Nasdaq just gave former unicorn Allbirds a 6-month warning to raise its stock price or risk getting booted—experts say to look at its B Corp status

Allbirds was once a direct-to-consumer darling, promising a shoe that was not only comfortable and fashionable, but environmentally sustainable, capturing the attention of investors like Leonardo Dicaprio and Warby Parker founder Andrew Hunt. In fact, its social purpose was inextricable from its business model. Now it’s on a six-month warning.

The San Francisco-based eco-friendly shoe brand received a non-compliance notice from Nasdaq on Monday after its share prices fell below $1 for 30 consecutive days. Hovering around $0.60 per share for the past two weeks, the last time Allbirds stock was above the dollar cutoff for the market’s listing compliance was Feb. 15.

According to Nasdaq's listing rules, Allbirds has six months, or until Sept. 30, to regain compliance by having its common stock close at over $1 for 10 consecutive business days. The company said in a press release that it will “actively monitor” stock prices and “consider actions that it may take in response to this notification.”

“Over the past year, under our plan, we significantly improved our business model–cleaned up inventory, captured cost savings, reduced our operating cash use, and signed agreements with international distributors–providing the runway and financial flexibility to continue to execute on our plan and position the Company to drive profitable growth in future years,” an Allbirds spokesperson told Fortune in a statement.

Allbirds’ fiscal 2023 was marred by a near 15% plummet in net revenue and gross profit of $104.2 million that was down 41% compared to $129.6 million in 2022. Last month, COO Joe Vernachio stepped up to helm the company as CEO and implement a “strategic transformation plan” that included closing down 10 to 15 U.S. stores and using a distributor model in international markers, per its fourth-quarter earnings report.

Allbirds’ recent struggles highlight the company’s albatross: It has never turned a profit in nine years of business. While the company prioritized its sustainability mission, there’s evidence it came at the expense of actually making money for the company. To understand what’s going on, you need to dive into the world of B Corps.

Environmentally or economically sustainable?

Allbirds gained B Corp classification—meeting the social and environmental standard set by independent non-profit B Labs—in 2016 at a time when CEOs coveted the certification, wanting to earnestly make a difference through this status that comes with an explicit social mission. There are over 6,000 certified B Corp companies as of 2023, a figure that has tripled since 2016.

Outlined in their Product Carbon Footprint Methodology, Allbirds sources natural materials such as sugarcane and tree fibers, as well as recycled materials to manufacture its shoes. In 2023, the company committed to reduce its per-unit carbon emissions by 95% by 2030. But its environmental pledges haven’t been consistently profitable. Allbirds disclosed in a Dec. 31 SEC filing, that it accumulated $391.2 million in deficit as of the filing’s publication: “We have incurred significant net losses since inception and anticipate that we will continue to incur losses for the foreseeable future.”

While hit with a remote work boom that saw decreased demand for work-appropriate footwear, Allbirds ultimately failed to understand its audience: Even though the company’s founder cared about the environment, their target audience really didn’t, Neil Saunders, GlobalData managing director of retail, told RetailDive in March.

“​​Allbirds has pushed the sustainability message because it is a passion of its founder,” he said. “That’s fine, but the passions of individuals are not selling strengths if they are misaligned with the market.”

The company’s attitude for sustainability above all else was apparent after Amazon introduced Galen wool sneakers in 2019 that cost 50% less. Then-CEO Joey Zwillinger admitted that he wasn’t upset that Amazon adapted a similar design—but he was that Amazon did so without also mimicking Allbirds’ sustainability practices.

“Given what I know about manufacturing, there is no way you can sell a shoe for that low while taking care of all of the environmental and animal welfare considerations and compliance we take into account,” Zwillinger said in an interview with Co.Design in September 2019. “Amazon is stating that it wants to be a green company. It should be taking steps to make their products more sustainable.”

Amazon denied copying Allbirds’ design, saying in 2019 that “This aesthetic isn't limited to Allbirds, and similar products are also offered by several other brands.” The e-commerce giant sells Allbirds on its marketplace.

The B Corp blues

To be sure, some B Corp firms have used the certification as a form of virtue signaling, touting commitments to social and environmental causes while also finding ways to cut corners. While Nestlé subsidiary Nespresso gained B Corp certification in 2022, smaller coffee roasters have accused the company of paying its coffee bean farmers a pittance and selling single-serving cups that generate immense waste. Nespresso posted 5.3% organic growth in fiscal 2023.

But others, as in the case of Allbirds, have held onto their political convictions to, at times, the expense of making money. Ben & Jerry’s, a certified B Corp since 2012, has been parent company Unilever's problem child, as its generated backlash for its social stances, such as refusing to sell ice cream in Israeli-occupied Palestinian territories and saying the U.S. was “founded on stolen Indigenous land.”

Last month, Unilever decided to restructure the company to separate its ice cream unit, including Ben & Jerry’s, laying off 7,500 mostly office-based employees. The restructuring began immediately and is slated to be completed by 2025.

Unilever and many of its subsidiaries have had B Corp status for years, though not always to the delight of its shareholders. Investors such as Terry Smith, who is behind Unilever’s 10th largest shareholder Fundsmith, long criticized Unilever for its social statements detracting from business.

“A company which feels it has to define the purpose of Hellmann’s mayonnaise has in our view clearly lost the plot,” he wrote in a 2022 letter to investors.

Smith praised the conglomerate’s decision to restructure. In a similar moment of reckoning, Allbirds’ leadership has offered some optimism on the future of the brand. The company revamped its iconic wool sneaker late last year in an effort to go back to basics.

“People love a comeback and I think they love what we stand for," Brown told Business Insider in November. "And now we just have to go execute really well."

This story was originally featured on Fortune.com