Mission-Driven Companies Seek 'Beneficial' Label

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What do a Union Square marketing firm, an online crafts retailer, and a countertop manufacturer in the Brooklyn Navy Yard have in common?

Each is now a B Corporation, a pioneering form of socially responsible business. In New York City, already home to a critical mass of socially and environmentally conscious firms, investors, and consumers, the B Corp movement is gaining steam. If the national trend is any indication – in the last nine months, 80 companies across 17 states and 20 industries have been certified as B Corps – New York City may lead the next wave in the growth of B Corps and the marketplace for “mission-driven” enterprise.

B Corps are the brainchild of Jay Coen Gilbert, Bart Houlahan, and Andrew Kassoy, three longtime friends and veterans of the business world in both the private equity and consumer product sectors. Last July they launched B-Lab, a nonprofit organization based in Berwyn, Pa. that certifies individual B Corps and advances their collective potential as a meta-brand for socially minded consumers and investors. To become a B Corp – the “b” is for beneficial – companies must meet extensive standards for their environmental and social performance, scoring at least 80 out of 200 on the B-ratings scale. They must also expand their legal and fiduciary responsibilities beyond the interests of traditional shareholders to include a broader universe of “stakeholders” – employees, suppliers, consumers, community and environment.

The idea behind standard-based certification is not new. “Trust labels” such as organic, fair trade and sweatshop-free have flooded the marketplace in recent years. Companies hope these emblems will distinguish them to increasingly discriminating consumers who are willing to pay for responsible practices and products. B-Lab aims to provide a comprehensive assessment that draws upon existing best practice in measures of environmental stewardship and social responsibility to ultimately rise above the trust label clutter. By requiring B Corps to modify their legal structure, B-Lab also seeks to help companies, in Kassoy’s words, “embed mission and values into their corporate DNA.” The rigor of the B Corp certification process – companies first self-evaluate and then submit to regular third-party verification – helps ensure against the kind of less meaningful public relations exercise that skeptics call “greenwashing.”

The first cohort of B Corps mostly comprises firms that are natural candidates for certification: companies that already exemplify progressive corporate citizenship. Initial recruitment efforts also focused on logical geographic “nodes, beginning with the San Francisco Bay Area and now expanding to other hospitable regions including New Hampshire and Vermont, the Pacific Northwest, Southern California, Boulder, Denver and New York City. The handful of New York B Corps represent a variety of goods and service providers, but profess similar motivations for enlisting: an obvious and natural extension of their current work, the desire to join and learn from a community of like-minded entrepreneurs, and the opportunity to increase momentum for socially responsible business writ large.

Take UncommonGoods, an internet purveyor of “anything but ordinary” home accessories and gifts, with offices in an industrial stretch of 58th Street between Sunset Park and Bay Ridge. Although it sells products from designers and artisans all over the world, UncommonGoods has a distinct Brooklyn sensibility and a self-described “uncommonly accomplished and diverse team hailing from all corners of the globe.” The company says it sells merchandise “created in harmony with the environment and without harm to animals or people,” and has launched a program called Better to Give, which allows its customers to direct a $1 donation to charities including AmeriCares and the Craft Emergency Relief Fund.

A few miles northeast along the Brooklyn waterfront lies IceStone, another B Corporation. Operating out of a factory in the Navy Yard, IceStone manufactures durable surfaces for kitchen countertops, flooring and bathroom vanities. Rather than use natural stone, which burns fossil fuel to mine and transport, IceStone harvests glass – mostly from crushed windshields, computer screens and bottles – for its precast slabs. IceStone co-CEOs Miranda Magagnini and Peter Strugatz have long been committed to socially and environmentally responsible business as entrepreneurs and investors. They founded IceStone as a “triple bottom line” company committed to “people, the planet, and profits” – and to demonstrating that their model works. The company strives to provide well-paying “green collar” jobs and also is a founding member of SBN-NYC, the Sustainable Business Network of New York City, and a local chapter of BALLE (Business Alliances for Local Living Economies).

