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Why We Care About Certified B Corporations: From Valuing Growth to

Certifying Values Practices

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DOI: 10.5465/amd.2018.0074

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r Academy of Management Discoveries
2019, Vol. 5, No. 1, 97–101.
Online only
https://doi.org/10.5465/amd.2018.0074 Original Article>>>

C O M M E N T A R Y

WHY WE CARE ABOUT CERTIFIED B CORPORATIONS:

FROM VALUING GROWTH TO CERTIFYING VALUES PRACTICES
JOEL GEHMAN1
University of Alberta

MATTHEW G. GRIMES
University of Cambridge

KE CAO
University of Alberta

There is now broad interest in understanding how & Terlaak, 2005). Other examples include Cal-
organizations can contribute to achieving sustain- ifornia Certified Organic Farmers and related
ability, commonly defined as meeting the needs of state certification agencies (Lee, 2009; Lee, Hiatt,
the present without compromising the ability of fu- & Lounsbury, 2017), Demeter Certification Ser-
ture generations to meet their needs (e.g., Garud vices (Delmas & Grant, 2014), Leadership in En-
& Gehman, 2012). The rapid emergence of social ergy and Environmental Design (LEED; York,
entrepreneurship, hybrid organizations, and re- Vedula, & Lenox, 2018), and Fairtrade (Reinecke &
sponsible investing is particularly notable (Grimes, Ansari, 2015). As these examples illustrate, many
McMullen, Vogus, & Miller, 2013). Because efforts sustainability certifications are relevant within a
such as these are not readily assimilated into pre- single sector (e.g., manufacturing, agriculture, or
existing categories, interested audiences often seek construction); others may be relevant only within
to rationalize them through labels, measures, and particular geographies (e.g., California); and some
evaluations (Grimes, 2010). Certification has emerged certifications are restricted by both industry and
as one effective strategy for doing so.2 For instance, the region (e.g., the Malaysian Sustainable Palm Oil
Ecolabel Index reports more than 450 sustainability- certification).
related labels and certifications. To date, however,
only a handful have been studied by management
CERTIFIED B CORPORATIONS: A SANDBOX FOR
scholars.
STUDYING SUSTAINABLE BUSINESS AND
One of the most extensively studied examples is
SOCIAL ENTERPRISE
the ISO 14000 family of environmental manage-
ment certifications (Boiral, 2007; King, Lenox, Against this backdrop, the emergence of the Cer-
tified B Corporation designation has prompted a
wave of interest among scholars (for a review, see
1
Corresponding author. Cao, Gehman, & Grimes, 2018). Just as the Federal
2
Although no uniform definition guides research on Trade Commission’s Line of Business data gave rise
certifications, several themes are common. First, certifi- to a decades-long stream of research in strategic
cations typically define and codify standards, which or- management (e.g., Rumelt, 1991; Schmalensee,
ganizations then enact through constitutive practices. 1985), Certified B Corporations provide a rare cross-
Second, certifications involve evaluations or assessments
industry, cross-geography context for studying a
aimed at assuring compliance with these standards and
range of issues of interest to scholars of sustainable
practices. Third, certifications often provide badges, la-
bels, or symbols to identify such products (ISO 14001 is an business and social enterprise. Figure 1 summa-
exception; e.g., see Delmas & Grant, 2014). Fourth, al- rizes 226 scholarly articles and book chapters pub-
though certifications almost always begin as voluntary lished between 2009 and 2018 that discuss B
initiatives, some may become normative or even manda- Corporations and/or Benefit Corporations in a sub-
tory within certain fields. stantive way.

