June, 2020
The extent to which businesses are responsible for promoting outcomes other than the welfare of their owners has been a matter of longstanding debate. Friedman (1970) articulated the traditional view in an appropriately titled New York Times article: “The Social Responsibility of Business Is to Increase Its Profits.” Friedman wrote this piece in response to the influence of advocates for corporate social responsibility, a notion that he associated with socialism.
Over the past 50 years, Friedman’s argument for focusing a corporation solely on earning profits has not prevailed in the public square. Indeed, corporate social responsibility, supported by stakeholder theory, exerts a significant influence on current management. According to Harrison (2013),
Interest in stakeholder theory has blossomed in recent years, to the point that it might now be called a field of scholarship, albeit a field that is very diverse. Its popularity is probably a function of several forces: an increasingly complex and interconnected external environment that stakeholder theory is especially well suited to address, acknowledgment among business scholars and managers that too much emphasis on short-term financial returns has led to unfavorable outcomes for businesses and society, numerous highly visible business scandals that have raised public awareness of ethical issues, and a global sustainability movement. (p. 765)
In an effort to bring further clarity to the subject of socially focused enterprise, this essay provides a case study of a particular business organization, Better World Books (hereafter abbreviated as BWB). Discussion will include (a) frameworks that guide organizations in their pursuit of sustainability; (b) an overview of BWB’s business model; (c) an appraisal of BWB’s outcomes in economic, social, and environmental domains; and (d) a concluding assessment.
The for-profit world has gradually come to terms with the idea that a firm’s success cannot be measured solely in terms of business success. Measures such as return on equity and market share, although important, do not fully capture the drivers of a company’s economic health. The balanced scorecard, proposed by Kaplan and Norton (1992), identified four major perspectives—customer, internal, innovation and learning, and financial—that managers should consider when monitoring their businesses. As Stewart (2017) noted, the balanced scorecard appropriately takes a broader view than shareholder value; however, it does not take into account the social and environmental impacts of a firm’s activities.
The triple bottom line (here abbreviated as TBL; also known as 3BL) is a framework that explicitly enjoins corporations to address responsibilities in three spheres: economic prosperity, social justice, and environmental sustainability. These spheres are often labeled as people, planet, and profit (Orlitzky, 2018; Stewart, 2017). Originally articulated in 1994, the TBL has gained widespread attention. It has also attracted various criticisms (e.g., Orlitzky, 2018; Ruebottom, 2011; Stewart, 2017). The inventor of TBL recently acknowledged that its intent has not been realized: “Whereas CEOs, CFOs, and other corporate leaders move heaven and earth to ensure that they hit their profit targets, the same is very rarely true of their people and planet targets. Clearly, the Triple Bottom Line has failed to bury the single bottom line paradigm” (Elkington, 2018). Nevertheless, given that the language of the TBL has become commonplace across the business world, it provides a mechanism for meaningful exchange about progress—or the lack thereof—in pursuing sustainability in the broadest sense.
Movement toward the pursuit of beneficial social and environmental outcomes has occurred in various sectors of the economy in recent decades. Around the turn of the millennium, Dees (1998) detailed the emergence of a variety of entrepreneurial models in the nonprofit sector. A few years later (2001), in a particularly influential paper, he made clear that social entrepreneurship can occur in for-profit and nonprofit contexts. He characterized social entrepreneurs as individuals who establish ventures to seek social value, engaging relentlessly in learning, resource procurement, and reinvention. Notably, Dees (2001) was candid about the challenges associated with measuring social value:
Because market discipline does not automatically weed out inefficient or ineffective social ventures, social entrepreneurs take steps to assure they are creating value. ... They assess their progress in terms of social, financial, and managerial outcomes, not simply in terms of their size, outputs, or processes. (p. 5)
One novel development in the realm of sustainable business has been the emergence of a process whereby for-profit enterprises can achieve recognition as certified B Corporations—that is, “businesses that meet the highest standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose” (B Lab, n.d.-a). Gaining and maintaining certification requires a business to do the following:
Since 2007, the community has grown to encompass 3,358 firms in 71 countries across 150 industries (B Lab, n.d.-d). Noteworthy examples of B Corps include Ben & Jerry’s and Patagonia, but a variety of smaller firms, including more than 20 located in the Commonwealth of Virginia, have also achieved certification. Of significance for this essay is the fact that BWB has been a member of the B Corps community since 2007 (Wilburn & Wilburn, 2015).
