2012-10-22

Co.Exist

Ben And Jerry’s Becomes A B Corporation

Ever since its acquisition by Unilever, the quirky ice cream company has been the poster case for a campaign to create a new kind of company that’s friendlier to social enterprise: the B Corporation. Now Ben and Jerry’s is one, too.

For a particular breed of businessman (and ice cream lover), Ben and Jerry’s has been both an inspiration and a sharp lesson in corporate law. Today the story gets an update, as the ice cream company becomes the first subsidiary of a publicly traded company to become a B Corporation, a new kind of corporate entity that’s legally allowed to consider social good as well as shareholder good when making business decisions.

Ever since 1978 when the quirky founders began serving up punny-named scoops in a converted Burlington, Vermont, gas station, their practices read like a corporate social responsibility textbook: sourcing products from organic and Fair Trade suppliers, using eco-friendly packaging, paying extra to farmers who didn’t use growth hormones, donating 7.5% of revenue (not profit, revenue) to charity, and more.

But 12 years ago, the oddball ice cream company went from a pioneer of socially responsible business to a cautionary tale when it was acquired by Unilever against the objections of its hippie founders and their fans. Shareholders had sued, demanding that the sale go through and the board caved, citing a legal obligation to maximize returns to shareholders.

The case of Ben and Jerry’s became the spark for a growing movement to challenge the idea that “shareholder rights” are always right. Since then, "never again" has become the implied mantra of the emerging movement known as B Corporations.

To become a B Corporation a company must change its charter to say that founders or the board can consider the community, employees, and social impact as well as shareholder profit when making a business decision. And for the past six years, as B Corporations have grown from the seed of an idea into a community of more than 600 non-public companies, Ben and Jerry’s has been the go-to case study to explain why B Corporation status is an asset worth the cost (certification costs up to $25,000 a year for large companies, though much less for startups): "Become a B Corporation now, so that when you go public, you can keep your social mission. Don’t end up like Ben and Jerry’s." That argument will have to change a bit after today.

“It’s awesome to have Ben and Jerry’s join a movement that they inspired,” said Jay Coen Gilbert, co-founder of B Lab, the nonprofit organization that certifies B Corporations through a vetting process known as an impact assessment. “What is most impressive is that they and Unilever have been so open to transparency, making their full B Impact Assessment available to the public."

It’s not that Ben and Jerry’s stopped behaving well when Unilever took over for $326 million. On the contrary—as the B Lab vetting shows—Ben and Jerry’s is behaving quite well. The outrage is over what could have happened; that the iconoclastic founders couldn’t do what they and their customers wanted with the company. Co-Founder Ben Cohen referred to the acquisition as a “forced marriage."

The case of Ben and Jerry’s proved that existing law was too narrowly focused on shareholder rights to protect the essence of a company, the values, the way of doing business. Unilever could have ended many of the social practices, even though they didn’t. (They did downsize however.) It’s a situation other social entrepreneurs want to avoid like an IRS audit.

Now, 12 years later, Ben and Jerry’s Co-Founder Jerry Greenfield says, “I am thrilled that Ben and Jerry’s has become a B Corp. Kudos to the folks in the company that made it happen.”

By becoming a B Corp as a subsidiary of a publicly traded company, Ben and Jerry’s once again steps into a leading position in the world of social enterprise. It is the only subsidiary of a publicly traded company to get the B Corp stamp of social enterprise approval, which requires some serious vetting. It’s a dozen years too late to prevent the sale of course, but the certification process is now clearer for other publicly traded companies and their holdings.

“When Ben and Jerry’s was acquired, many folks thought it would be a challenge for the company to keep its values,” said Sean Greenwood, Ben and Jerry’s spokesman. “To undergo the process of certification—where every facet of our business is scrutinized to ensure that we’re walking the talk—is a rigorous but rewarding process. It allows an experienced, holistic, values-led third-party entity that B Lab is the chance to affirm that there’s still lots of good things happening at Ben and Jerry’s.”

What happens now is that the sales pitch to become a B Corporation gets a tweak. Ben and Jerry’s will still be the poster case, but with a bit more nuance. The ice cream company will now get a chance to prove another reason why third-party certifications are important to social enterprises, even ones that are owned by a conglomerate: proving the value of transparency. Anyone can see any answer to their certification survey (PDF).

Plus, maybe we’ll see a new flavor out of this.

“While there haven’t been any official discussions,” Greenwood said, “we never turn down a good flavor brainstorm. How about B Hive, a honey-flavored concoction or B Gorp with Fair Trade nuts and dried fruit?”

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4 Comments

  • couldntcareless

    Mary,  the next step of what you propose, is a communist dictatorship. People's freedom and
    freedom of enterprise are as important as the public benefit. The two BOTH
    must be safeguarded, protected and promoted. What you propose is an extremism
    that (hopefully) will never be embraced by any western government.

  • Seth

    This seems like an absolute perversion of the goals and ideals of benefit corporations for one to be a wholly owned subsidy of a traditional corporation. To claim that a wholly owned subsidy can function as a benefit corporation when their owner is not functioning as one seems like it is "green washing" an aspect of the corporation, without providing any of the real protections that being a benefit corporation should. When push comes to shove the directors of Unilever are still obliged to act in the interests of their shareholders without the legal protections that would be afforded to them by being part of a benefit corporation.

    Thoughts? I'm not an expert on benefit corporations, but to me it seriously discredits my faith in an exciting concept.

  • Mary McGuirk

    The cost of becoming B CORPORATION CERTIFIED should be paid by the C CORPORATIONS...We need to change the laws so that ALL CORPORATIONS have a PUBLIC BENEFIT to keep their corporate status. When individuals gain ECONOMIC INSULATION FROM LOSS from the public, they MUST provide a PUBLIC BENEFIT! Read "Life, Inc." if you are not aware of the benefits that corporations get that people don't!

  • dragonthc

    How about Unilever is as evil as you can possibly get without having a persian cat on your lap.