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B Corporations to Expand “Business for Good” Initiative Globally

RP Siegel | Wednesday October 3rd, 2012 | 3 Comments

It was busy at the Clinton Global Initiative (CGI) last week.

Along with President Obama and Mitt Romney both speaking, as well as Hillary Clinton, the program kicked off with an endorsement of Smokey Robinson’s new social media site Smoke Alarm and CGI’s global efforts in support of safe drinking water for children.

They also announced the expansion of B Lab’s Certified Benefit Corporation’s (also known as a B Corporation) program into South America.

This exciting new trend in corporate governance ties a company’s mission and charter directly to the triple bottom line. According to B Lab’s website, “Benefit corporations are exactly the same as traditional corporations except for three little things that make them game-changers: higher standards of purpose, accountability, and transparency.”

It was developed as a mechanism for entrepreneurs and investors to codify their desire to use business as a tool for solving social and environmental problems.

According to The Economist, “To qualify as a B Corp, a firm must have an explicit social or environmental mission, and a legally binding fiduciary responsibility to take into account the interests of workers, the community and the environment as well as its shareholders. It must also publish independently verified reports on its social and environmental impact alongside its financial results. Other than that, it can go about business as usual.”

B Corps are often confused with Benefit Corporations – the former is the certification discussed here. The latter is a legal structure (currently enacted at the state level in 11 states) that incorporates a material positive impact on society and the environment into the company’s bylaws.

B Corp certification is not mandatory, nor does it confer legal standing. However, it does offer the validation of an independent body acknowledging that the company has met a responsibility performance standard. It also offers a community and a set of helpful tools.  Says B Lab, “B Corp certification is to sustainable business what Fair Trade certification is to coffee or USDA Organic certification is to milk.”

The two approaches differ in the details of implementation, but their intentions are the same.

Now the certification program is spreading beyond the 50 states. At the CGI meeting last week, B Lab announced its commitment to certify 100 B Corporations outside the U.S. in 2013.

B Lab cofounder Andrew Kassoy said, “Impact requires scale and global reach; by extending the B Corp movement into emerging markets in South America, India, Asia, and Africa, the B Corp movement will have dramatic impact on the development of more inclusive and sustainable economies.”

B Lab announced a South American partnership with Sistema B to build the B Corp movement in South America. Together they will build a founding class of 100 B Corps by the end of 2013 in South America alone.  B Lab also committed to expanding into other regions of the world, with the goal of having B Corps in 20 countries on six continents, and of reaching a total of 750 Certified B Corps globally.

According to the Sacramento Bee, “B Lab will establish partnerships with organizations that have regional presence and expertise and leverage financial and technical support provided by the Inter American Development Bank, the Rockefeller Foundation, Halloran Philanthropies, Prudential Foundation, Linklaters, the Ford Foundation, the Avina Foundation, InnovaChile CORFO and Deloitte LLP.”

The B Corporation journey has thus far been characterized by pioneers like Yvon Chouinard, the iconoclastic CEO of Patagonia, who was the first CEO to sign on once B corps became recognized in California.

Chouinard has called prior laws governing corporations and charities too restrictive. He says that for-profit firms often face pressure to abandon social goals in favor of increased profits, while non-profits are overly restricted in their ability to raise capital when they need it to grow.

The B Corporation is another important step in the journey to build a new, more Earth-centered, more sustainable economy.  Perhaps something along the lines of what David Korten writes about in his latest book, Agenda for a New Economy, where he says, “to create an economic system that works for all, we need a different design grounded in different values and a different understanding of wealth, our human nature, and the sources of human happiness and well-being.”

Sometimes, in order to change the game, you need to make new rules.

 

RP Siegel, PE, is an inventor, consultant and author. He co-wrote the eco-thriller Vapor Trails, the first in a series covering the human side of various sustainability issues including energy, food, and water in an exciting and entertaining format. Now available on Kindle.

Follow RP Siegel on Twitter.


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  • Tim MacDonald

    I applaud the work of B Corp relative to certification of an organization’s commitment to sustainability, but caution against perpetuating the equivalency of enterprise = incorporation.

    A corporation is a just one legal construct for defining the rights and responsibilities of all the different parties whose contribution is essential to the success of any enterprise.

    There are others. Corporations happen to be ideally suited to selling shares. Partnerships are actually better for sharing values. The problem with partnerships is that you cannot have too many partners. It just gets to be too much. The corporation is a better architecture for chopping up an enterprise into bite-sized pieces.

    We invented the corporation in the 19th Century to solve a problem that was new at the time: aggregating large amounts of capital in small increments to fund investment in private enterprises of unprecedented scale and longevity that were driving American Industrial Expansion into our vast and seemingly empty Western Frontier. In those days, sustainability was not the issue it is becoming for us today. The corporation as the architecture of choice for financing industrial expansion was not selected for its ability to support sustainability.

    Today, we are confronting a new challenge to our prosperity. Increasingly, we are seeing a need to direct investment not just at scale, but also with sustainability. As we come to understand this new experience of sustainability, we are learning that the 19th Century architecture of incorporation and securitization is not such a good choice for building a 21st century economy of sustainable abundance.

    Fortunately, there are other choices.

    Large institutions that have the scale, skills and longevity to participate in large-scale enterprise directly, taking a share of profits as earned as their strategy for realizing investment returns, are leading the way. They are bypassing the process of securitization, and going direct. Instead of selling out, they are staying in. Sometimes they still do this through corporations. Increasingly, they are using alternative forms of legal agreement: limited partnerships and limited liability companies.

    These legal structures give them the flexibility they need to architect an investment that meets multiple objectives, some financial, others sustainable.

    This really is changing the rules!

    • RPSiegel

      Interesting. Would love to see some examples.

      • Tim MacDonald

        Renewable Energy projects are probably the most plentiful examples today, although they are not perfect exemplars because there is such a large component of public policy architected into the business case for renewables.

        However, the need that those of us who are concerned that the risks of being wrong about whether the world-wide consensus opinion among climate scientists is right that the cumulative effects of releasing fossilized carbon into the Earth’s atmosphere at a constantly accelerating rate for some 150 years now is heating up the Earth too much are too high not to be taken seriously is one of the catalysts driving the evolution of these new investment architectures. (Sorry, that’s tough sentence. Not easy stuff.)

        Infrastructure also exemplifies this architecture, although there are complications associated with the use of blind pool funding mechanisms to select these choices.
        Real Asset investing is problematic. Some investments are still buy-to-sell, instead of invest-to-share. Others, maybe not. I don’t know. Also, the problems with blind pool selection, as above, complicate things here, as well.
        Venture Capital starts out strong, but then, there is always an exit. This breaks the bond between enterprise and investment, and changes the rules. Also, the blind pool thing is at work here too, forcing professional pool operates to find deals where they want them to be, rather than where the economy is really creating new value. Booms-and-Busts result.
        Private Equity could do the job, but like Real Assets, there is still too much emphasis on selling out, rather than staying in. And the blind pool thing is very strong here, too.
        This is an evolving, new pattern for thinking about investing and investment architecture, purpose built to align interests between investment and enterprise along multiple points of shared value, both financial and sustainable, that is being promoted for its unique ability to meet the needs of Institutions, as chartered trusts of the present and future financial futures of their beneficiaries.
        Examples right now are limited, and imperfect. The call to action right now is to grant our institutions of chartered trust the social license they need to replicate this architecture, and perfect its use.
        Exciting stuff!