The Social Justice Enterprise
Actually though...how business leaders can take meaningful actions toward building responsible enterprises.
Hey folks. This is the 9th edition of The Great Near, the final post in a three-part “better business” series, back after a quick detour on corporate commitments to racial equity. Today’s post explores a third frontier for responsible business: the social justice enterprise. (Part 1 / Part 2) A big thanks to Aaron Tanaka and the doers in the Common Future network who prove that a better way is always possible.
There is a better way.
Most dreams sound impractical until they become reality and every critic forgets they ever said anything.
Take electric vehicles. “If you walked around talking about EVs, everybody assumed you were smoking something,” said one environmental entrepreneur in 2007. Skepticism prevailed even though EVs had been around since the early 1900s. Edison and Ford actually worked together on an affordable EV, stoking the anger of oil cartels and possibly prompting a mysterious fire in Edison’s shop.
Conspiracy or not, the oil industry and automakers poured millions into discrediting the EV in the 1990s while Ford argued that they would “never be the future of environmental transport for the mass market.” This is curious when you consider where things stand today. Ford plans to invest $22B in electrification over the next five years, perhaps because a company that only produced its first car model in 2009, Tesla, is worth $655B. That’s thirteen times greater than Ford’s market cap.
Take another idea that has been laughed out of the boardroom—there is a better way to do business. Billionaire philanthropists and politicians who fear the short-term fiscal repercussions of change have started to demonize “woke capitalism” and redirect social responsibility to an underfunded nonprofit sector. It’s not surprising that they’ve co-opted language from Black social justice organizers to vilify even mild skepticism about capitalism.
Corporations have long funded the idea that socially responsible business models, from electric cars to accessible healthcare and plant-based foods, are economically unviable and unrealistic. That’s why Amazon promotes the myth that the only possible way to sustain its business model is to work employees at breakneck speeds, deny basic job security, and scam consumers. This narrative conveniently shifts when corporate execs realize that social change, or even the guise of it, can increase power and profits as was the case with Ford. (The new all-electric F-150 is enough to make this city girl swoon.)
Business ⮕ Business + CSR ⮕ Social Enterprise ⮕ Social Justice Enterprise
This series explored the evolution of public demand for businesses to address the problems they create, the wishful thinking that social entrepreneurship would be the anecdote, and a third frontier for socially responsible business models—the social justice enterprise. Despite laudable intentions, social entrepreneurship has long suffered from a fuzzy theory of change that overvalues market-based solutions and undervalues politics and power. The social justice enterprise is an evolution of the social enterprise that flips the scales.
Aaron Tanaka, Director of the Center for Economic Democracy, coined this term in a 2019 Nonprofit Quarterly essay that inspired this series. Aaron is a personal role model and a Boston-based community organizer who has built a number of institutions, including the Boston Ujima Project, that model the principles of the SJE.
This post summarizes three pillars of the SJE with context from my conversation with Aaron and examples of businesses that model these practices (or don’t). Spoiler alert: no business beyond the local level perfectly meets these parameters. This model isn’t meant to exclude, but to offer a starting point to the question: “How can business leaders take meaningful actions toward building responsible enterprises?”
What makes a social justice enterprise?
1. Stakeholder Ownership & Control
—Worker and Consumer Democracy
—Community Collective Bargaining
Stakeholder ownership means that a business is partially or fully owned by employees, customers, or community members, which democratizes decision-making and enables more people to share in a company’s success. Usually, this idea leads back to cooperatives that can come in many shapes and sizes. Worker cooperatives are fully owned by employees, but other types of co-ops can be owned by consumers, including credit unions or big retail chains like REI. For more on co-op structures, check out this great report by Urban Institute.
Employee stock ownership plans, or ESOPs, can be offered by any business, not only cooperatives. They function like a retirement plan that offers shares of stock to employees. On the principle of worker ownership, Aaron added: “These are changes that really matter. It’s different from something like corporate diversity, which isn’t even on my list of the things that I work on.”