BWB was founded in 2002 by three recent graduates of the University of Notre Dame. Viewed in retrospect, the company’s emergence and success seem improbable. The founders did not set out to launch a new business venture. Rather, upon graduating from college, they encountered a challenging job market. The limited opportunities that presented themselves led two of them to remain in the university community long enough to identify and test an emerging business opportunity: the online reselling of unwanted textbooks. Joined by a third classmate, they entered a business plan competition at the university, where they obtained useful business advice and won the prize for “Best Social Venture.” One of the judges would eventually become BWB’s chief executive officer (Better World Books, n.d.-e, n.d.-h).
From the beginning, BWB was designed to generate social benefit, with a portion of revenues being allocated to support literacy efforts. Early on, the firm collected its inventory of books via drives conducted on college campuses around the country. When the founders learned that libraries withdrew millions of books from their collections each year to free up space for new volumes, and that some of the withdrawn items went to landfills, they conceived of a business model that would yield economic, social, and environmental benefit (Better World Books, n.d.-e, n.d.-i).
BWB obtained certification as a B Corporation in 2007. It was one of the first companies to do so, and it remains certified today (Wilburn & Wilburn, 2015; B Lab, n.d.-b). In 2015 Wilburn and Wilburn summarized BWB’s business model as follows:
Better World Books is a for-profit company that sells books discarded by libraries and colleges and sets aside part of each book sale for its non-profit literacy partners; it also donates one book for each book it sells. It has donated over 11 million books, reused or recycled 123 million books and raised over $15 million for global literacy and local libraries. It has won awards for waste reduction. It calculates its carbon inventory, purchases Renewable Energy Certificates to better its carbon balance and provides a few cents from each customer purchase to support wind projects. (p. 267)
BWB built its revenue to $10 million in its first four years of existence. Nevertheless, obtaining $4 million of venture capital in 2008 almost certainly accelerated its growth trajectory. By 2011 it had been profitable for a few years and had achieved annual revenues of $55 million (Sward, 2012). Around this time the company “made a commitment to donate one book for every book it sold” (Rosen, 2016, p. 4).
BWB eventually expanded its operations beyond the United States to England and Scotland (Better World Books, n.d.-g). Over the years it has garnered much positive press and earned various honors and awards. Some of these recognitions, along with several indicators of its economic and philanthropic success, will be mentioned in later sections of this essay. BWB attracted news coverage in November 2019 with the announcement that it had been acquired by Better World Libraries, a nonprofit organization affiliated with the Internet Archive (Enis, 2019). According to a BWB blog post,
This new relationship will allow Better World Books to provide a steady stream of books to be digitized by the Internet Archive, thereby growing its digital holdings to millions of books. Libraries that work alongside Better World Books will now make a bigger impact than ever. Any book that does not yet exist in digital form will go into a pipeline for future digitization, preservation and access. (“For the Love of Literacy,” 2019)
As noted earlier in this paper, the TBL emphasizes the necessity for organizations to consider social and environmental outcomes along with economic ones. The TBL’s framer, John Elkington, intended for companies to go beyond sacrificing profit levels in order to achieve desirable non-economic outcomes. In fact, when considering a business as a system, the ideal is to design (or redesign) production and marketing models so that they are inherently sustainable (Elkington, 2018). BWB has consciously described its business model in terms of the TBL (Better World Books, n.d.-j). The paragraphs that follow show how it has achieved positive outcomes across economic, social, and environmental dimensions.
There are various indicators of BWB’s economic success. First, unlike many startups, the company survived; 18 years after its founding, it is thriving. Obviously, it found a business model that worked. Creating a market for books that owners no longer needed required it to learn how to collect, process, sell, and donate efficiently. BWB’s profit level does not seem to be a matter of public record, but the fact that it engages continuously in philanthropic activity gives clear evidence of its economic viability.
