Professor Christopher Marquis On How Businesses Are Prevented From Becoming Powerful Forces For Good

Christopher Marquis is the Sinyi Professor of Chinese Management at the University of Cambridge and author of The Profiteers: How Business Privatizes Profits and Socializes Costs.

His research examines business sustainability and social entrepreneurship, and he has written two prior award-winning books, including Better Business: How the B Corp Movement Is Remaking Capitalism and Mao and Markets: The Communist Roots of Chinese Enterprise. Marquis is passionate about how academic research can help people around the world address some of the biggest crises of our day — including climate change, inequality, and racism.

Chris discusses why social enterprises are key drivers of positive outcomes for people and planet, and the challenges presented by our current system of capitalism and how this can be reimagined for a brighter future.

Highlights from the interview (listen to the podcast for full details)

[Sarah Ripper] - To start off, can you please share a bit about your background and what led to your interest in sustainable business and the social enterprise movement?

[Professor Christopher Marquis] - As listeners may be able to tell, I'm not English. I'm working at Cambridge, but I'm American. I started here about two years ago, but most of my academic background, job, and work history has been in the U.S. Growing up in the U.S. and teaching in a lot of business schools there imbued me with the idea that business is an amazing engine for positive social change, and my students are the ones who brought this movement to my attention. I was teaching a class around 2009, and one of my students told me about this phenomenon of B Corporations. They wondered that if I am interested in social impact, have I ever heard of this movement?

I'd never heard of this before; at the time I think there were only a couple of hundred B Corps in the world. It was just in the U.S., it had not moved to Australia, Europe, or Latin America yet, places where it’s now a very vibrant movement. I started studying this movement and called up B Lab, the folks who run the certification, to ask if I could start researching them, and that has led to this very long but rewarding process. There's an incredible amount of innovation in this community which spurs a lot of the work I've done.

As author of The Profiteers: How Business Privatizes Profit and Socializes Costs, can you share a bit more about the book's content, and your key findings and learnings from writing it?

People have said to me (and I'm sure I'm going to hear this more) that I've written a book called Better Business and now I've written a book called The Profiteers, which seem to be two books which would be written by two different people!

The core of my books is that business is an amazing force for good, but I think a key condition is that the broader economic systems, legal systems, and even the mindsets of people make it hard for business to do good.

This is where I’ve focused in The Profiteers, and the title references my critique of the broader system which facilities how businesses privatise profits and socialise costs. Firstly, I just want to say that the publisher wanted to highlight the 'sexy critique’ my book presents, hopefully get people to buy the book! When I published Better Business (my book on the B Corp movement), several publishers said to me, “[the content] is too good. People don't want good things, they're attracted by critiques,” so now I've focused providing a critique which relates to this idea of externalities.

Externalities are the social and environmental costs the public or environment bears for things like business production. Carbon emissions are a famous example, and lots of businesses emit pollution which has released carbon into the atmosphere. They don't have to pay for that, but global warming is happening, so we all pay for it. There are a lot of other issues, around health and damages that occur locally from pollution. After I wrote Better Business, I had the chance to engage with a lot of innovative companies, many of which are B Corps.

They described the creativity they were taking to address some of these externalities, so one salient example is from the entrepreneur Stu Landsberg, who co-founded and ran for a long time a company called Grove Collaborative. They make and sell a variety of health and beauty products, things like dishwashing liquid that frequently comes in plastic bottles. He described how the core of his business was focused on plastic, which was their largest externality. He thought businesses should be focused on eliminating the externalities of their core operations, and then I'd never thought about plastic as an externality. I'd never thought about how businesses should be thinking about their core purpose as resolving externalities, and as I looked around there were a lot of companies doing this in the environmental realm.

Grove Collaborative, Patagonia, Seventh Generation, Allbirds, are well known sustainability focused companies, but there are many social externalities around inequality and discrimination they need to consider as well. I decided to combine these two aspects, a critique of the system based on externalities, and discussing how pioneers are working to overcome those impacts and create sustainable businesses.

What are the unique features of the contemporary model of capitalism and how does social enterprise currently fit into that landscape?

There are a couple of things which define contemporary, but there is one main feature everything else flows from:

Businesses are overwhelmingly pushed to prioritise short term profitability, and this is clearly shown by companies that are in public markets around the world. The U.S. is one example, but around the world companies and in many cases their country’s legal frameworks place investors as the primary responsibility for firms.