Worker ownership does not mean that everyone always participates in every decision, nor that there is no hierarchy. If that were the case, a company like Mondragon probably could not have grown to become the seventh-largest company in Spain. Most co-ops are admittedly much smaller, but decision-making is by nature more democratic, which can redistribute wealth, and more importantly power, beyond a company’s shareholders.
If you’re still unconvinced about co-ops, consider that farmer-based cooperatives were the first to provide electricity to rural areas when large companies wouldn’t serve them. They currently provide electricity to 12% of the U.S. population.
Case studies: Bob’s Red Mill is 100% employee-owned and offers ESOPs. REI is a member-owned company. At the local level, Baltimore is a hub for worker-owned businesses like Red Emma’s and Taharka Brothers (s/o to my favorite city 😎). Both are investments of The Baltimore Roundtable for Economic Democracy (BRED), an organization that strengthened the city’s cooperative ecosystem.
“Worker and consumer democracy” means engaging stakeholders who are impacted by the company. In practice, this means that customers, community members, or employees could be offered seats on company boards or be surveyed for major decisions. This idea may seem outlandish in the U.S., but Germany demonstrates what is possible. It has a long history of codetermination or requiring workers to elect representatives for almost half of a company’s board (half!). This applies to all German companies with over 2,000 employees, and there are similar laws for small businesses. A handful of U.S. companies have received investor requests to explore employee board representation this year, including Starbucks and Disney, but these measures are unlikely to pass.
Companies could theoretically offer board seats to employees or turn to their stakeholders before making major decisions, but their actions would be voluntary and nonbinding. Consider Facebook’s creation of a new “Supreme Court.” While it has the final say over individual posts, it can only suggest new community standards, likely because these recommendations would cost Facebook real advertising money. This is not consumer democracy.
What might happen if a food-processing company like Smithfield Foods instituted a community board? People might cause a ruckus about the industrial-sized pig waste lagoons in their backyards. Since there are no “economically viable alternatives”—their argument—I doubt they’ll implement such a board without a legal requirement anytime soon.
In absence of legislation, companies could implement binding resolutions that give stakeholders a seat at the table. If you’re like, “actually, tell me how that would happen,” check out these recommendations from Harvard Law School.
Case Studies: At the local level, CERO Cooperative and Hayley House are great models. I haven’t found an example of employee board representation at a large company since a failed attempt at Chrysler in the 1970s to keep a labor union representative on the board. (*sigh*) There are some signs of progress. Airbnb has created a“Stakeholder Committee on Airbnb’s Board of Directors,” but it doesn’t sound like employees have more than advisory power. Walmart workers have also requested one seat on the board, a proposal that was rebuffed but gained media attention.
Community collective bargaining means that a company’s business practices reflect the values and interests of the community. In practice, companies could create community-governed standards or adhere to third-party certifications that are guided by the interests of larger communities. B Corp is one example of a third-party certification that measures a company’s entire social and environmental performance and certifies companies that score high enough on their assessment. (Patagonia and Danone North America are prominent examples of B Corps). B Lab has announced that they are doubling down on racial equity, climate justice, and a stakeholder-driven economy in recruiting and supporting B Corps. This is the change we like to see. 👏
Case Studies: The Boston Ujima Project created a Good Business Certification for local businesses in the Ujima Business Alliance. This certification is democratically governed by Boston’s working-class neighborhoods of color and updated yearly by Ujima’s voting members. It includes requirements that reinforce good business practices, like electing at least one worker to a company board with outside investors and committing to an employee ownership feasibility study.
2. Social Impact & Community Benefit
—Workforce Inclusion and Labor Rights
—Regenerative Business Practices
—Positive Products and Service
To the great disappointment of every DEI coordinator with a five-point racial equity plan, building an inclusive company must go beyond recruiting diverse talent. It means guaranteeing basic labor protections (from worker safety to a predictable work schedule) and creating an environment that is actually welcoming of all people.
