Thursday, January 12, 2012

B Corporations: Driving a New Ecology of Commerce

There’s a growing buzz with a new kind of business - Benefit Corporations! 
building better business, social enterprise and corporate policy

Benefit Corporations (a.k.a. B Corps) are leaders in a new type of commerce that uses business as a leverage to solve social and environmental problems. B Corp, bottom-line, is about changing or rather growing corporate law, standards, systems (capitalism) and society - evolving capitalism to incorporate greater value for society and all stakeholders.

B Corp asks the question: “How do we use business as a tool for social change?”

How can this happen - by harnessing the growing market and stakeholder demand for a ‘new capitalism’ or ‘creative capitalism’ backed by a solid certification, standards and metrics underpinning each unique business story of becoming more ‘green’ or ‘sustainable’.

“Governments and non-profits are necessary but insufficient to solve today’s most pressing problems. Business is the most powerful force on the planet and can be a positive instrument for change.”

This was Jay Coen Gilbert’s thought back in 2007, when he initiated the Philadelphia-based nonprofit B Lab. Now, four years later, B Lab has certified 506 B Corp companies; corporations, organizations, and LLCs and counting that together —boasts more than $2.9 billion in revenues. They include businesses in some 60 different industries, from bakeries and artists to plastics and capital investments contributing to over $2 million in annual savings.

B Corp History
B Corps have been growing in number across the country for years, building momentum and leading the way in social responsibility and higher standards of performance. They are now pushing towards a tipping point in how ethical business happens - by setting more socially based goals rather than pure economic ROI (return-on-investment).

“Certified B Corporations” are among the new entrepreneurial leaders paving the way for a new ecology of commerce. Blending commerce and community, profit and social responsibility, the Certified B Corp program creates a new platform for what business and economy really means and how people can build economies based on real value.

Behind B Corp is B Lab, which drives systematic change through three initiatives:
  • o   Building a community of Certified B Corporations to make it easier for all of us to tell the difference between “good companies” and just good marketing; 
  • o   Accelerating the growth of the impact investing asset class through use of B Lab’s Global Impact Investment Rating System (GIIRS) Ratings & Analytics by institutional investors; and
  • o   Promoting legislation to create a new corporate form that meets higher standards of purpose, accountability, and transparency.

So what does it mean to be a B Corp?

By registering as a Benefit Corporation, a company is committing itself to:
  • ·      Creating a material positive impact on society and the environment
  • ·      Expanding its fiduciary duty to require consideration of non-financial interests when making decisions
  • ·      Reporting on its overall social and environmental performance using recognized third party standards

To become a B Corp, a company must go through a rigorous B Impact Assessment, which involves an audit step and a guided process to become more resource efficient and socially responsible. Once a business undergoes this assessment, anyone can check on its performance data and better understand the business’s practices behind its products and services. The certification must be renewed every two years.

A business has to score at least 80 points out of 200 to become B Corp certified and can continue to push their limits and strive for greater resource efficiency, social responsibility and community investment if they choose to do so. And these folks will keep striving for more because there is no doubt that the growing green market favors entrepreneurial sustainability. The changing market is demanding businesses need to do good for society and the environment if they want business.

Once B Corp certified - a business is able to solidly offer its clients, members, or constituents “value creation” and value-added products and services—”feel good” ingredients that are additional to what they traditionally provided. Some businesses might feel an alignment with certain environmental or social justice principles, or they may simply see the business case in crafting a more a socially responsible model. Either way, there is increasing incentives for businesses to do better business - B Corp provides a coherent standard and certification to demonstrate and communicate this.

Consumer research from the Natural Marketing Institute tell that 58% more customers are likely to support services and products of companies that are transparent and proud about being mindful of their social and ecological impacts. Even more, NMI found that 68 million adult American make purchasing decisions (whether product or service based) based on their personal, social and environmental values. They found that consumers are willing to spend up to 20% more for environmentally sound products and services.

Why do companies want to be B Corps?

Even in a time of economic slowdown, more and more companies are seeking sustainable business paths because of the growing demand for better business - the consumer market is changing with more and more people demanding green certified products and services, standards, ratings and certifications backing their consumer goods.

Benefits of driving better business include: meeting comprehensive and transparent social and environmental performance standards; meeting higher legal accountability standards; and building business constituency for good business.

Not just business: How B Corp is changing the corporate playing field

The State of California, just like the States of Hawaii, Virginia, Maryland, Vermont, and New Jersey (among other States pending legislation), has adopted B Corporation legislation as a new legal status for businesses. These states have adopted the new legal structure to provide businesses with a way to integrate and maintain considerations for social and environmental efforts into their operations while also lending legal protection from shareholders concerned solely with protecting their financial interests.
Benefit corporation legislation creates the legal framework to enable mission-driven companies maintain sound ethics, standards and commitments through succession, capital raises, and even changes in ownership, by institutionalizing the values, culture, processes, and high standards put in place by founding entrepreneurs.

Yvon Chouinard, Patagonia’s founder sums up the B Corp revolution:
“I hope that five years from now, ten years from now, we’ll look back and say this was the start of the revolution. The existing paradigm isn’t working anymore—this is the future.”  

Meet the B Corps: From Patagonia to small mom-and-pop entrepreneurs