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The Business of a Better World: Can a New Kind of Corporation Save Us and Our Economy?

Corporations by today's definition, are obligated to make as much money as they can. But a new kind of corporation is changing that and potentially our economy, too.
 
 
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In 2012 corporations reign supreme. Citizens for Tax Justice reports that 26 Fortune 500 companies -- including General Electric, Verizon and Mattel -- paid no federal income taxes from 2008 through 2011. Big banks have gotten big bailouts, while kicking back hundreds of millions to elected officials and political parties in the last year alone. It took the government only 18 months to award BP another permit for deep water drilling in the Gulf after its catastrophic well blowout in 2010.

It doesn't seem to matter if corporations cripple the economy, destroy communities or trash the environment, it's still an all-you-can-eat buffet for them. The 2010 Citizens United decision was icing on the cake. Politicians eat from the hand of the corporate kingmakers. The rest of us muscle for the crumbs.

It hasn't always been like this. When the American colonies were first starting out, incorporation was granted for things that would benefit the public good -- like building roads. But corporations today are much more driven by the bottom line and appeasing shareholders, which can make being "good" difficult and risky.

"The public benefit has all too often been subverted as a result," writes Francesca Rheannon on the Corporate Social Responsibility Newswire. "Those corporations that sincerely wanted to operate according to the Triple Bottom Line (variously characterized, but traditionally defined, as 'People, Profits, Planet') have had to privilege profit over the other two goals, or risk shareholders' wrath if pursuing environmental or social goals lessened potential financial returns." 

But that may be changing with the nonprofit B Lab, which started a program less than two years ago to certify a new kind of corporation -- a Benefit Corporation or B Corp.

In that short time over 500 companies have become B Corps. Legislation to change corporate law and make B Corps official entities has been signed in seven states -- Maryland, New Jersey, Vermont, Virginia, California, Hawaii and New York -- with legislation pending in seven more states. The folks behind B Corps believe that, "Governments and nonprofits are necessary but insufficient to solve today's most pressing problems. Business is the most powerful force on the planet and can be a positive instrument for change." 

Our vision is simple yet ambitious: to create a new sector of the economy which uses the power of business to solve social and environmental problems. This sector will be comprised of a new type of corporation -- the B Corporation -- that meets rigorous and independent standards of social and environmental performance, accountability, and transparency.

B Corp in Action

In 1995 in Corte Madre, California, Helen Russell and Brooke McDonnell launched Equator out of a warehouse with a few employees. Today the company has grown into a successful boutique artisan coffee roaster. It has 22 employees and roasts 700,000 pounds of coffee annually, supplying some of the best restaurants, including many San Francisco Bay Area favorites like Thomas Keller's French Laundry, Pascal Rigo's La Boulange bakeries, Tracy Des Jardin's Jardinière, and Sharon Ardiana's Gialina.

Equator has been praised for its quality as well as its mission. “They started out very modestly, and as they have gotten bigger they have had to make choices concerning their growth,” said Ardiana. “They have always had a keen eye concerning making choices that are sustainably based, rather than purely profit driven. Equator really is a model for other businesses, no matter how large or small, to evaluate their practices and make changes. Because every little bit does matter! They have a huge composting program that incorporates all of the chafe and coffee grounds. They even rethought their bagging. Going from a black treated bag to a natural brown one, even though the black one from a branding prospective was their look.”

"We've always been fairly progressive and thoughtful in how we run our business -- we're women-owned and green-certified," said Equator founder Russell. They also bought Priuses for service cars, a biodiesel delivery truck, and an energy efficient roaster that uses 80 percent less natural gas. They worked to build direct relationships with coffee growers, aided their efforts with micro-loan programs, and started their own farm in Panama, which is a year away from harvest. Their employees have health insurance, opportunities for professional growth and profit sharing.

This year, they took their commitments to the next level by becoming a B Corp. "We want to be a truly triple bottom line company -- and how do you do that?" asks Russell. "We felt it was a good way to educate our customers and consumers about the work that we've been doing. It is a way for consumers to easily identify what our values are and mission is. It's the same thing that Fair Trade certification did for coffee 15 years ago."

The B Corp process assesses companies on their environmental, community and workforce impact. While Equator scored high enough to qualify for the program, they're already seeing ways in which they can be even better.

