2014-03-11

Co.Exist

A Q&A With B Lab's Andrew Kassoy About Benefit Corporations, B Corp Certification, And Everything In Between

For companies that are truly serious about social responsibility, the landscape can be difficult to navigate. B-Lab is one place to go for help.

B Corps certification? Benefit corporations? For companies that are truly serious about social responsibility, the landscape of legal issues and certifications can be difficult to navigate. On March 4th, Co.Exist did a live chat with Andrew Kassoy, the co-founder of B Lab to give our readers a chance to learn more about these two entities. We didn't get to nearly all of the reader questions--and there were a lot of good ones. Kassoy graciously offered to tackle some of the remaining questions via email. Here are the questions and his responses (condensed and lightly edited), plus his overview from the live chat of the differences between B Corporations and benefit corporations. You can read more of the first reader discussion here.

What's the difference between a B Corporation and a benefit corporation?

That's a good place to start. The two are often confused. They share much in common but have a couple of important differences. Certified B Corp is a certification conferred by the non-profit B Lab where I work. Essentially it's a judgment by a private party--B Lab--that a company has achieved high levels of social and environmental performance, accountability, and transparency. Benefit corporation is a legal status--like a C Corp or S Corp or LLC or partnership--conferred by a state.

I talk to young rebellious startups all the time that are already thinking triple-bottom-line even before they have an established language (like B Corp) for it. But given that Andrew comes from a more "traditional" businesses background, I'd be interested to hear what the most consistent resistance he hears from mainstream businesses that aren't buying in (pardon the pun) to B Corp. What is the number one thing that keeps traditional business on the sidelines?

Mainstream businesses want to know if they are compromising their business's capacity to succeed and if they are going to lose the trust of investors. Once they see that there are already plenty of real, profitable, venture-funded businesses in the B Corp community, like Rally Software or Etsy or Farmigo or Warby Parker, they are intrigued.

Then it's a question of helping them understand how becoming a B Corp can actually add value to their business, whether by helping them to attract and retain talent, gain the trust of their consumers, or build relationships with investors who actually care about creating long-term value and impact, not just short-term profit at the expense of everything else. From there, it's just a question of how to get started.

I think one of the greatest hurdles is knowing where to start. There are so many ways a company can make an impact and so little direction on how to measure and manage social and environmental performance. However, with the launch of bimpactassessment.net, we hope to encourage all businesses to measure what matters using the free and confidential B Impact Assessment (BIA).

The first step is to simply get a baseline. The BlA allows a company to assess their performance against dozens of best practices. They can also compare themselves against the more than 16,000 businesses who already use the Assessment and create a plan to improve using a variety of Best Practice Guides and Case Studies. By improving impact, a company creates a better business--helping to attract and retain talent, gain a competitive advantage, increase trust and hopefully one day, not only be the best in the world, but best for the world.

Does the certification differ by country, both in what qualifies a company to earn it and how its perceived in the marketplace (i.e. USA vs Canada specifically)?

Certified B Corporations throughout the world are all required to meet higher standards of social and environmental performance and consider their stakeholders, as well shareholders. What is different is the assessment used to evaluate whether a company has met those performance standards. The B Impact Assessment is customized by location, size, and industry to best fit each company's needs.

Globally, the certification is considered the gold standard for sustainable businesses and social enterprises. Today the community of Certified B Corporations can be found in 32 countries, including Afghanistan, South Korea, Kenya, Brazil, and Australia. In Canada specifically, there is an engaged and active community of over 100 B Corps, including Genuine Health, the Ian Martin Group and Bullfrog Power. You can learn more about our international community and partners here.

How are B Corps doing in comparison to the general business environment? If I'm an investor with money to give a company, why should I pick a Benefit Corp to give it to?

With the passage of benefit corporation legislation in 20 states, including Delaware, home of the American Corporation, investors now have the freedom to invest and hold management accountable to create value for shareholders and for society. Benefit corporation legislation helps address the problem of short-termism in public capital markets. By increasing transparency and accountability (and reducing transaction costs and risk), it creates more efficient and effective capital markets for taking purpose-driven companies to scale.

Today, there is a $3.7 trillion U.S. market in socially responsible investing. However, these investors have only been able to nibble around the edges, removing so-called “sin stocks” like tobacco or weapons from their portfolios or simply advocating for businesses to do the right thing. With benefit corporation legislation, these investors can now hold companies legally accountable to operate in a sustainable and responsible manner and to balance the interests of shareholders with the broader interests of society.

By meeting the highest standards of corporate purpose, accountability, and transparency, benefit corporations build the most important corporate asset: trust. This trust enables benefit corporations to attract the best talent and to turn their customers into evangelists. Assuming strong underlying business models, this makes them attractive investments.

But don't take my word for it. You can watch Albert Wenger of Union Square Ventures speak to the benefits here or read his thoughts.

In what sectors would you like to see B Corps exist that you haven't yet?

I believe the B Corp Community is evidence of a larger systemic shift and the evolution of capitalism. These companies are leading the movement to redefine success in business, and one day we hope people are asking, "Where aren't there B Corps?" Change is less about a specific sector, and more about a new mindset.

Today, B Corps can be found across 60 different industries, from manufacturing to health care to financial services. That said, it is important to continue this growth. A company in any industry can create a positive impact and use business as a force for good. The first step is simply to measure what matters and set the intention: to B the Change.

[Paintings by Paul Corio]

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