Directors and managers, if they're considering things like being acquired or other business decisions, they must put profit first. This has now spilled over to all the venture capital, private equity, and other types of private investment in companies. Companies because of their investors and corporate governance, which many times legally mandate they follow profit first, are constrained as far as in how they can operate. This is the thing which attracted me to the B Corp movement, and which made me end up writing the book you mentioned (Better Business).

What the B Corp movement does that is very valuable is that it creates a variety of processes and mechanisms to break out of that short term profit trap. This is through their impact assessment, which helps companies benchmark, learn, and assess themselves on a variety of ESG metrics.

Companies can assess how they perform socially and environmentally by adopting corporate governance innovations and new legal models to understand their purpose and hold directors and managers accountable. The system is constructed as it is, but there are also ways to get around it.

What actions are entrepreneurs and businesses taking to create social impact and move towards a longer-term sustainability model?

The thing that attracted me to social entrepreneurs or innovators is that frequently they are not just selling certain products and services like typical entrepreneurs would be. Instead, they are trying to transform the broader system. It's about collective action for social change, and one example that comes to mind is Patagonia and their mission statement, which is not, “we want to sell a bunch of puffy jackets!” Their mission is to be in business to save our home planet. No business is perfect, so some of your listeners might say, "but Patagonia did this or that," but they do a lot of things which are well aligned with their mission beyond selling their products and services.

For social entrepreneurs, it's important to be engaging in other activities and have a broader mission. There are many different networks and communities where you can benchmark and learn ways to engage with the investing ecosystem, and help foster impact, investment, and policy.

This is where I think Patagonia really put their money where their mouth is; they have been active in trying to overturn the laws which forces businesses to focus on short term profits and avoid environmental issues.

What actions are required from people, governments, or legal institutions to progress the business for good movement?

If you think about key stakeholders, there are obviously governmental, investment, corporate actors, and individuals. A lot of the attention is in some ways been put on individuals; are there conscious consumers or people who will actually buy sustainable products? That is a way for those actors to avoid responsibility. I'll start with my recommendation to businesses; they need to authentically look at what they’re trying to achieve and be transparent and measurable in what they say they’re going to do.

One example of an issue is there has been a lot of greenwashing around corporate net zero targets. These are targets which were set out for 2050, but this makes no sense. I know that countries adhering to the Paris Agreement agreed on 2050, but companies can't be setting 2050 as a goal because no one that works there will be around by then. This means there will likely be no path of how to get there, they’re just saying, "we'll innovate between now and then to get there." There need to be more short-term goals. Another issue is that companies a lot of the time (and this is a big difference between countries and companies), have movable boundaries.

If a country like France, the United States, or Australia says that they’re going to be net zero, the boundaries of their countries are well defined. Companies however end up trying to move their boundaries, so they can say that their scope three emissions are not included in the supply chain or downstream of their consumer impact.

This boundary shifting or accounting shenanigans to try and use offsetting are going to prevent us from getting to net zero. One company that I think has tackled this program effectively is Allbirds. This is a shoe and apparel company based in the U.S., they make sneakers and a variety of other shoes out of natural materials like wool or products from trees. They look at their entire production stack, from where they get their materials from to how those materials are shipped and how their products are put together and shipped to the end user and ask, “how can we in each of these steps work to decarbonise our products?" This results in them supporting regenerative agriculture (frequently in New Zealand), changing their shipping from the air to the ocean, and even to how they make their products so that they may stand up longer, or don't require as much washing.

One thing companies can be doing is Looking at their entire production stack and how each of their elements of production can be decarbonised by setting intermediate goals. You need to be specific, measurable, and transparent.

Quickly I will say something about states and policies because I think this is such an important lever. Many entrepreneurs think this is going to be business led and propelled by innovation. There's a lot of amazing work out there, this is what I've dedicated myself to writing and communicating, but this voluntary basis is always just going to be the leading edge. These ideas need to be codified into standards that all companies are in some way forced to do, and I think the EU has taken a lot of great steps to do this. They have announced a new Green Claims Law, whereby companies can be sued, and penalties imposed if they're greenwashing. They have new laws mandating a set of accountability measures for companies pushing ESG performance deep into their supply chain. Enforcement of these laws will start this year, and these are important areas on a government level. The reason why I think they're so important is because they're not just going to apply to EU companies, but also to any company that wants to do business in the EU will have to report on their global footprint. Nike for example I'm sure has an EU subsidiary, and they will be subject to this law. But it will not just be their EU subsidiary, it will be Nike's global business. This can drive global change.