97
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written permission. Users may print, download, or email articles for individual use only.
98
FIGURE 1
Academic Research on Certified B Corporations
and Benefit Corporations3
70
Others
Count of Publications
60
Business
50
Ethics
40
Legal
30
20
10
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Others 1 2
Business 1 1 4 6
Ethics 1 1 1 1
Legal 2 5 7 13 20
Interest first surfaced among legal scholars (Sneirson,
2009), and work in this area continues to be prolific
(McDonnell, 2017). This research is focused almost ex-
clusively on Benefit Corporations, a new legal form that
B Lab has helped promulgate. This legal perspective
was followed by research from an ethics perspective,
which also has emphasized Benefit Corporations
(André, 2012). Research motivated by an ethics per-
spective appears to have peaked, at least for the mo-
ment, with a group of 13 articles published in 2016. In
2012, business scholars began publishing research re-
lated to B Corporations (Cooney, 2012). Additional re-
search was seeded by the Duke University CASE i3 B
Lab and GIIRS Research Project, an initiative that pro-
vided 13 teams of researchers with access to proprietary
data from B Lab (Grimes, Gehman, & Cao, 2018). More
recently, a network of academics organized Global B
Corp Academic Community Roundtable events in 2016,
2017, and 2018, in conjunction with B Lab’s annual
Champions Retreat.
Of greatest interest to us—and most germane to
Academy of Management Discoveries (AMD) readers—is
the increasing attention from management scholars.
Based on our review, McMullen and Warnick’s (2016)
article in the Journal of Management Studies is the
earliest substantial discussion of Certified B Corpora-
tions in a mainstream management journal. Gehman
and Grimes’ (2017) article in the Academy of Manage-
ment Journal is the first in the management field de-
voted exclusively to the empirical examination of
3 We have been curating scholarly research related to
Certified B Corporations and Benefit Corporations, pri-
marily through keyword searches on Scopus, HeinOnline,
ResearchGate, Google Scholar, and SSRN. The data pre-
sented here are limited to scholarly works published in
English, through the end of 2018. The “Others” category
includes publications from fields such as medicine, polit-
ical science, psychology, and hospitality and tourism.
Academy of Management Discoveries March
Certified B Corporations. Most recently, Moroz, Bran-
zei, Parker, and Gamble (2018) edited a special issue in
the Journal of Business Venturing, including six articles
devoted to Certified B Corporations.
Parker et al.’s AMD Research: Valuing Growth
Building on this scholarly momentum, Parker,
Gamble, Moroz, and Branzei (2018; hereafter PGMB)
have made an important contribution to our un-
derstanding of Certified B Corporations. First, their
research is notable for its ambitious and careful data
collection efforts. Specifically, they used two survey
1 4 2 4
5 10 24 waves together with a companion website to collect a
4 13 2 1 4-year panel dataset from 249 North American Cer-
14 12 30 34 tified B Corporations or some 27 percent of the 2014
population within North America (i.e., Canada,
Mexico, and the United States). To our knowledge,
PGMB have performed the largest and most granular
time-series study of Certified B Corporations to date.4
Second, PGMB have taken great pains to be rigorous,
transparent, and robust in their data analysis. We
especially appreciate how they have “talked” readers
through their logic, moving methodically from their
primary results to a variety of other analyses which
shed further light on their data. Third, they have
complemented their statistical analysis with data from
35 interviews and other secondary sources. Their as-
siduous use of mixed methods enabled them to per-
form a very compelling and comprehensive examination.
Finally, most striking is PGMB’s core finding: companies
that attain B Corp certification experience a short term
growth penalty of 20 percent on average, and this effect
size more than doubles for the smallest and youngest
firms in the sample. Thus, the most “vulnerable” com-
panies appear to pay the biggest growth penalty.
Looking Ahead: Certifying Values Practices
When viewed conventionally, PGMB’s findings
may appear puzzling. Are entrepreneurs and exec-
utives naı̈ve to the growth-related challenges posed
by certification? Assuming they are not, why would
organizations work so hard to obtain a certification
that may prove detrimental to their growth? Whereas
PGMB have emphasized the technical or infor-
