As the company grew, expounder Gilbert and president Holland emphasized financial success along with corporate social responsibility (also called triple bottom line strategy and sustainable business): AND aid employees respectable wages, donated 5% of profits to charity, and made sure factories In China met their standards. The company was generating close to $250 million In annual revenue when it was sold to American Sporting Goods, Inc. , In 2005. Gilbert and Holland were personally enriched;but disemboweled: They watched their effort to create an innovative business model vanish under the new owners. Gilbert and Holland were not alone. Ben & Jerry, known for its ice cream and its social responsibility, was sold to Milliner in 2000. Although some board members ad misgivings, they voted for the sale because Vermont, like most states, required the board to act in the interest of the shareholders, which meant accepting Milliner’s exceptionally lucrative offer. Gilbert and Holland wanted a way to protect the triple bottom line (combined financial, social, and environmental performance) of companies even as companies switched owners, evolved over time, or grappled with shareholders’ desire for greater dividends.
That desire motivated them to contact another Stanford classmate, Andrew Kazoos, a private equity Investor with the MS Capital real estate fund of the Michael & Susan Dell Foundation. Each man invested $1 million of his own money to start the nonprofit B Lab in 2006 to bring about their 1 Susan Adams, “Capitalist Monkey Wrench,” Forbes, March 25, 2010; Peter Van Allen, “American Sporting Goods Buys AND Philadelphia Business Journal, May 18, 2005. This technical note was prepared by Mark Meier under the supervision of Andrea Larson, Associate Professor of Business Administration.
Copyright CLC 2010 by the university of Virginia Darned School Foundation, Charlottesville, VA. All rights reserved. To order copies, send an e-mail to sales@dardenbuslnesspubllshlng. Com. No part of this publication may be reproduced, stored In a retrieval system, used In a spreadsheet, or transmitted In any form or by any means;electronic, mechanical, photocopying, recording, or otherwise;without the permission of the Darned School This document is authorized for use only in Business and Sustainable Development by Dry.
Trips Mishear at Slashes J. Meta School of Management from March 2013 to September 2013. -2- shared vision of capitalist corporations working simultaneously toward financial health and social and environmental benefits. 2 With additional funding from the Rockefeller Foundation, B Lab created various tools o help companies achieve these broader goals. B Lab developed the B Impact Rating System (BIRR), which companies could use to assess their social and environmental performance.
B, as in benefit, Lab also established standards for transparency and a basic legal framework that companies could adopt into their articles of incorporation to safeguard their social and environmental goals, especially in times of transition. Finally, Gilbert, Holland, and Kazoos recruited 81 companies that scored high enough on the BIRR and were willing to commit formally to transparency and working for the greater public benefit. Thus, in late 2007, the first B Corporations appeared.
B Corporations were companies that were third-party-certified by B Lab, demonstrating they were serious about sustainability strategies and corporate social responsibility. They sought certification because they wanted to distinguish themselves from competitors, to reassure consumers and investors, and because they fundamentally believed that “doing good” had to become part of business itself, not ancillary to it. Hence, B Corporations shared … La vision that] is simple yet ambitious: to create a new sector of the economy which uses the power of business o solve social and environmental problems…
As a result, individuals and communities will have greater economic opportunity, society will have moved closer to achieving a positive environmental footprint, more people will be employed in great places to work, and we will have built more local living economies in the U. S. And across the world. 3 Objectives and Advantages of B Corporation Status B Corporations shifted the emphasis of business from shareholder value to stakeholder value. Employees, consumers, and communities, including the environment, should all benefit from economic activity (Exhibit 1).
B Corporations popped to create these benefits in three ways. First, in addition to financial goals, they established explicit social and environmental goals and strategies. Second, these companies were transparent about their operations and broader stakeholder goals, and they progressed toward those goals. To be certified as B Corporations, companies had to earn at least 80 of 200 possible points on the BIRR survey and submit to random audits of their social and environmental performance.
Formalizing these principles was believed to help these companies survive transitions and gave B Corporations some legal grounds for considering social and environmental consequences as well s shareholder returns in their decisions. To be considered for certification, a company paid an application fee to B Lab and submitted its BIRR survey responses along with documentation for some of the answers. The BIRR survey covered an array of categories organized largely by stakeholders: Accountability, Employees, Consumers, Community, and Environment.
For instance, under Employees, a series of questions covered employee benefits, including health insurance coverage and premiums, sick days and maternity leave, training opportunities, flexible schedules, and so on. Completing the BIRR took about 0 to 90 minutes, according to B Lab, and after submitting the survey to B Lab, companies received a report (Exhibit 2). Those companies that met or exceeded the 80-point minimum could be certified. Through mid-2010, more than four-fifths of companies that applied for B Corporation status had been rejected.
