Desktop version

Home arrow Political science arrow Sustainability of Agro-Food and Natural Resource Systems in the Mediterranean Basin

Acquisitions by Larger Corporations Pose Complications

A few large corporations have recently moved to acquire smaller companies that had gained attention for their economic success in the sustainable business community. One of the first companies to file in Delaware as a PBC, for example, was Plum Organics, which just a month earlier had become a fully owned subsidiary of Campbell Soup Company, a Fortune 500 company that had revenues of about $8.1 billion in fiscal year 2013. Plum Organics, a major producer of organic baby and toddler foods, chose “working on hunger and malnutrition” as its specific public purpose. This appears to be the first instance of a large, publicly traded company becoming directly connected to the benefit corporation movement.

Group Danone, a Fortune Global 500 company, recently bought a 92 percent stake in Happy Family, a fast-growing Certified B Corp that also produces organic foods for babies and children. Because Happy Family is incorporated in Delaware, the fact that the state now has passed its PBC statute means that B Lab will expect the company to either file for that status or forfeit its eligibility to renew its B Corp certification.

Ben & Jerry's, a popular ice cream producer, since 2000 has been a wholly owned subsidiary of Unilever, a Fortune Global 500 company with annual sales of more than $70 billion in 2012 and more than 1,000 brand names. In 2012, Ben & Jerry's was the first wholly owned subsidiary to become a Certified B Corp, with support from its parent company. B Lab, in awarding that certification, created new requirements for transparency that it will expect of other wholly owned subsidiaries as well. These include posting online the full results of the companies' B Lab assessments and relevant portions of their governing documents to demonstrate that their directors are legally obligated to take into account the interests of all stakeholders. (Divisions or individual brands of larger corporations are not eligible to be Certified B Corps.)

One recent controversy suggests how complicated these relationships may prove to be. Campbell Soup Company in 2013 contributed more than $384,000 to help the Grocery Manufacturers Association mount a massive campaign to defeat a ballot initiative in Washington state to label genetically modified organisms (GMOs) in food products. Campbell's gave half of that amount after its subsidiary, Plum Organics, had registered as a Delaware PBC. Anti-GMO groups that supported the initiative but were vastly outspent had publicized Plum Organics as a line of baby food products that parents trying to avoid GMOs could safely buy. For the businesses involved, the fallout from the revelation of Campbell's political involvement in fighting GMO labeling, which many public interest groups support, was negative. For the benefit corporation movement itself, the episode raises serious questions about whether large corporations that acquire smaller benefit corporations without a shared commitment to their new subsidiaries' particular social and ecological values will end up diluting both the identity and potential of the whole movement.

Other big questions challenge the movement's long-term potential. Could it really ever be possible for large, publicly traded companies to fully embrace such a model? And, if so, can they do so quickly enough and in large enough numbers to help communities and countries shift to truly sustainable economies as rapidly as the situation demands?

The legal sufficiency of benefit corporation status has not yet been tested in the courts, as the statutes have been enacted so recently. Also, some nonprofits, while not necessarily opposing this new form, have raised concerns that benefit corporations may seek special tax treatment or other exceptional treatment from governments, or may compete for limited funding from do-good investors and donors, at the expense of the nonprofit community.

Poster used in the Washington State ballot initiative campaign.

They are also concerned that benefit corporations could amass enough capital to underbid nonprofits for government contracts just long enough to drive them out of business and take over the public service space themselves, with no historical understanding or commitment to that space.

Skeptics worry that if benefit corporations vie for business in areas that are now in the public sector, this could expose common-property resources such as water, parks, and public transportation to the inequities of the marketplace. (See Chapter 9.) Some public interest advocates also oppose the idea of elevating the role of the market in solving social problems. That work, they say, rightfully belongs to citizens, making decisions together within democratic institutions. The potential for abuses of this new model for “greenwashing” also exists. This is especially the case given how attractive fast-growing companies that appeal strongly to socially conscious consumers—i.e., most prominent benefit corporations—are to larger corporations that seek profitable acquisitions but that are not necessarily committed to advancing a triple bottom line.

“I'm all for people pushing these models, and am happy some people are grappling with such experiments,” commented Charlie Cray, director of the Center for Corporate Policy in Washington, D.C. “But I don't think the people who talk about it are facing up to the reality of the magnitude of the problem of corporate domination of the economy, how much of public life has been captured as a result, and the importance of building strong institutions outside of the market sphere to take on the corporate-friendly ideology that so pervades society today.”

On the other hand, nonprofits themselves rely heavily on donations from wealth generated under the conventional model of amoral capitalism. Many do not provide public assessments of their own overall social and environmental impacts, based on a third-party evaluation tool, as benefit corporations do. So the movement for benefit corporation statutes offers a chance to rethink the ethical operation of nonprofits as well. It is still early in the movement. But this experiment is spreading rapidly and its potential for good— especially if nonprofits advocating for human rights and environmental activism engage directly with this movement to help shape and promote it in the most responsible forms possible—seems too strong to be ignored.*

 
Found a mistake? Please highlight the word and press Shift + Enter  
< Prev   CONTENTS   Next >

Related topics