Business Design for a Sustainable Future

Author Carina Millstone Says Employee Ownership May Be Most Direct Path Toward Environment-Minded Economy

Can large, multinational companies like Unilever, which is building its brand around sustainability and has several Certified B Corporation subsidiaries, deliver on their environmental goals?

This is the fundamental question that sustainability expert Carina Millstone asks in her book Frugal Value: Designing Business for a Crowded Planet. In a provocative discussion of these issues on a recent Next System podcast, she discusses whether it possible for publicly traded companies, with their need for growth, to “create the environmental conditions on which human life can flourish now and in the future.”

For Millstone, the answer is “no.” The business case for sustainability is limited, she says: Taking steps to save our planet requires moral decision-making, and the publicly traded corporation is not designed to make these choices.

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As Millstone explains in her conversation Adam Simpson, program associate at the Next System: “What happens in the instance of a public corporation where the shares are traded on public markets is that the only motivation for shareholders to be in any way involved in the firm is the possibility of reaping high dividends in the next quarter. And this creates a firm where the drivers are to maximize cost externalization. That is to say, any social or environmental impacts will not be priced in products, but passed on to societies, and of course to grow, because the more the firm grows, the higher the profit.

“Both these elements—this kind of cost externalization element and this growth element—are really inherently very problematic for the challenge of sustainability. Because what we want is actually products that are less impactful on communities and the environment, and what we want are businesses that don’t need to continually grow and continually push consumption. And that’s why I think this kind of big corporation that is investor-owned, where the owners are so distant from the firm, presents so much trouble for the challenge of sustainability.”

Millstone contrasts the distant ownership of shareholders with the potential to transform our economy through worker ownership models. In worker-owned firms, she argues, “there’s less of a driver to expand.” She continues: “For the workers, they might well prioritize more enjoyable working conditions over growth. So I think this is a question of proximity to the work — the person actually doing the work and the person also being the owner, they’re one and the same person — is likely to lead to companies that exhibit characteristics that are more congruent with resource-use reduction.”

The problem for investor-owned companies, Millstone argues, “is that there’s zero moral or legal responsibility amongst the owners for the work of their firm.” This prohibits the moral decision-making necessary for sustainability.

For a large, multinational company such as Unilever, which Millstone acknowledges is trying to do the right thing, she asks, “What will happen when sustainability no longer pays, or when the leadership, Paul Polman, who has a personal interest in this, moves on? The fact is that due to its structure, the likes of Unilever are legally bound to operate in their shareholder’s interest. I’m skeptical of talk about balancing the needs of shareholders and other stakeholders. We could consider them, but, nonetheless, these companies exist to maximize financial returns.”

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B the Change gathers and shares the voices from within the movement of people using business as a force for good and the community of Certified B Corporations. The opinions expressed do not necessarily reflect those of the nonprofit B Lab.