quantity to answer our Research Question.
For that, our methodology is divided in three parts:
- Meetings with the owners and employees of DOMI;
- Interview of B Lab Taiwan;
- Observation and Analysis of the company.
4.1. Meetings with the employees of DOMI
For that, the owners and employees of DOMI were met during the process of my Internship at DOMI. These meetings were mainly informal meetings as colleagues, in order to get some in-depth insights about the uniqueness of the company. Moreover, one formal interview was done with Tammy; the Interview Guide can be found in Appendix n°2.
The colleagues that provided the most insightful information are:
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Table 2: DOMI’s Employees who Provided Information
Tammy and Corey, the owners of DOMI. They provided all the the information and material needed to make this study possible.
They were always available to help.
Moreover, Tammy was interviewed through a formal meeting.
Brian, the International Business Manager, who gave general insights about the company, about how DOMI works, the projects of the company and also its international development.
Brian was the principal interlocutor during the time of this study. He also provided a lot of valuable material for this study (Books, PowerPoints, data).
Ken, member of the Product Team, provided interesting information about the different products of DOMI and the work as Consultants of the company.
Judy, member of the Marketing Team, also gave information about the different products of the company.
Jan, member of the Marketing Team, provided information about the different events organised by DOMI.
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Catherine, member of the Operations Team, also provided with general information abut DOMI.
4.2. Observation and Analysis
A big part of the methodology of this study was to observe the company, its environment, its organization, its workers, etc. and then to analyse all these insights in order to understand what makes the company so unique compared to Traditional Corporations.
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