In the news: Ben & Jerry’s and the importance of embedding purpose-beyond-profit

Recently, news broke that B Corp Ben & Jerry’s co-founder, Jerry Greenfield, has stepped away from the company after nearly 50 years. Following a series of disagreements with its parent company, Greenfield accused Unilever of having “silenced” Ben & Jerry’s social mission. Without commenting on Ben & Jerry’s situation specifically, this news has reminded us of a key issue for the founders of purpose-driven businesses who wish to protect their legacy: how to preserve the business’ purpose-beyond-profit for the long term, including through changes of ownership. Although UK company law doesn’t allow businesses to embed their purposes indelibly, there are ways for purpose-driven companies, including B Corps, to protect their purposes from the outset, some of which we consider below.

Avoiding ‘mission drift’

Where a business’ social and environmental impact is part of its brand and commercial strategy, the interests of its shareholders are more likely to be aligned with and in support of the business’ purpose-beyond-profit. However, it’s possible for a purpose-driven business to lose sight of its impact goals over time – this is sometimes described as ‘mission drift’. This can happen when founders depart and new owners/investors come in who have different ideas about what the business’ priorities should be. 

The sale of a company is a natural part of the business lifecycle and not necessarily to be avoided because an entity is a purpose-driven business. For example, being acquired by a larger parent company can support the scaling of the business and its impact. Previously, Bates Wells has written about B Corp acquisitions, exploring some key considerations for B Corps and potential buyers to help preserve purpose through a change of ownership. The key take away is to consider what needs to be done to protect the purpose-driven nature of the company, to help preserve the purpose into the future.

Embedding purpose reshapes the lens for governance

Many purpose-driven companies write their purposes into their articles of association. This makes the business’ social and/or environmental mission part of its legal purposes, or ‘objects’, which the board must pursue in the way it runs the company. Amending the articles in this way shapes the lens for governance for the board, enabling the directors to weigh up the interests of relevant stakeholders as needed, without being obligated, ultimately, to always give priority to the interests of shareholders.

Embedding purpose into the articles provides some protection for the business’ mission. It also signals to potential investors or buyers that the purpose is core to the business model. However, by default, articles of association can be amended by a shareholder resolution passed by a majority of at least 75%. Companies can raise this voting threshold by amending the articles, for example, so that the provisions in the articles that relate to the business’ purpose can only be amended by a unanimous decision of the shareholders. However, if the company is wholly-owned, a higher voting threshold will not prevent the owner from changing the purpose of the business.  

Going further: ‘locking-in’ purpose

Some businesses are breaking new ground in this area, by demonstrating different approaches to protecting their purposes for the long term.

Tony’s Chocolonely – A golden share model

In 2023, Tony’s Chocolonely adopted its “Mission Lock”. A ‘golden share’ was issued to an independent foundation, overseen by “Mission Guardians” intended to act as representatives of the business’ social mission. Tony’s mission and its ‘5 Sourcing Principles’ in its constitution cannot be amended without the approval of the golden shareholder. Effectively, the Mission Guardians can use the rights provided by the golden share to prevent changes to the purpose-related clauses of the articles, if those changes might undermine the mission. The Mission Guardians also have other rights of action intended to enable the public escalation of any serious concerns – these actions focus on holding the business to account through enhanced transparency. For more detail, Bates Wells has written about the Tony’s Chocolonely model.

Patagonia – Using steward-ownership principles

In 2022, Patagonia announced the transfer of the entire issued share capital of the business from the Chouinard family to two new entities: the Patagonia Purpose Trust and the Holdfast Collective, with each entity having a specific role in ensuring the longevity of the business’ purpose-beyond-profit:

• Holdfast Collective – holding 98% of the company’s shares, including the right to dividends but without decision-making powers.
• Patagonia Purpose Trust – holding 2% of the company and all of the decision-making powers.

The structure intends for Holdfast Collective to use the dividends received from Patagonia to address the climate and nature crisis. The Patagonia Purpose Trust has the right to approve company decisions, such as whether changes can be made to the company’s legal charter. Broadly, Patagonia’s structure reflects the principles of ‘steward ownership’, having largely separated out the right to economic participation into one entity, from the voting rights that can be used to protect the business’ purpose. For more, Bates Wells has written about Patagonia’s model and steward ownership.

Faith in Nature – Bringing key stakeholders into governance

Although this last example does not directly help to embed the business’ purpose within the articles, it is worth considering in this context. Faith in Nature amended its articles to create a “Nature Guardian” on its board, aiming to give the natural world “a voice and a vote” on the running of the business. Arguably, this arrangement sends a clear signal to potential investors/buyers that the business’ impact on nature is core to the business’ strategy and brand. While the mechanisms described in this article may not be familiar to mainstream investors/buyers, perhaps those who are open to understanding the business’ arrangements for embedding purpose are more likely to continue to support the mission as the business grows. Moreover, it is possible to use models like Faith in Nature’s Nature Guardian in combination with approaches to lock-in purpose, to help ensure a voice for key stakeholders within governance. For more, Bates Wells has considered Faith in Nature’s Nature Guardian model.

While there’s no approach that can protect a business’ purpose with absolute certainty, purpose-driven businesses do have tools available that can help to protect their missions. The right approach will depend on the business, and no one can predict what changes it might face over time, but thinking about how to embed purpose now might help the business to stay true to its mission, whatever the future holds. Bates Wells advises purpose-driven businesses on the best way to embed and protect their purposes for the long term. If you would like to know more, please get in touch with Louise Harman, Luke Fletcher or Sung-Hyui Park.

The material in this article is provided for guidance and general information only and is not intended to constitute legal or other professional advice upon which you should rely. In particular, the information should not be used as a substitute for a full and proper consultation with a suitably qualified professional. Please do contact the Bates Wells team if you require further information.