Imagine a company telling you not to buy its products. How would it stay in business? Well, maybe it just redefines what business success means. That’s what family-owned outdoor equipment maker Patagonia has done for years.
Now it’s practising its “Reduce, reuse, repair, recycle, reimagine” mantra in a way that would seem to be financially suicidal. In a partnership with eBay, Patagonia operates the online Patagonia Used Clothing Store, allowing owners of unwanted Patagonia clothing to sell it instead of storing it or throwing it away. Ultimately, yes, that could heighten brand awareness for even more new clothing purchases, but let’s assume that’s not the driving motivation here.
“No company has ever told their customers, ‘Don’t buy our stuff unless you really need it,’” says Patagonia vice-president Rick Ridgeway.
But if the greenest product is the one that already exists, and if the company is true to its five-R mission, what else can it do? Most companies would get out the greenwash and retreat to business as usual because of their perceived fiduciary duty to shareholders to deliver maximum financial returns.
Or, they could adopt a new business model that also measures success in, say, “adventures per garment sold,” rather than financial returns alone.
Upcoming changes to the Canada Business Corporations Act (CBCA) have opened up discussions about how far a private or public corporation can legally stray from maximizing shareholder return.
Most of us assume that corporations always have to put shareholders’ interests first. Hence the creation of hybrid governance structures like the U.K.’s Community Interest Companies, which was copied here in B.C. with the creation of Community Contribution Companies last July. These are companies – usually made-over non-profits – that deliberately pursue social goals through their businesses while still generating a profit and providing investment opportunities to like-minded investors.
In the U.S., a legal category of company called a B Corporation has been created to redefine success in business. Certified B Corps voluntarily meet higher standards of transparency, accountability and performance, baking sustainability into the DNA of companies even as they bring in new managers, new investors or new owners. Patagonia is a B Corp.
Among the many areas of corporate governance in the CBCA under review (and welcoming comments by May 15) are “rules applicable to the incorporation of socially responsible enterprises.”
That has raised concerns by two local corporate governance experts.
Both champions of corporate social responsibility, they fear that creating certain hybrid corporate models that cater to more socially responsible companies could have the opposite effect: make traditional companies think they dare not go beyond maximizing shareholder value.
Christie Stephenson is manager of environmental, social and governance evaluations and research at NEI Investments, which screens companies for ethical funds. NEI believes companies should be responsible to a broad range of stakeholders.
“Canadian case law suggests a duty by corporate directors to consider stakeholders beyond just shareholders.”
Carol Liao, incoming law professor at the University of Victoria, agrees: “Canadian corporate laws already accommodate what B Corps are intended to achieve regarding broader stakeholder interests. It’s legally redundant to have the U.S. model of B Corps in Canada.
“My research found that most corporate lawyers surveyed believe directors should [be] or are obliged to consider stakeholders’ interests in their corporate decision-making.”
Not every Canadian company will want to be as socially and environmentally responsible as Patagonia, but the good news is that if you want to, there’s no legal impediment. •