Many organizations are now reckoning with white supremacy culture in the workplace. These are the invisible forces that stem from a dominant white culture, like a focus on individual performance, perfection, and a constant sense of urgency. Companies could also provide extra support to employees who are caregivers in their families, promote objective measures for promotions, develop a third-party forum to contest disciplinary action or process grievances, and pay their interns (it’s 2021).
Case Studies: It’s hard to know whether a company’s DEI pledges actually create an inclusive environment (remember Bon Appétit), so I won’t make assumptions. Patagonia however does go above and beyond many companies of its size by providing health care and sick time for all employees, paid maternity and paternity leave, and access to on-site child care.
When it comes to the environment, social justice enterprises must actively repair the environmental systems they touch and seek to do less harm. Most companies don’t make it to the ”do less harm” part as it can require scaling back the business or investing heavily in environmentally-friendly alternatives. Exxon can sponsor as many beach cleanups as they want, but these efforts will be futile and frustrating for everyone watching them expand drilling operations around the corner.
Aaron shared what this looks like in practice: “Transitioning to 100 percent renewable energy, adopting zero-waste practices, incentivizing suppliers to adopt industry best practices, and implementing policies that actively contribute to the mending and regeneration of our ecosystems.”
The circular economy movement—intentionally designing waste out of supply chains to keep products and materials in use—has helped promote businesses that practice regeneration. The Ellen MacArthur Foundation and Circle Economy’s Knowledge Hub are great resources for case studies on businesses that practice these principles.
Patagonia again demonstrates what is possible. Not only are they hyper-transparent about their supply chains, carbon footprint, and working conditions, they have a self-imposed environmental tax, 1% for the Planet, that directs a portion of revenues to environmental nonprofits. They actively engage in politics, having once sued the Trump administration to protect public lands. (I imagine that it will be hard to sell outdoor gear without…nature. Protecting the environment is just good business.)
Case Studies: The best models are local. Rather than provide a laundry list of examples, here are a few organizations that work exclusively with small businesses that prioritize regenerative practices: Kitchen Table Advisors works with farmers of color and Indigenous land stewards who are leaders in regenerative land management, Accelerating Appalachia is an accelerator for nature-based businesses, and Boston Impact Initiative invests in triple-bottom line businesses that prioritize ecological stewardship.
3. Worker & Community Power
—Worker Organizing and Policy Advocacy
—Electoral Engagement and Mobilization
—Social Movement Infrastructure
The social justice enterprise organizes its workforce as educated, engaged actors for social change. Aaron points out that social justice movements have historically sidelined the act of building political power to nonprofits and labor unions, even though businesses can be a key agent of change. He added:
“The reality is that enterprise has been a major and important driver in U.S. politics starting from the slave trade. The idea that businesses aren’t involved in political work is prevalent, but we’re missing the bigger picture if we think that businesses aren’t political. Corporate allocations for lobbying, PACs, and advertising are examples of how business is already embedded in politics. For social movements, I think about the aligned institutions that have political power to wield but haven’t been activated, like the small business sector. We’re at a place in human history where many crises are coming to a head, so everyone who wants to be part of the solution must have pathways to join. The goal is to bring along social enterprises and build socially-conscious businesses that think beyond their operations and see the enterprise as a place for building political power in coordination with grassroots organizations.”
The most distinct feature of the SJE is the ability to leverage the private sector to build political power in oppressed communities, for example, by providing employees with civic engagement opportunities or allowing workers to act on their political interests without repercussion. Many companies already provide paid time off for voting or working at the polls, though this is the bare minimum. Others have signed pledges to help workers get to the polls and provide flexible work arrangements.
Businesses could also provide resources that educate employees about community issues, offer voter registration cards and election information, or actively support progressive policies. For example, CEOs from hundreds of companies, including Converse and Ben & Jerry’s, have supported the policy to end qualified immunity for police officers.
Case Studies: I struggled to find examples of Fortune 500 companies really putting this principle to work, but Ujima’s Good Business Directory offers a great list of Boston-based businesses that are mobilizing their workforce.