It was as members of the Social Venture Network, which advances new kinds of responsible and sustainable businesses, that Strugatz first met B-Lab founder Jay Coen Gilbert. When Gilbert launched B-Lab, Strugatz was eager to support the effort. He and Magagnini already recognized the advantages of certification: before becoming a B Corp, IceStone had garnered two other important environmental credentials. First, use of IceStone products allows many projects to obtain their LEED (Leadership in Energy and Environmental Design) credits under the U.S. Green Building Council’s rating system. Second, IceStone produces the only durable surfaces that have received Cradle to Cradle certification for environmentally intelligent design (related to safe material and water use, reutilization content, energy efficiency and social responsibility). Magagnini appreciates the camaraderie of joining other organizations whose ethics inform their operations. “This is why we get up in the morning,” she says.

New York City’s professional service B Corporations lie across the river in Manhattan. BBMG, a major branding and marketing firm, with clients ranging from Fortune 500 companies to Unicef and the Gates Foundation, was one of the nation’s first B Corporations, signing on in June 2007. Raphael Bemporad, a BBMG founder, says “for-benefit businesses” and conscious consumers are driving a “revolution in the marketplace – a huge paradigm shift” requiring a very different approach to branding. In this context, Bemporad says, “branding is about being … about backing your words with socially responsible, authentic actions.” Like IceStone, BBMG became a founding member of the B Corp community in large measure because of the value of belonging to a community of like minds, says Bemporad, an “evangelist” for the B Corp movement.

Andrew Kassoy, one of the B-Lab founders, contends that for B Corporations to truly take New York, they need to establish a firm and visible presence within the financial services sector. He acknowledges that it is unlikely in the immediate future that a large, publicly traded firm, with several layers of shareholders and a sweeping set of businesses, will certify all its operations under the B Corp banner. But that doesn’t mean there aren’t important ways for bellwether socially and environmentally responsible Wall Street firms to advance the cause, Kassoy insists. This is particularly true, he says, in the capital markets, as with private equity investments in double- and triple-bottom-line companies or funds, or simply in exemplary dealings along the supply chain. In the meantime, he believes, the more likely candidates for B Corp certification on Wall Street are smaller, privately held firms.

Just this week, New York’s first private equity B Corp made its debut. “It seemed like a no-brainer,” said Jason Scott, of the decision by his firm, EKO, to become a B Corp. EKO is a private equity firm identifying and investing in environmental market (carbon, water, biodiversity) opportunities, says Scott, a founding partner. EKO aims to “harness the power of capital markets and help allocate resources to their 'highest and best' ecological use, but also to help preserve ecosystems for future generations.” Scott initially met the B-Lab team through the Impact Investment Collaborative of the Rockefeller Foundation, a major B-Lab supporter.

“We maximize profit,” Scott said, “but we are a socially responsible business focused on environmental sustainability… we should be a B Corp. We should support this endeavor.” If the certification process were truly radical, Scott concedes, he likely could not have signed on. After receiving assurances from his lawyers that B Corp status would not expose his company to additional legal liability, EKO enlisted. And although he may not be as active a proselytizer as say, BBMG’s Bemporad, Scott doesn’t need to be; EKO’s high-profile investors, including lead investor and former World Bank president James Wolfensohn, make the company one of the more watched in private equity.

Local B Corps have not yet sought out support from local government. “The next big opportunity,” says Kassoy, “is to take the B Ratings System to several municipalities for use as a procurement or supply chain preferences tool, and New York and San Francisco are the two obvious starting points.”

When the Rockefeller Foundation announced its $500,000 grant to B-Lab this winter, it described the start-up as “one of the newest social capital market infrastructure innovations.” (Rockefeller is now pursuing this idea further by exploring the viability of a “social stock exchange.”) The ultimate intent of launching an entire sector of B Corps, according to Kassoy, is to create transparent standards for good business and a changed legal environment which will allow investors, entrepreneurs and consumers to find each other, thus improving the scale and efficiency of the social capital markets. Among other things, this will require a strong B Corporation brand.

“This is a very big goal,” says Strugatz, of IceStone. “They’ve just launched.” In the meantime, momentum is growing, as is what Magagnini calls New York’s “tribe” of socially responsible businesses.

According to Bemporad of BBMG, this local community of kindred entrepreneurs is invaluable, even – or especially – in a place as big as New York City. “Community matters,” he says. “Local is the next green.”

– Georgia Levenson Keohane