In addition to screening new companies, B Lab audited 10% of existing B Corporations any given year, and any company that fell below acceptable performance standards had 90 days to correct the problem. 4 The rating criteria were continually reviewed and revised by B Lab’s Standards Advisory Council, which included one B Lab member ND eight independent members from business, academic, and nonprofit organizations. In 2010, the B Impact Rating System was in version 2. 0, with version 3. 0 under development. The original version 1. Was developed from various extant corporate social responsibility metrics plus input from more than 600 reviewers. Since B Lab provided its rating system to anyone, not Just applicants, more than 1,000 companies used BIRR in 2009 to monitor their performances. In conjunction with private investment funds and government agencies, B Lab in 2010 was also developing a Global Impact Investing Rating System for investors. 5 renaissance and scrutiny, B Corporations received a number of benefits. First, they reduced the effects of labor, environmental, and other problems to their companies’ brands.
Second, they shared ideas and services with each other. Indeed, in addition to routinely swapping best practices, B Corporations provided services to one another at a discount and helped each other find like-minded suppliers, consultants, and investors. Third, B Corporations had access to support from B Partners (non-B Corporations that nonetheless supported the concept) and the B Lab, which promoted B Corporations and helped devise metrics and attract investors and customers. Among other things, B Lab advocated for state laws that favored B Corporations.
As of 2010, no state recognized B Corporation as such, although the Maryland legislature passed a bill March 29, 2010, that would create separate legal recognition for B Corporations and give them 4 “The B Impact Rating System,” http://www. Abstraction. Net/index. CFML/obfuscation/ content. Page/nodded/ fodder-cuff b-AAA-beep-195abbe68fb5; B Lab, “Large Manufacturer Impact Assessment,” http://www. Abstraction. Net/resources/bicorn/ documents/2010-B-almanac-Assessment (1). PDF. Petrifaction annual report, 2009, 5. By Dr.ByrDrytiTripsaMishearaileSeashells
Meta Metal of Management from March 2013 to -4- some protection if shareholders sued to improve their returns at the expense of social and environmental goals. 6 Six other states were considering comparable laws, and the city of Philadelphia had already announced it would give $4,000 in tax breaks to 25 B Corporations in the years 2012 through 2017. Ultimately, B Lab hoped the IRS would recognize B Corporations with a different tax status and expected B Corporations to equal nonprofits’ current share of GAP, agape 5%, in 20 years. 7 Other benefits may accrue to B Corporations.
Attracting more talented and dedicated employees may be one because potential employees are motivated to work for places that care about a triple (economic, social, environmental), not single, bottom line. Schools may help push their graduates in that direction. Already, the Yale School of Management has offered to forgive its graduates’ loans if they work for B Corporations. 8 The B Corporation Community As of March 2010, 285 B Corporations existed in 54 industries in 27 states and the District of Columbia. Most were in California, which had 81 B Corporations, followed y Pennsylvania with 37, and New York with 20.
One-third of all B Corporations were community generated $1. 1 billion in revenues and saved more than $750,000 through discounts they offered each other. 9 B Corporations encompassed a diverse group, including shoemaker Demonstrableness energy contractors and lawyers, real estate management firms, banks, and tea distributor Minimum Uneconomic Tea. They ranged from older companies to relatively young entrepreneurial ventures, and included both explicitly green service providers and more conventional service providers. B Corporations tended to be smaller, reverentially and incorporated in states that encouraged sustainable businesses.
Several of them are profiled briefly here. 6 Douglas Totalitarianism’s in Line to Become B Corporations Pioneer,” http:// www. gazettGazettetoNonevents2010/paleontology_32561 . PH Map 29, 2010. 7 “The B Corporation: A Business Model for the New Economy,” Impact Investor, March 17, 2010; ‘Why B corps Matter. ” 8 Casseroles “B School B Good,” Yale Alumni Magazine, March 29, 2010. 9 B Lab, http://www. Abstractionist(andantes April 20, 2010). -5_ King Arthur Flour Based in Norwich, Vermont, King Arthur Flour was 100% employee-owned and the mountainously flour maker, having operated continuously for more than 200 years.