Electoral engagement means encouraging people in historically marginalized communities to participate in elections and politics. Beyond voter turnout efforts, the SJE could also bundle donations for aligned political campaigns. This idea may give people across the political spectrum pause, but corporations are already donating massive sums of money to politicians without employee involvement.
Popular.info reported that Comcast donated $755,000 in the 2020 election cycle to politicians who voted to overturn the election. Comcast can say that “voting is fundamental to our democracy,” but they are actively funding the largest attack on the voting rights of people of color since the Voting Rights Act was enacted.
Many businesses have no problem playing politics, so let’s demand that they act in the interest of all stakeholders. I’d find it easier to believe those Business Roundtable CEOs who say that they support stakeholder capitalism if they fought for employee wellbeing in the political arena as hard as they fight for the interests of shareholders.
Case Studies: Contrast Comcast with Patagonia. The New York Times remarked that Patagonia has been “unapologetically political since the 1970s.” While lobbying for stricter labor and environmental standards, they’ve also used their position to recruit poll workers and resource organizations making elections accessible, specifically in BIPOC communities. It doesn’t hurt that being explicitly political has actually helped their brand. Sales have quadrupled over the last decade and recently surpassed $1 billion.
Is it possible?
I expect some of you might read this with an eye of skepticism. Aaron has also made the point that integrating many of these practices can be costly, time-consuming, and even “bad for business.” When asked about this, he clarified:
“I definitely don’t think these practices are inherently limited to small, place-based companies. I think the biggest barrier to larger corporations will be changing ownership structures. There are great examples of companies making products or services that benefit communities, although there is a lot of work to be done in terms of building worker power. Larger corporations that don’t already see themselves as social businesses are unlikely to adopt these principles if they are not required to. Some level of existing culture is conducive to change.”
We need policies that will encourage businesses to adopt SJE principles in addition to capital that will fund the transition. If banks and other capital providers are not willing to fund worker ownership transitions or major investments in clean technology, we can’t expect CEOs to advocate for change.
None of these practices are easy, especially for companies that may employ many thousands of employees. Even the most progressive companies, like Equal Exchange, a worker-owned farmer cooperative, face pushback. Look no further than the comments on their blog post where they said “Black Lives Matter.”
So… is the social justice enterprise possible? It needs to be. The long-term financial risks of exorbitant wealth concentration and environmental destruction are too great. I’ll leave you with a final quote from Aaron on how we will realize the vision of the social justice enterprise:
Rather than bending to the system, we bend the system to us.
What’s Up This Week? 👀 ✨
Caught my attention
CNBC posted “Tech companies made big pledges to fight racism last year — here’s how they’re doing so far.” This is a great follow-up to my last post. Things do seem to be changing (substantial multi-year grants to community organizations, massive support for HBCUs, etc.) but companies are still shying away from the deep, introspective, power-shifting work. Notably absent: pledges to halt contributions to politicians who are suppressing the vote, commitments to employee representation on boards, and wealth-building opportunities for low-wage workers (sup Amazon).
A deep dive
Check out this report from our friends at The American Economic Liberties Project, Access to Markets: The Other Red Tape: Market Concentration and The Rise of Private Gatekeepers. As the title suggests, this paper shows how corporations are increasingly acting as gatekeepers to markets, thus acting almost like private regulators. For more on this topic, I highly recommend Matt Stoller’s awesome substack, BIG.
Someone you should know about
You should know about…Elaine Rasmussen! Elaine is the CEO of Social Impact Strategies Group, an organization based in the Twin Cities that designs community-centered strategies for philanthropists, nonprofits, foundations, and investors. Elaine and her team do incredible work, from advising investors to align their money with their values to supporting entrepreneurs of color to help grow their businesses. A few posts back, I highlighted Elaine’s insightful presentation at the Skoll World Forum on the origins of the racial wealth gap. Stay tuned for the next post where I’ll get into the weeds of a new character-based lending initiative that Elaine has been co-leading with others in the Common Future network.
until next time,