mational benefits of certification (i.e., its signaling
4
We know firsthand how difficult it can be to obtain
basic revenue, employment, and industry data about B
Corps. For instance, in Gehman and Grimes (2017), we
studied the 526 U.S.-based companies certified as of De-
cember 2013. Of these, we matched 484 (or 92 percent)
with Dun and Bradstreet data. However, these data were
not time-varying, and obtaining such data from Dun and
Bradstreet is a costly and time-consuming proposition.
2019 Gehman, Grimes, and Cao
benefits), our own work offers a different entry point
into this discussion. Namely, because the B Corp
certification operates as a “value-laden category”
(Gehman & Grimes, 2017: 2315), we argued and
found evidence that organizations seek to certify
their values practices, that is, sayings and doings that
articulate and accomplish what is normatively right
or wrong, good or bad, for its own sake (Gehman,
Treviño, & Garud, 2013). In other words, we un-
derstand organizations as pursuing certification for
reasons that can only be understood by taking a
cultural perspective, which emphasizes the contex-
tual embeddedness of organizations and their values
practices (Gehman & Soublière, 2017; Grimes et al.,
2018). In our view, such a cultural perspective on
sustainability certification opens up a completely
different research agenda. Here, we propose three
broad questions prompted by PGMB’s latest contri-
bution to this stream of research.
First, why do organizations certify their values
practices? In essence, PGMB have documented a
“growth penalty” for small and young companies.
Initially, this might seem problematic for an organi-
zation such as B Lab and sustainability certifications
more generally. For instance, were this finding to
become widely known by prospective B Corps,
would certification rates decline? Based on our re-
search, we doubt it. In our prior work, we empha-
sized the value ladenness of sustainability-related
categories, such as the Certified B Corporation des-
ignation.5 This harkens back to earlier work that
emphasized the process of infusing an organization
with values beyond the technical requirements at
hand (Selznick, 1957), and is consonant with re-
surgent interest in values work in and around orga-
nizations (Gehman et al., 2013). For instance, in our
“positively deviant” article, we theorized and found
that otherwise identical firms vary in their likelihood
to adopt B Corp certification depending on the extent
to which doing so might authenticate their distinc-
tive values (Grimes et al., 2018). Moreover, these ef-
fects were amplified and attenuated in predictable
ways depending on firms’ cultural contexts, in-
cluding local sustainability norms, mimetic pres-
sures, and the prevalence of women-owned
businesses. Elsewhere, we theorized and found that
regional and industrial differences with regard to
sustainability practices among non-B Corps signifi-
cantly predict the extent to which B Corps promote
their membership in this category (Gehman &
Grimes, 2017). In other words, our work suggests
both “internal” and “external” culturally based
5
In their discussion, PGMB highlight the importance of
“morally imbued categories.”
99
mechanisms that may be critical to understanding
why organizations obtain (and promote) sustain-
ability certifications.
Second, when do organization certify their
values practices? Another insightful aspect of
PGMB’s research is its emphasis on the question of
“when” companies certify (Parker et al., 2019: 61).
Although PGMB initially approached this timing
question in terms of growth impacts, they later con-
sidered how companies may face “tradeoffs:” mis-
sion vs. growth, short- vs. long-run impacts on
mission, and competitive vs. legitimacy advantages
(Parker et al., 2019: 74). To our knowledge, PGMB are
the first to highlight such timing questions in the
context of sustainability certifications. On reflection,
this absence is rather surprising, as intertemporal
considerations are fundamental to sustainability
(Garud & Gehman, 2012). PGMB also provide qualita-
tive evidence that organizations vary in their capability
to reconfigure their practices and structures in-line
with B Lab’s requirements (Parker et al., 2019: 69).
Linking these two insights together suggests “temporal
capabilities” may be important to understanding the
adoption and survival of sustainability certifications,
and reminds us of prior work on speed capabilities and
time compression diseconomies (Pacheco-de-Almeida,
Hawk, & Yeung, 2015). Applied to the question of
sustainability certification, it points to the likelihood
