Remaking Capitalism: The Strength of Weak Legislation in Mobilizing B Corporation Certification

Abstract

Myriad cross-sector initiatives seek to remake capitalism into a more just, sustainable, and inclusive system. But how do these distributed efforts—which often vary in strength—interact? We contribute by attending to the interaction between weak and strong governance reforms. Drawing on longstanding research on organizational values and the sociology of law, we theorize how the enactment of weak and broad sustainability legislation is likely to increase pressure on values-driven businesses to pursue both values authentication and material authentication by way of strong third-party certification. We test our conceptual model by examining the effects of the frequently criticized benefit corporation legislation passed in 36 U.S. jurisdictions on the related B Corporation certification. We find that both new certifications and recertifications increase in states with such legislation, and that these effects are amplified or attenuated depending on corporate sustainability norms in the region. Taken together, our findings contribute to the intensifying societal conversation regarding the prospects for remaking capitalism by illustrating how even weak legislation can contribute to systems change not only by encouraging incremental sustainability reforms within a field, but also by triggering an authentication imperative that mobilizes values-driven businesses to pursue rigorous certifications.

Keywords: B Corporations, benefit corporation legislation, certification, authentication, values, sustainability

JEL Classification: L31, L26, O35