Ensemble Capital Becomes a Certified B Corporation

26 June 2023 | by Sean Stannard-Stockton, CFA

“Whatever affects one directly, affects all indirectly. I can never be what I ought to be until you are what you ought to be. This is the interrelated structure of reality.” ― Martin Luther King Jr.

In our white paper Understanding Stakeholder Value, we explained the way that our investment process seeks out companies which understand that the “interrelated structure of reality” means that long-term profits are a function of the company creating value for all of its stakeholders. Sustainable profits are the shareholders’ portion of the value a company generates for the communities it serves – customers, employees, suppliers, and the society within which it operates.

We have long operated Ensemble Capital with this philosophy in mind and in recognition of our approach to business, we have recently become a Certified B Corporation.

The brilliance of capitalism is that it can create conditions under which buyers and sellers come together in mutually beneficial transactions. While dysfunctional markets can give rise to exploitive transactions in which profits are extracted from customers, employees, or other stakeholders, truly sustainable and functional economic transactions generate value for all participants. This is why so many successful companies repeat the mantra “always put the customer first.” Because these companies know that the surest path to sustainable profits for shareholders is to generate enormous value for your customers.

B Corp Certification means that a company has been verified as meeting B Lab’s high standards of social and environmental impact, that it has made a legal commitment to stakeholder governance, and that it is demonstrating accountability and transparency by disclosing this record of performance in a public B Corp profile.

B Corps make a commitment to consider the interest of all stakeholders in their business operations. By certifying, B Corps step into a framework for continuous improvement. In order to maintain certification, companies must undertake the assessment and verification process every three years, demonstrating they are still meeting B Lab’s standards – which themselves are always improving, with continual input from expert stakeholders.

While you may not be familiar with the concept of B Corporations, you have certainly heard of many of the 6,000 certified B Corps found around the world:

  • Global businesses such as Danone, Unilever, Patagonia, and Ben & Jerry’s.
  • Wealth managers such as BakerAvenue Wealth Management, Wetherby Asset Management, and Abacus Wealth Partners.
  • Asset managers such as AKO Capital and Trillium Asset Management.

As we explained in our paper exploring stakeholder value analysis, our investment strategy is not meant to be an ESG strategy nor seek to conform to 3rd party ESG rating systems. Rather than simplistically viewing stakeholder relations as a compliance driven, “check the box” framework, we believe that great companies recognize the complex balancing act required to deliver value across their stakeholders. And we believe reasonable people can have different perspectives on whether a company is exploiting some of their stakeholders or whether instead the stakeholders are taking a company for granted. Importantly, no company will always get this balancing act right. Perfection is unattainable, but a culture of continual improvement and a willingness to recognize and correct mistakes is a hallmark of high performing organizations.

There is a natural tension between stakeholders that smart management teams need to understand and manage well. All customers would like lower prices. All employees would like higher pay. A company that simply seeks to create value for one set of stakeholders without regard for the others, including shareholders, is going to find its strategy unsustainable.

The tricky part about running a business is figuring out how to create tremendous value for your customers, even as your employees are thrilled to work for you, your suppliers value your business, and society is either indifferent to your activities or you are actively making the world a better place. And you need to do all of this while delivering high and sustainable profits for shareholders.

Managing stakeholder value effectively is a challenging task, which many management teams fail to achieve. And no company, including Ensemble, will strike the optimal balance at all times. But by becoming a Certified B Corporation we are making tangible, through the lens of third party verification, the way that we have long run our company with all our stakeholders in mind. We have much in the way of improvements we hope to make in the years ahead, and we appreciate the role that all of our stakeholders have played in creating the firm we are today.

For more information about positions owned by Ensemble Capital on behalf of clients as well as additional disclosure information related to this post, please CLICK HERE.

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