that the “right time” for attaining certification may
differ across firms and contexts.
At the same time, by emphasizing “internal” fac-
tors, PGMB may have inadvertently overlooked a key
explanation for the growth penalty they found. Namely,
although it has been around for a decade now, the B
Corp certification remains quite nascent when com-
pared with others such as USDA Organic, Energy Star,
or Fairtrade. Stated in more theoretical terms, the cate-
gory has low currency (Kennedy, Lo, & Lounsbury,
2010). From this perspective, the growth penalty PGMB
documented could be a function of the fact that many
audiences do not yet understand what a B Corp is, nor
do they yet care whether a company attains this certi-
fication (e.g., see the discussion in Gehman & Grimes,
2017). In other words, although PGMB approached the
question of the growth penalty in terms of an organi-
zation’s maturity, future analyses of this question would
benefit from additionally considering issues related to
the category’s maturity and by extension its currency,
recognizing that such attributes may vary by context.
Third, should organizations certify their values
practices? Finally, we believe that PGMB’s pro-
vocative study and findings raise questions about the
utility of sustainability certifications. If the B Corp
certification and others like it offer limited growth-
related opportunities (at least in the short term), should
organizations pursue certification? Or put another
100 Academy of Management Discoveries
way, is organizational growth the only or the best
measure of a certification’s utility? Although they were
not responding to this specific question, PGMB offered
a fascinating discussion of “de-growth” or the in-
tentional reduction in consumption and promotion of
frugality, autonomy, and conviviality. When coupled
with existing evidence suggesting that organizations
certify as B Corps for reasons unrelated to growth
(Gehman & Grimes, 2017; Grimes et al., 2018), PGMB’s
discussion reminds us, first, that founders’ motivations
for certification may vary and, second, that organiza-
tional growth may be a restricted variable for assessing
the utility of sustainability certification.
Indeed, it may be that scholarly efforts to un-
derstand organizational performance and success
have too often conflated traditional measures of
growth (and other performance measures) as some-
how indexing concepts of impact or value creation.
Although such outcomes may be correlated (Aguinis
& Glavas, 2012), they also are likely to be orthogonal
to one another in important ways. Thus, organiza-
tional growth may prove valuable in narrow in-
stances, but it also may undermine broader forms of
organizational impact. To better understand the im-
pact of sustainability certifications and of the orga-
nizations that pursue those certifications, future
research likely will need to overcome the field’s tra-
ditional reliance on truncated measures of organiza-
tional performance, while taking into consideration
broader perspectives on how organizations might
contribute to, for instance, societal well-being and so-
cial impact (Ferraro, Etzion, & Gehman, 2015; Louns-
bury, Gehman, & Glynn, 2019; Wry & Haugh, 2018). In
the case of B Corp certification, PGMB have clearly
shown that the process of certification is arduous,
thereby diverting organizational members’ attention.
But if the primary utility of the certification is not in the
potential for growth, but rather in the process
itself—the process of raising awareness of stakeholder
needs and of refining the certifying organization’s re-
sponse to those needs—then, some organizations may
find it worthwhile to pursue such certifications even in
the presence of a growth penalty.
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Joel Gehman (jgehman@ualberta.ca) is the Francis Winspear
Associate Professor of Business in the Alberta School of
Business at the University of Alberta. His research examines
organizational responses to sustainability and values con-
cerns, especially the role of innovation processes and cul-
tural entrepreneurship.
Matthew G. Grimes (m.grimes@jbs.cam.ac.uk) is a reader
in entrepreneurship and organization at the University of
Cambridge’s Judge School of Business. His research focuses
on the challenges of idea-stage entrepreneurship and social
innovation.
Ke Cao (kcao@ualberta.ca) is a doctoral student in the
Alberta School of Business at the University of Alberta. His
research examines the use of values-laden certifications in
social entrepreneurship and global agricultural supply chains.