A new business classification, the benefit corporation, which legally requires a company to address both people and profit, is attempting to address this question.
I first became interested in this certification when I was researching project topics for my Business and Sustainability course term project the past spring. It was fascinating to read about companies that were truly implementing a triple-bottom-line approach of people, planet and profit into their business model, and not just throwing around rhetoric (seriously, if I see the word ‘green’ one more time...). In many ways, B corps are a hybrid between non-profits and traditional corporations, bridging the gap between profit and nonprofit. This is promising for skeptics of nonprofits, who have criticized nonprofits for being “unsustainable” in the long run.
More importantly though, this movement, powered by the non-profit, B-Lab, is making change where it matters most: in our legislation. By working with legislators and businesses themselves, this non-profit is catalyzing a shift in traditional business and if it is possible to measure success beyond dollars.
This raises the question: what is the purpose of business and for whose benefit is it to be run? But before we even attempt to dive into this question, we must also look at what is formally stated in the law.
The formal rules of corporate governance under American law considerably inhibit a corporation from being socially responsible. The American Law Institute (ALI), states in its Principles of Corporate Governance: “…a corporation should have as its objective the conduct of business activities with a view to enhancing corporate profit and shareholder gain.”
In other words, the formal rules of corporate governance impose a strict discipline that the purpose of the corporation is to bring profit to its shareholders.
Notice how the ‘public good,’ to any extent at all, is completely left out of the above clause... Are you okay with this? What do YOU think the purpose of business is?
B-Lab is working to change this. Because of this new legal protection, (which as of recent has passed in 9 states), Certified B Corporations are protected from being sued by shareholders under traditional corporate law, which requires corporations to consider finances first.
A term coined by B Lab, “Certified B Corporations are a new type of corporation which uses the power of business to solve social and environmental problems. B Corps are unlike traditional businesses because they meet comprehensive and transparent social and environmental performance standards, meet higher legal accountability standard and build business constituency for good business.” (B Lab: B Corps.)
Working at the Hub has its many perks and B Lab actually has one of its offices here in the Hub Soma! I was lucky enough to talk to a member of B-Lab who stressed that what makes this certification unique from other certifications is that it goes beyond the product level, and looks at all areas of impact, from the supply chain to operations.
What is important to note is that Certified B-Corporations are still for-profit. These are companies who do make money and also measure their success in lives impacted and dollars earned. There is a profit mission and a social mission, both with at least equal importance. Not only do over 500 Certified B-Corporations exist already, but they exist in virtually every industry!
Some of the big names include sports-apparel tycoon Patagonia and Greyston Bakery, whose brownies are key ingredients in Ben & Jerry’s ice cream flavors. What makes Patagonia a Certified B-Corp, you ask? Some of the highlights include a Board consisting of independent members to represent community & environmental interests (governance), health benefits extended to part-time, retail, warehouse staff (workers), 100% of significant suppliers made transparent on website (community), and 75% of materials used are organic or recycled (environment).
I highly reccommend checking out http://www.bcorporation.net/b-corporations to read about what makes these companies “Certified B-Corporations.” You can even view their B Impact Reports online!
Becoming a Certified B-Corporation is a lengthy process, and requires a corporation to a complete a through B-Impact assessment, a point system used to assess a company’s accountability, employees, consumers, and impact on the community and environment. If the corporation scores above an 80, it can then be considered for the legal requirement, which depends on the state in which the company operates and its classifying structure. In either case, the company will have to modify its company’s legal structure to institutionalize stakeholder interests in its business.
You may be thinking, “this sounds nice and all, but what is the catch and what is the incentive?”
One potential challenge is a yearly fee to keep the certification, which may be too much of an investment for smaller companies. In addition to maintaining rigorous standards Companies are also randomly chosen every year to be audited.
But most Certified B-Corps agree: the classification pushes them to be better companies. Jeni Bauser, senior account executive at Green Team, said, “B Corporations’ rigorous criteria create a structure for us to improve our sustainable practices, and stand with like-minded businesses that believe it’s their responsibility to meet the highest social and environmental standards.”
Becoming a certified b-corp also shows that you committed to solving social and environmental problems and are part of a movement of people committed to doing business, better. Currently, special tax benefits only occur if the company operates in Philadelphia, but since the certification is only two years old, some of the greatest benefits may still be to come.
We at Yellow Leaf Hammocks are proud to be a Certified B Corp and and stand united with other values-driven enterprises and share in the collaboration, debate and vision that will help bring market-driven solutions to the world's social ills.
Read more about Yellow Leaf's Commitment to upholding its Benefit Corporation certification here.
Sources:
[1] ALI, Principles of Corporate Governance, (St. Paul, Minn., 1994) sec. 2.01(a).
http://www.huffingtonpost.com/2012/06/27/benefit-corporations-patagonia-greyston-bakery_n_1632318.html?utm_hp_ref=fb&src=sp&comm_ref=false
http://mashable.com/2012/03/02/benefit-corporations/
http://www.bcorporation.net/about
