Business has the wrong operating system

Business has an extraordinary power to shape a world in which we can all thrive – but it would lack integrity for me to create wealth while stripping value from our precious communities, from our beautiful planet, or from families, the foundation of our society.

There are more than 2,500 B Corps around the world, ¹ and their number is increasing. To be certified as a B Corp companies have to pass a rigorous test every two years to prove they meet tough standards of social and environmental performance, accountability and transparency. ²

B Corps are a new, superior version of the limited liability company. The limited liability company is the most powerful vehicle invented by mankind. It is how we organise the capital that shapes the world and invents the future. But the structure we use was invented to help the owners of tall ships manage risk – and their liability was unlimited. When investors wanted to limit liability, they had to apply for a licence from the government, who only granted it if they were satisfied that there was a meaningful public benefit in exchange for society taking on the liability.

Since then, limited liability became unconditional. And in the latter half of the 20th century, the notion that the limited liability company had a fiduciary duty to maximise profits for its shareholders became entrenched as a cultural norm in financial markets – and therefore business.

Sadly, the orthodoxy of ‘maximising shareholder value’ has, if inadvertently, led business – especially institutionally owned business – to do only this, on an industrial scale. As markets have become more sophisticated, too much of business is driving our world towards catastrophe. Most of us are now waking up to the reality of acute planetary distress – climate change, ocean health, ongoing rainforest destruction – and social distress, evident in the gross inequality driving mass migration, and resulting in political shocks such as Trump and Brexit.

Business (and associated capital markets) is responsible for both these forms of distress. Put simply, business has the wrong operating system. And I am not alone in my concerns. Larry Fink, head of the $6 trillion asset management firm BlackRock recently called argued that companies’ futures lie in embracing a social purpose.

While COOK operates on a smaller scale, since we certified as a B Corp in 2013, we have achieved record commercial performance each year and delivered outstanding returns to our investors. Last year our like-for-like retail sales (our key measure of brand health) were up 11%. We have done this while stating in our governing documents that the directors’ duties are to create value for all, not just shareholders.

I cannot directly attribute our B Corp model to greater sales, I can say that all of the groups that benefit from it contribute to the value chain – suppliers, customers, consumers and employees – and their excitement at what’s possible drives better commercial performance. In addition, we have worked hard to ensure that we have aligned shareholders who are ‘woke’ to our values, and who have a long-term perspective.

I cannot follow Jesus and stick with the old operating system: the two are, to me, mutually exclusive. But I love the amazing and wonderful power of business to shape our world and invent the future. Which probably explains why I devote so much of my time to seeking a superior business model that is consistent with my faith: tasking the get-shit-done-machine that is business with creating value for all of God’s incredible creation.

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James is co-founder and Director of COOK, a certified B Corporation.

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