Do Ethical Companies Survive the Buy-out?

TreeHugger had an interesting post about the fate of small, ethical companies in big corporate buy-outs. The scenario has been playing out with some hard true green favorites taking on questionable parent companies - like Burt’s Bees, recently purchased by Clorox, and The Body Shop, who sold to L’Oreal last year.

In Lush Advice for Green Entrepreneurs, Bonnie Alter highlights some of the ethical ground rules that Lush founder Mark Constantine has used to avoid the big sell or sell-out. At the top of the list, “Do not sell shares to investors whose moral priorities may be different from your own.”

Lush sells “fresh handmade cosmetics” in 79 countries around the world. Although Lush products do contain parabens, they are not tested on animals, do not contain animal ingredients and are sold with minimal packaging. Lush is held by Mr. Constantine, his wife and just one other investor, Peter Blacker.

Constantine is hesitant of the stock market and critical of moves that some of his contemporaries have made, like The Body Shop’s founder Anita Roddick. The Body Shop forged an ethical, cruelty-free mission but is now in the hands of L’Oreal, a company that still tests on animals.

Still, Constantine hopes to continue to expand. The question is how. He has been wondering if “another kind of stock market” makes sense, one where the players are playing by the same ethical rules.

As far as consumers go it seems that first impressions can be lasting. For instance TreeHugger recently called Burt’s Bees a “Maine-based” company even though the company had moved to a factory in North Carolina long ago. Likely, the misprint wasn’t because the author was misinformed but rather because that’s sort of how we like to think about Burt’s Bees, as a quaint success story from the deep woods.

Companies that start with ethical, sustainable missions seem to have a lingering identity, even if the image of goodness has been bought and is distributed by someone else. However, consumer’s are savvy and as soon as news of a big corporate buyout spreads to long-time loyals - those that funded the success with their own values and money - the song will change with the tune.

It’s likely that commercial success will follow many of the smaller, value-driven brands that are absorbed by big companies. But is a trade of values for capital the only option? Green investment companies, socially responsible investing and corporate social responsibility are on the rise - and not just from companies who are buying into trends but from deep-pocketed, ethical pioneers. Soon, the current crop of companies giving in to questionable buy-outs might find that a better way was just around the bend.

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