B the Change: Social Companies, B Corps, and Benefit Corporations

Abstract

In the wake of highly publicized corporate scandals like the Rana Plaza collapse and the BP oil spill, a new type of entrepreneur emerged, eager to use the market to solve social and environmental problems. Although it is widely accepted that a corporation’s primary purpose is to maximize profits, brands like Warby Parker and Patagonia are challenging this model. These organizations are what I call social companies, for-profit organizations with a social or environmental mission at the core of their business model. For example, Warby Parker donates a pair of glasses to someone in need for every pair it sells.

Social companies combine the mission of a nonprofit with the structure of a corporation. How do these companies navigate a capitalist market, one that values profits above all else? How do they balance their social mission with the profit imperative? I explore these questions by studying two types of social companies: certified B Corps and benefit corporations. B Corp is a certification with rigorous social and environmental standards. Benefit corporation is a legal structure, like C Corp or LLC, for companies with a social or environmental mission. Drawing on 76 semi-structured interviews with social entrepreneurs, I examine how these companies balance mission and profit, how they create a cohesive organizational identity, and how they change over time.

This dissertation brings together the disjointed literature on hybrid organizations, examining social companies through the lens of goals, categories, and identity. I investigate the history and consequences of B Corps and benefit corporations and unpack the challenges facing these organizations, both real and imagined. I show that B Corp certification – and to a lesser extent, benefit corporation status – help to solve the problems associated with hybridity. Finally, I demonstrate that quantification remakes what it measures, even in the absence of rewards. To become certified B Corps, companies must pass a rigorous assessment, a quantification of their social and environmental practices. This process drives organizational changes, as companies conform to the assessment’s measures. This study extends our understanding of commensuration, reactivity, and incentives, demonstrating that quantification inherently incentivizes.