A New Business Model
So, how do you, the consumer, know whether a company is acting in a way that benefits society and not just profiting from it?
And how do you, the executive, know whether your company is really doing all it can to protect the environment, create a positive work environment and help the communities in which you operate, both locally and globally?
Jay Coen Gilbert and his team at B Lab have devised a way to answer both while potentially growing a new sector of the economy.
What’s B Lab? The nonprofit, with offices in New York and Pennsylvania, evaluates and certifies companies as B Corporations or B Corps. The “B” stands for benefit. Gilbert is a co-founder, along with Bart Houlahan and Andrew Kassoy.
Here’s how they describe it: “Our vision is simple yet ambitious: to create a new sector of the economy which uses the power of business to solve social and environmental problems. This sector will be comprised of a new type of corporation—the B Corporation—that meets rigorous and independent standards of social and environmental performance, accountability and transparency.”
Earning a B Corps certification is like getting Fair Trade Certified or the USDA organic seal. It’s the stamp that lets consumers know there’s substance behind claims of corporate benevolence—not just smart marketing.
“As more and more people get interested in this, more and more people are claiming that they are green or responsible or sustainable. It’s hard to separate the folks that are walking the walk vs. those that are just talking a good game,” Gilbert says.
Consumers are demanding accountability. Research suggests that 73 percent of Americans care about the company behind a product, but less than 1 percent of consumers believe a company’s claims outright, Gilbert says.
“No one wants to buy a supposedly green product that was made with slave labor,” he says.
More than 3,000 businesses have gone through the free, online B Corps impact assessment, which forces executives to consider all aspects of their company’s operations and their impact on stakeholders and the environment. Those scoring an 80 percent or higher are eligible for certification, pending a B Lab review and other steps.
As of June, about 420 companies, ranging from engineering firms to artists, from tradespeople to social enterprises, had earned the B Corps seal. The B Lab certified 75 percent more B Corps businesses in the first half of 2011 than in the first half of 2010.
What’s really unique is that the certification requires companies to rewrite their bylaws so that social benefit becomes a required part of corporate decision making. Doing so liberates board members from shareholder demands and also protects them when their civic-minded decisions mean lower profits.
“We are looking at the whole company… [and] getting at the basic legal DNA of the business,” Gilbert says.
Pushing that matter further are state legislatures, which are beginning to set statewide legal frameworks for B Corps, offering even greater protection to these for-profit firms. In four states, with six more on the way, new businesses can incorporate as B Corporations, rather than C Corps or LLCs or other designations.
Frameworks like that can prevent takeovers, such as the infamous case of Ben Cohen and Jerry Greenfield, who 11 years ago fell prey to the laws of shareholder responsibility that forced them to sell their socially minded ice cream company.
Companies earning the B seal are as disparate as the Greyston Bakery in Yonkers, N.Y., which offers jobs to those considered unemployable, the Freelancers Insurance Company, which was established to provide independent workers with affordable benefits, and Re:Vision Architecture of Philadelphia, which specializes in sustainable design and development.
Wayne Norwood, president of Norwood Marble and Granite outside Washington, D.C., recently attained B Corps status. The certification just made sense; “We were always environmentally and socially conscious,” he says.
Among the company’s highlights: employee-shared ownership, use of third-party suppliers that also adhere to high social and environmental standards, and a commitment to environmental stewardship that puts it in the top 10 percent of the industry for water use reduction.
Even so, Norwood says the process was rigorous, and he had to further refine some of his practices before earning the certification.
“Look at your business and where you’re going,” Norwood advises other business owners. “This is the wave of the future. All of us who live on this planet have an opportunity to give back not just to Mother Earth but to our employees and our communities.”