Second, BWB has clearly grown over time, likely displacing actual or potential competitors that were less organized, altruistic, or environmentally conscious. Finally, there is evidence to suggest that BWB delights the vast majority of its customers. According to a company that has collected more than 211,000 ratings from BWB customers, the bookseller has an overall satisfaction rating of 4.8 on a scale of 1 to 5 (Shopper Approved, n.d.).
BWB has generated social value on several fronts. First, it has obviously provided employment for a significant number of workers. Current, reliable information about the company’s labor force is difficult to find, but Sward (2012) cited a headcount of 350. Second, over the course of its history, BWB has donated nearly 29 million books, working through a large number of nonprofit organizations (Better World Books, n.d.-a, n.d.-f).
Third, BWB reports that it has raised more than $31 million for literacy and libraries (Better World Books, n.d.-a). This figure presumably includes a few different kinds of transactions:
BWB’s chief environmental value proposition is the fact that it enables books to be reused or recycled, depending on whether there is a market for them. To date the company has disposed of 365 million books in one of these ways, obviously reducing the impact on landfills (Better World Books, n.d.-a). In 2010 BWB won a WasteWise award, justified by the fact that in the prior year it had “recycled 7,090 tons of materials, which is the carbon dioxide equivalent to removing 2,900 passenger vehicles from the road for one year” (U.S. Environmental Protection Agency, 2011).
Also significant is BWB’s purchase of renewable energy credits (RECs) and carbon offsets. In 2016 the company reported purchasing 2,591,000 kWh of RECs corresponding to its electricity use (Better World Books, 2016b). BWB’s carbon offset program is customer-funded; it seeks to compensate for the impact of transporting books to their buyers (Better World Books, 2015). The firm asserts that this program has so far reduced the carbon footprint of shipment activities by 87,000 tons (Better World Books, n.d.-f).
A review of BWB’s donation and grant activities clearly shows that it has achieved a global impact in the social realm (Better World Books, n.d.-c). However, it has also impacted the environment on a global scale. Quoting from an interview with Xavier Helgesen, BWB’s founder and board chair, Sward (2012) wrote,
BWB has “turned waste streams into value streams … through simply making an existing waste stream available to a global market,” Helgesen says. Yet he admits that BWB also benefited from having the right idea at the right time. “When an industry is changing, the change creates opportunity for small outfits to do things the big outfits can’t or won’t do.” (p. 64)
Given that BWB uses resources in a regenerative manner, it comes as little surprise that it received a VIBES Circular Economy Award in 2015 (Better World Books, 2016a; VIBES, 2016).
Based on the evidence already presented in this essay, one might be inclined to view BWB as an ideal company. Capra and Luisi (2014) concluded that “one of the hallmarks of a systemic solution is that it solves several problems simultaneously” (p. 392). With its innovative business model, BWB has managed to create economic profit while looking after the interests of society and the environment. The firm is indeed exemplary in many ways, but it is not perfect. BWB has sought to balance a variety of competing interests, but there is evidence to suggest that the needs of an important stakeholder group—the firm’s employees—have received less than optimal attention.
According to Glassdoor (n.d.), BWB employees have given their employer an average rating of 3.3 on a scale of 1 to 5. Ratings of specific areas range from a high of 3.4 (“Culture & Values) to a low of 2.8 (“Compensation and Benefits”). The anonymous testimony of BWB’s workers should serve as a cautionary note to even the most socially and environmentally responsible of managers. Human organizations are systems that, like their counterparts in nature, can suffer not only from outright abuse, but also from benign neglect. It follows, then, that an organization’s quest for sustainability must be ongoing.
Bendell and Little (2015) defined sustainability leadership as “any ethical behaviour that has the intention and effect of helping groups of people achieve environmental or social outcomes that we assess as significant and that they would not have otherwise achieved” (p. 16). Judging by the outcomes that reported in this essay, BWB has benefited from the influence of such leaders—likely including the company’s founders and perhaps some of its managers. As was noted earlier, the company was acquired less than one year ago by a likeminded nonprofit. Given that B Corporations are required to take legal actions to ensure continuing accountability to their stakeholders (B Lab, n.d.-d, n.d.-e), one can only hope that BWB will continue to lead in the realm of social entrepreneurship in years to come, exhibiting an admirable combination of ethical responsibility and financial success.
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