What inspiring projects or initiatives have you come across creating a positive change?

This is partially self-promoting, but I hope that the readers or listeners won't mind too much as it's not me directly! I've been inspired by some of my colleagues at the Cambridge Judge Business School where I'm a professor. When I joined two years ago, I gave some folks a copy of my book Better Business. One of the members of the executive education arm thought that although we are organised as a corporation, I bet we could become a B Corp. The executive education arm (the Cambridge Judge Executive Education) is its own organisation that reports to the university, and it offers programs on all kinds of different topics such as sustainability, leadership, and accounting to executives around the world. People come to Cambridge, even some come from Australia as well. He realised that this organisation could become a B Corp, and less than a month ago, it was finalised after two years of hard work. This organisation, the Cambridge Judge Business School Executive Education became one of the newest B Corps, and it is something that this organisation has taken on and I'm part of. I teach a lot in their programs (we have a lot of sustainability programs), but I mentioned it because they don't just want this to be about their organisation. Like all social innovators, they want to create a bigger impact, and so they started off with a discount for B Corps on programs. Also, they are going to be developing some special programs (which I'm also involved in) for B Corps themselves, courses on regenerative business and other topics we think will be particularly appealing.

Education is such an important lever, and I think that too much business school education has been focused on promoting short term profit-oriented models. At Cambridge, we’re trying to reorient the broader ecosystem and B Corp is an important part of this.

Can you share a bit more about your other published book Mao and Markets and then any other books or resources you find inspiring?

From 2010-2020, I did a lot of research in China. It was very much focused on sustainability, and a lot of my work over the past 20 years has focused on environmental themes. For a variety of random reasons I won't bore your listeners with, I ended up spending time in Hong Kong and Mainland China. In 2009- 2010, I realised that if I'm going to be focused on sustainability and the environment, I should also focus on the broader context. Air pollution was a tremendous problem there then, but the government was strong in its ability to implement change. In the U.S. it's messy and hard to get things done, but in China, if Xi Jinping says he wants to do something it gets done. Joe Biden in the U.S. however has more challenges with that.

I thought that this is an interesting context to understand environmental change, problems, and powerful governmental levers. Between 2010 and 2020, I spent three and a half years living in China. I talked to hundreds of Chinese businesses about sustainability, and one of the things that intrigued me was this dichotomy around having a vibrant market economy in many sectors, but the country being run by the Chinese Communist Party. Growing up during the Soviet U.S. Cold War, these two concepts seemingly couldn't mix, so how could this be? Many of the students I took to China over the years were also puzzled at this, you go to China and see it's amazing buildings and incredible subway, but ostensibly it is run by a communist dictatorship.

In the book I try to unpack and understand this model. It is also focused on sustainability and social responsibility through trying to understand how these two economic and political logics are mixed. The book is called Mao and Markets, and we look at how many of the foundational ideas in institutions and cultures that were set down by Mao are responsible for this unique melding of the two ideologies. I haven't been to China since COVID-19 (and I probably won't be going back anytime soon), so I'm glad to have that book as in some ways a capstone to my work on China.

Now I'm leaning much harder into the sustainability focus and being at Cambridge has been fantastic for this. One of the things that has inspired me and the first thing that came to mind when you asked this question is not a book. I read a lot of books as a professor, but I hope the listeners might be interested in something more practical. My recommendation is to look at the B Impact Assessment, the reason being it is a learning and education tool providing you with the ability to benchmark and understand your business more broadly.

The reason why I titled my first book Better Business is because I was interested in studying the social and environmental performance of companies. When I interviewed companies, they would say they started the B Impact Assessment because they wanted to be more socially and environmentally responsible, but they actually came out of it a better business.

If there are any entrepreneurs or companies listening, there’s an assessment online you can do very quickly. It's a great way to gauge and understand your business better, a free resource I'll pass along to your listeners.

Any final thoughts before we finish our interview?

My website is chrismarquis.com; I hope people will check out my work there. I’m also on LinkedIn and am easy to find through the Cambridge Business School. Feel free to be in touch, I enjoy learning about the interesting things companies and individuals are doing in this space, so please don't hesitate to contact me.