"One of our roles as an organization is to educate the consumer," said Maureen McHugh, Equator's vice-president of operations. "We feel strongly that this is a positive role for business." The B Corp label helps them take the conversation with consumers to another level. It becomes not just about ensuring a "green" or socially conscious end product, but about guaranteeing the entire process is sustainable and fair. "Capitalism is changing -- we are moving to more of a stakeholder economy. Equator coffee is such an identifiable chain from the farm to here -- there are so many stakeholders in that chain," said Russell. And the B Corp program helps to make that chain transparent to consumers and investors.

Russell see B Corps as the changing face of business. "There is a shift happening, there is a need for it. It can't just be about shareholder value, it's about everyone in the chain, all boats have to be raised or I don't know where the capitalism model will go if we don't go in this direction."

The model for Russell's company gets to the heart of B Corps. "We have to grow revenue to grow our impact -- the more coffee we can sell, the more we can do for our employees and farming partners. Grow revenue, equals grow impact."

The Business of Saving the World

While the coffee world has set up some of their own product standards through Fair Trade certification, most other industries operate without third-party verification and it can be hard to tell a green and socially conscious business from just clever marketing and a big ad budget. B Corp, however, holds a company accountable for not just its impact, but its mission. In fact B Corps have a Declaration of Interdependence

We hold these truths to be self-evident:

  • That we must be the change we seek in the world.
  • That all business ought to be conducted as if people and place mattered.
  • That, through their products, practices, and profits, businesses should aspire to do no harm and benefit all.
  • To do so requires that we act with the understanding that we are each dependent upon another and thus responsible for each other and future generations.

Last month B Labs released its list of the top companies that are the "best for the world." In terms of overall impact, they highlighted companies such as Method Products, Better World Books, Global Green Energy Corp, Namaste Solar, Piedmont Biofuels, New Resource Bank, Re:Vision Architecture, to name a few. They also recognized the top performers for environmental impact like Patagonia, Bullfrog Power, Guayakí Sustainable Rainforest Products, IceStone, gDiapers, Larry's Beans. For community impact there was Change.org, Care2, Cap Global, Virginia Community Capital, Ideal Network and for worker impact there was Exponent Partners, Heller Consulting, King Arthur Flour Company, Peaceworks Technology Solutions, Sungevity. The full list of top companies can be found here, along with high-fives for most impactful small companies, too. 

While there are a few big names on the list -- like Patagonia, Method and Change.org -- many of the companies are ones most consumers likely haven't heard of. As Alex Goldmark writes for GOOD -- that's because many of these companies are actually business-to-business operations. "These businesses deserve twice the recognition because they don't face the same public pressure to go green," writes Goldmark. "Of the 19 companies that took the title 'best for overall impact,' more than a third are business-to-business. Another third also provide some mix of consumer- and commercial-focused offerings ... B Lab measures results and brings us companies that toil away on principal even when nobody's looking." 

It's easy to see why a consumer would seek out a B Corp when looking for a product or service. But there is more in it for companies than just winning over progressive-minded consumers and earning the accolades. "For one thing, Benefit Corporations can't be held liable by courts for failing to place profits over everything else," writes Jamie Raskin for the Nation. "This is an important shift in law. The fear of shareholder litigation has driven many public-spirited businesses, most famously Ben & Jerry's, to take the high bid rather than the high road in a corporate takeover fight. Becoming a Benefit Corporation declares legal independence from the profits-über-alles model. More important, having Benefit Corporation status sends a powerful message to shareholders, employees, business partners and consumers about what kind of company you're running."

This, Raskin writes, is one of the most powerful shifts we've seen in business. "We can have a market economy without having a market society, and we can have prosperous corporations that act with conscience."

Right now the mighty power of 500 B Corps may be a drop in the bucket compared to the huge multinationals that control our economy and politics. But our business-as-usual model in recent decades has put us on the fast track to financial and ecological ruin. Without a dramatic shift toward revolutionary change, we're in a mess of trouble. By changing the way we do business, B Corps may be providing an invaluable part of the equation for change.

"It may take a while to displace the rent-seeking leviathans that get rich off lobbying, power plays, pyramid schemes and defense contracts," concludes Raskin. "Then again, a lot of those companies have relocated their operations abroad in search of cheaper labor, while the Benefit Corporations are taking root and blossoming right here in America, restoring the bonds of community while doing honest commerce. This is what economic recovery looks like."

 

Tara Lohan is a senior editor at AlterNet and editor of the new book Water Matters: Why We Need to Act Now to Save Our Most Critical Resource. You can follow her on Twitter @TaraLohan.