It had gross sales of more than $3 million in 2009 at its flagship store and was “the number-one selling unbleached flour in every market where we have full distribution. “10 The company was committed to environmental stewardship and did not use chemical additives or genetically modified wheat in its flours. Employees could take 40 paid hours each year to volunteer at nonprofit organizations, and the company donated 5% of profits to charities and offered free baking classes to children. The company won numerous awards for its efforts, including a 2008 Wall
Street Journal Top Small Workplaces Award and a 2008 WorldBWorldlyDemocratic Workplaces Award. King Arthur Flour was a founding B Corporation, certified in June 2007. 11 Seventh Generation Seventh Generation had been making nontoxic, sustainability-oriented cleaning and household paper products since 1990. In 2008, the sale of its products saved more conventional products, and the company generated around $4 million in pretax profits, 10% of which was donated to charities. Seventh Generation took its name from the Iroquois injunction to “consider the impact of our decisions on the next seven generations. “12
Like King Arthur Flour, Seventh Generation was based in Vermont and became a founding B Corporation in June 2007. According to Jeffrey Wholeheartedness’s Chairperson and Chief Inspired Protagonist,” as well as the coauthor of The Responsibility Revolution:13 Seventh Generation decided to become a B Corporation because there needs to be standards around corporate responsibility. In a landscape in which every company now says authoritativeness’s business, there is no way for consumers, investors, and other stakeholders to tell real responsible businesses apart from those businesses that Just say they are.
The dual focus of B Corp., Corp.h involves a change to your bylaws and a comprehensive evaluation, is the best way to separate companies that really are responsible from ones that Just pretend to be so. 14 Trillium Asset Management 10 “About the King Arthur Flour Company,” 2010, http://www. kingarCountersignatureabCom/ (accessed April 20, 11 “Good Works,” 2010, http://www. kingarCountersignatureabCom/godlessness’s#authenticates April 20, 2010); B Lab, “About King Arthur Flour. ” 12 Seventh Generation 2008 Corporate Consciousness Report: Reinventing the Purpose and Possibility of Business, 5-6; “About Us,” 2009, http://www. Ventriloquist’s coma? Link-plinking=footer (accessed April 20, 2010). 13 Jeffrey HollenHollanderResponsibility Revolution (Hoboken, NJ: Psychoses 2010). 14 B Corporation annual report, 2009, 12. -6- This Boston-based firm pioneered socially responsible investing in 1982, and, in June 2008, it became a B Corporation with a Composite B Score of 116. 9 points. The institutions and was “deeply committed to using the power of capital markets to move toward a sustainable economy that properly values people and planet. 1 5 Trillium’s 30 employees included several people focused on ecological and social impact impact. And lampoonery’s could benefit from generous profit sharing. In addition, Trillium purchased carbon offsets for its operations and took other steps to improve its own sustainability record. Agreeableness’s Founded to combat child labor, Agreeableness’s gave 5% of sales to charities that helped achieve its mission. The company garnered 76% of the possible BIRR priers when it was certified in December 2009.
GreenlGristliness’sest was as follows: [We] became a B Corporation because we wanted to add a third-party endorsement to our social and environmental efforts. Not only does it signify our willingness to strive to be a better corporation by our internal measures, but also gives us an opportunity to measure our impact against our peers. 16 The company, with headquarters in Fremont, California, began as a project for five business school students at the University of California, Davis, after they observed labor conditions at apparel factories in Asia.
The students assembled a business proposal that made it to the finals of the Global Social Venture Competition. Their first chance to prove their business model came when a Silicon Valley marathon race placed an order for shirts. Deep Ecology Deep Ecology was a scuba diving shop in Wheelwright’s, that was dedicated to protecting marine wildlife and habitats while providing divers of all levels a great experience. Started in 1996 by Ken Coffeecakes$8,000, the shop regularly dispatched employees to pick up trash from the ocean and rescued animals trapped by debris or abandoned fishing lines and nets, so-called ghost nets.
Eventually, Coffeecake’s an environmental focus could differentiate his company from other dive shops. He changed the company’s name from North Shore Diving Headquarters o Deep Ecology because it would make it easier to franchise new shops “and more importantly, it reflects our unparalleled commitment to protection of the marine 15 B Lab, “Trillium Asset Management,” 2010, http://www. bcorpoAbstractiontrNetium (accessed April 18, 2010); Trillium Asset Management, “Trillium Asset Management Corporation Announces Hiring of Matthew Pathway’s New CEO,” press release, October 21, 2009. 6 B Lab, “About Agreeableness’s,” 2010, http://www. Abstractionist indistinguishableness April 18, 2010). Environmentalist’s Deep Ecology was certified as a B Corporation in December 009, its rating was highest in the Environment category. Conclusion In 2010, B Corporation status was growing in importance as a reliable standard by which companies could demonstrate their commitment to social and environmental goals concurrently with their commitment to financial performance.
