Tim, you said that 2020 will launch the decade of benefit corporations. Why?
Tim Greiner: I believe the companies that will thrive in the coming years
will be the ones that have purpose integrated into their business. These are the
companies that understand the importance of maintaining a balance between
profitability and positive impact on the planet. They will help to solve
important social and environmental problems — including climate change and
inequity — through their business.
Benefit corporations have their purpose formally included in their organizations
through their legal registration; certified B Corporations have gone through a
rigorous third-party verification process. Companies that have this level of
commitment to social and environmental benefit will stay the course and be
rewarded for it.
Before we dive in further, can you explain the difference between benefit corporations and certified B Corporations?
TG: In the simplest of terms, a public benefit corporation (also referred to
as benefit corporations) refers to a specific type of legal incorporation; while
certified B Corporations (or B Corps) refers to a certification.
The benefit
corporation
has a legal standing recognized by the state that protects its mission and
ensures that a company considers other public benefits in addition to profit.
Transparency provisions require benefit corporations to publish annual reports
of their social and environmental performance.
A certified B Corp is a for-profit business that has been assessed and verified
by the independent nonprofit B Lab to have exceeded a threshold for positive
impact on people and planet. This is a “seal of approval” kind of program,
similar to Fair Trade or Organic. B
Corp certification provides a clear
path for businesses to follow that focuses on other public benefits in addition
to profit, including the well-being of workers, community, customers, and the
environment.
A nuance to this is that, in most states, you do not have to be a certified B
Corp to be a benefit corporation and vice versa. There are companies, however —
including
Method,
Plum
Organics
and King Arthur Flour — that are examples of
certified B
Corporations
that met their requirement for certification by using the benefit corporation
model. Other leading companies, including
Patagonia
and Cabot Creamery,
are examples of existing benefit corporations that became Certified B corps
because they felt the certification offered additional value.
Does being a benefit corporation help to find balance between profit and purpose?
TG: Companies that have genuine purpose, passion, accountability and
transparency are the companies that will excel in 2020 and beyond. These are the
companies that are asking; What world do we want to live in? What kind of
economy do we want and how do we create that future?
Let’s face it — our day-to-day work can narrow our vision. We have so many
details to manage, it is sometimes difficult to step back and consider where you
are headed. Businesses that follow benefit corporation and B Corp ideals are
better prepared to answer the bigger questions as to why we are in business, and
how we want to impact our world. Benefit corporations are created with an
express mandate to operate responsibly, and their directors are accountable for more
than shareholder
return.
I think more and more companies will continue to follow this path; not only
because it is the right thing to do, but also because there is business value to
be gained.
What are some business benefits for these types of organizations?
TG: This approach to business can help companies gain desirable competitive
advantages — including enhanced
leadership status,
ability to attract investors and top
talent,
and enhanced consumer loyalty. What’s more — companies with robust
sustainability
practices
demonstrate better operational performance, which ultimately translates into
better profitability.
B Corp certification
claims
are among the fastest growing claims on products. For good reason, since
consumers are loyal to companies with social purpose. An article in
Forbes
notes, “Ben & Jerry's became a certified B Corp in 2012. … Their mission
statement includes a social, economic, and product mission. Ben & Jerry's
research shows consumers are two-and-a-half times more loyal to companies that
have a social purpose and incorporate values-driven action authentically
throughout their business.”
Whether it is
millennials
who want to make a positive difference in the world; or Gen
Z,
whose purchase decisions are influenced by the dedication of brands to social
impact, the consumer data has become clear in the past few years. Consumers
increasingly connect to companies with authentic purpose.
Can benefit corporations help to lead toward meaningful change for society and the environment?
TG: I see benefit corporations and certified B Corps as working in
unison, packing a powerful 1-2 punch toward sustainable business. If there
is still confusion as to how they work together, Patagonia offers a great
resource: An Entrepreneur’s Guide to Certified B Corporations and Benefit
Corporations.
In the guide, Vincent Stanley, Director of Philosophy at Patagonia, notes,
“Every business should actively benefit its employees, customers and communities
— and work effectively to minimize its adverse impact on nature. B certification
and/or [benefit] incorporation gives us the common tools we need to assess the
positive and negative impacts of our practices, make and measure improvements,
and share what we learn.”
I recently heard B Lab founder Jay Coen Gilbert say that, “The economic
system that got us into this mess is not the economic system that is going to
get us out of it.” When I talk about this being the decade of benefit
corporations, I am not hung up on the semantics of whether these companies are a
legal benefit corporation or a certified B Corp; that’s not the point. What
matters is companies in business to do the right thing — to create benefit for
people and planet. They push the envelope. They define true leadership in a time
of severe environmental and economic uncertainty.
This vanguard has moved a number of major business organizations. In recent
years, the Business
Roundtable,
the World Economic
Forum
and the US Chamber of Commerce are starting to talk about purpose. Companies
are not simply about making money; they need to embrace this broader sense of
purpose.
As we launch a new decade, reaffirming the need to integrate purpose and values
into the way businesses make profit comes at a perfect time. The work ahead for
addressing critical environmental and social issues may be daunting and there is
no quick or easy fix; but with more companies using the benefit corporation model, we will be closer to the right path toward
meaningful change.
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Pure Strategies
Published Feb 26, 2020 7am EST / 4am PST / 12pm GMT / 1pm CET