B Corporations – Business as a Force for Good

When your company began, you had a dream – a dream of how your company could make a difference in the world – to make people’s lives easier or better, safer, cleaner, or just less stressful. But getting the word out is a huge challenge. There are two reasons for this:

The first is skepticism. Consumers are tired of corporations taking advantage of their trust. We hear about this all too frequently.

Some of the worst offenders of consumer trust include:

Company      Industry
Volkswagen Diesel Engines
Enron Energy
Adelphia Cable TV
Lehman Brothers Financial Services
Bear Stearns Financial Services
BP Oil Industry
Wells Fargo Banking Industry
Takata Auto – Air Bags

The second is competition. Companies are bombarding the public with marketing materials. The Internet is the front line – the never-ending stream of ads and emails we all receive every day – but we are also bombarded by television ads, billboards,  radio ads, newspaper ads and more. So how does a small socially or environmentally responsible business stand out from the crowd?

One Way is to Become a B Corporation

The official B Lab B Corporation certification emblem.
The official B Lab B Corporation certification emblem.

A  B Corporation meets “the highest standards of verified social and environmental performance, public transparency, and legal accountability, and aspires to use the power of markets to solve social and environmental problems.”

Shareholder Capitalism vs Stakeholder Capitalism

The Birth of Shareholder Capitalism

The economist, Milton Friedman, promulgated Shareholder Capitalism. In his book, Capitalism and Freedom, he said “There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”

That was one of the first times the purpose of a company was defined. It was interpreted as meaning: The sole purpose of a company is to maximize its value for its owners and those who purchased its stock.

B Corps take a different approach.

They put stakeholder capitalism into action. B Corporations are in business for their stakeholders, where stakeholders include employees, the community, the environment, suppliers, customers and shareholders. In their Declaration of Interdependence they state it this way:

We envision a global economy that uses business as a force for good.

B Corps are purpose-driven and create benefits for all stakeholders, not just shareholders. The leaders of this emerging economy believe:

  • That we must be the change we seek in the world.
  • That all business ought to be conducted as if people and place mattered.
  • That through their products, practices and profits, businesses should aspire to do no harm and benefit all.
  • That to do so requires we act with the understanding that we are each dependent upon another and thus responsible for each other and future generations.

How a B Corp is Formed

To become a B Corporation, a company has to go through a certification process. It starts with a self-assessment across the following areas: governance, workers, community and environment.

Governance

  • How is the company run?
  • How accountable are its executives?

Employees

  • Are employees paid fairly?
  • Is their benefit package appropriate?
  • Is their training adequate?
  • Is the workforce diverse?
  • What does job creation look like?

Community

  • Do the company’s products or services benefit the community?
  • How does it treat its suppliers and distributors?
  • How involved is the company and its divisions and branches in the community?
  • Does it contribute both time and money to local efforts?

 Environment

  • Are the company’s products and services safe for the environment?
  • Are their offices, plants and the land they’re on environmentally safe?
  • Is the way they distribute their products or services safe for the environment?
  • Do they require their suppliers to be environmentally conscious?

To become a B Corporation, a company must score a minimum of 80 out of a possible 200 points on the assessment. Only a small percent of companies make the grade. The assessment points out areas where the company needs to improve.

Sometimes companies go through the assessment process several times before they score 80 or higher. Here are two cases where companies talk about the assessment process:

  1. Cabot Cheese of Montpelier, VT is a B Corp. They took the assessment three times in five years before scoring above 80.
  2. Fireclay Tile of San Jose, CA. On its assessment, it scored 61 and was not certified. However, the assessment revealed critical areas for improvement.

Once certified as a B Corporation, a company has to pay an annual fee to maintain their status. The certification process is managed by B Lab, the organization behind the scenes. Every year, B Lab randomly selects 10% of certified companies for a more detailed certification evaluation, and every two years each B Corp has to recertify.

B Corporations Have Advantages

Here are a few:

Increased Transparency

Customers and the public can easily check to see what the company’s beliefs are and the way it operates. They can see the rigorous certification process the company has gone through. That generates trust even before a customer knows what product or service the company offers.

Greater Stability

B Corps have more financial stability than regular corporations and have a greater survival rate than other businesses their size:  “B Lab reported that Certified B Corporations were 63 percent more likely to survive the 2008 recession than were companies without the B designation. Since then, Certified B Corporations have demonstrated an annual survival rate of 90-99 percent compared to the 69 percent average among small businesses in the United States.

Networking Opportunities

B Corps have the opportunity to network and create strategic partnerships with other certified companies.

Increased Access to Capital

It’s easier to get financing when needed. More and more investors are investing in socially conscious companies.

Lower Employee Turnover

These companies attract better-qualified employees. They are more motivated and do better work. Employee turnover rate is much lower.

B Lab started in 2007. Presently there are over 2,400 certified companies in over 50 countries. Could your company benefit from becoming a B Corporation?

 

About Andrew Clarke

Andrew Clarke is President of Ground Floor Partners. Over the past twenty years he has advised hundreds of small businesses on strategy, marketing, real estate and finance. He is passionate about small business, social and environmental justice, and is a proud member of the American Sustainable Business Council, Food and Water Watch, Green America, Food Consultants Group, and the American Planning Association.

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