Ben & Jerry’s Social Cause Melts Away

Social enterprises do not aim to maximize their profits but to maximize the reach of their social mission. For some social enterprises, having a greater social reach means partnering with current market systems for accelerated growth. That is what Ben Cohen and Jerry Greenfield decided to do when they brought their company, Ben & Jerry’s, public. However, what they did not know was that their social cause would have no voice in the case of an acquisition. No voice whatsoever…

From Happy Once Upon a Time, to An Unwanted Acquisition
It’s 1978, and Ben Cohen and Jerry Greenfield start up an ice cream store with a social mission to be fair to its double bottom line; people and profit. They became profitable, responsible to the environment, fair to employees, and pretty nice to cows. So with a growing customer base, and the desire to expand the reach of it’s social mission to greater lengths, Ben & Jerry’s goes public.

But in 2000, its outstanding success grabbed the attention of Unilever, the world’s third largest consumer goods company. While Ben & Jerry’s founders and customers were incredibly worried about the security of the Ben & Jerry’s social cause if acquired  by Unilever, the company was public – their legal stakeholders are the shareholders, and they wanted an acquisition. As a publicly-traded company, the board was legally required to sell to the highest bidder in order to maximize the profits for the shareholders. When bought out by Unilever on August 3, 2000, Cohen noted that it was ‘just about the worst day of my life’.

Although Unilever made promises to uphold Ben & Jerry’s social mission, evidence of this has been diminishing over the years. In 2010, labels touting that Ben & Jerry’s contains “all natural” had been removed following pressure from a US watchdog who questioned the transition of the ice cream’s ingredients towards corn syrup, and hydrogenated soya bean oil.

Is the B-Corp the Knight in Shining Armour?
Needless to say, this remains one of the horror stories for the social entrepreneurial community. Time and time again, successful social enterprises face the trade-off between accelerated growth and their social mission. We saw a similar story repeat itself in 2006 when L’Oréal acquired the Body Shop. So what can a social enterprise do? Revoke itself from this market system altogether? Remain in the private sector for fear of undermining their social responsibility?

Becoming a Certified B Corporation could be one of the solutions for fearful social enterprises who do not want the legacy of their social mission to become diluted. B-Corporations;

1) Meet comprehensive and transparent social and environmental performance standards;
2) Meet higher legal accountability standards,
3) Build business constituency for public policies that support sustainable business.

In a traditional corporation, shareholders are the stakeholders who legally reign supreme. So while social enterprises can work  as hard as they can to look after their various social stakeholders (the environment, the workers, the community), when push comes to shove the shareholders’ interest will always direct the decision making. However, with a B-Corporation the shareholders, the environment, and the social cause are equally given authority in the decision making process. While a B-Corporation can only be registered in few US states, there are now over 600 B-Corporations.

The negative component of a B-Corporation is that it opens social enterprises up to even greater legal liabilities than their business counterparts who are ironically less socially responsible than they are (B-Corporations being legally responsible for environmental and social stakeholders as well as shareholders). Will any of the social enterprises’ legal council really agree to opening their client to greater opportunities of being sued? Only time will tell.

Whether or not a B-Corporation becomes the salvation for social enterprises moving forward – the story of a once small ice cream company can remind us of how delicate the situation is for sustaining a social mission in a for-profit enterprise.

Ice cream scoop photo via Shutterstock

by Dani Thé

  • Dan
    Sep 14th, 2012 at 11:50 | #1

    It is flat out not true that Ben and Jerry’s had to sell to Unilever. The simplistic notion that every corporate decision must be made with only profitability in mind is itself corrosive to ethical business behavior. Ultimately, it is the people in charge that matter, not the corporate structure.

    See this SSIR article: http://www.ssireview.org/articles/entry/the_truth_about_ben_and_jerrys

    Or the law review article (pdf):

    Boards of all corporations have enormous leeway to conduct their businesses in a socially conscious manner. The B Corp, as far as I can tell, is a solution in search of a problem.

  • Sep 14th, 2012 at 14:13 | #2

    Along your comment, we see that in 1998 Vermont legislature passed a statute that enabled a board to also consider social issues when evaluating an offer of acquisition. Thus, this muffled a board’s Revlon duty which would have once obliged them to maximize shareholder’s immediate return. This is another reason that I am also suspicious of the true value that could come from a B Corp when we have statutes such as these come forth. However, we should also understand that at the time of Unilever’s proposed acquisition, the board could have understandably been afraid to accept a lower offer as this statute had still remained untested by the courts.

    It should also be considered that Unilever appealed to both the shareholder’s financial and social interest; offering significantly more than Dreyer’s had, and also stating that they would work to uphold many components of Ben & Jerry’s social mission. So yes, as you say it is simplistic to assume it was only profitability that mattered, but Uniliever was not naive to this and they communicated both a social and financial offer – making this particularly difficult for the leadership to overcome.

    However, I have no doubt that whether or not individuals can agree that an aquisition such as this could have been avoided, this case does demonstrate that social enterprises face real difficulties when operating in a publicly-traded marketplace. Perhaps not insurmountable ones, but difficulties that must be given attention nonetheless.

  • Julie Lawell
    Sep 17th, 2012 at 11:11 | #3

    Thank you for the article. At least I know now why Ben & Jerry’s contains corn syrup, etc. It also contains palm oil (responsible for deforestation in Borneo, and the death of the limited number of orangutans still on earth). I won’t be buying Ben & Jerry’s or any other ice cream from now on. It’s too time consuming to check all the ingredients on all the labels for a product I don’t really need anyway.

  • eric Smith
    Sep 20th, 2012 at 18:13 | #4

    Permaculture now. Read the book. Duh.

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