Sustainability and the Certified B and Benefit Corporations

By Jack D. Cichy
Dec. 15, 2011

There are several definitions of Sustainability as it relates to Sustainable Business Practices (SBP). For the sake of discussion, let us focus on the following definition – Sustainability involves protecting and enhancing long-term cultural, ecological and economic health/vitality. In addition to Financial Capital, two aspects of SBP are Social Capital and Environmental Capital or what is commonly called the Triple Bottom Line (TBL) or three legged stool. The TBL involves a belief that environmental stewardship of the (PLANET) and social capital (PEOPLE) are just as important as black ink (PROFIT) on the bottom line. In essence, Triple Bottom Line Sustainable Business Practices focus on reduced consumption by functioning to consume natural resources at a lower rate than the natural reproduction rate, or at a rate below the development of substitutes while recycling and reusing. SBP attempt to minimize or eliminate activities that pollute or degrade the environment.

Beyond corporate PROFIT, there are many ways to gauge world health and sustainability problems from a CSR (PEOPLE) and PLANET perspective. These measures include population growth, climate change, deforestation, marine and environment degradation, persistent pollutants in the environment, loss of biological diversity and stratospheric ozone depletion. The only P for most companies is financial based or Performance. Performance includes sales growth, return on equity and profitability. The Three Legged Stool (TBL) involves a stakeholder focus within two additional Ps. The second is PEOPLE or Social Capital. Social Capital is the result of the business engaging the community to determine reciprocally beneficial win-win solutions to common problems. The third P is the PLANET or environmental. A PLANET focus is centered on protecting the environment and assessing environmental administration programs to help understand every stage of product life cycles.

An aspect of the TBL focus on PEOPLE involves Corporate Social Responsibility (CSR). CSR is the equitable, fair and humane treatment of human beings via focusing on a company’s external ethical behaviors. Internally, a company seeks to be known as a ‘Chosen Employer’ or ‘Employer of Choice’. Typically, a PLANET focus will result in benefits to PEOPLE.

According to Pennsylvania based B Lab, the Certified B Corporation designation uses the power of business to resolve social and environmental problems. B Corps focus on a new kind of corporate organization that blends financial capital creation with nonprofit social consciousness. B Corporations are required to modify their bylaws to be considerate of the business impact of company decisions on all stakeholders including suppliers, consumers and employees, including the environment and the ‘common good’. B Corporations meet broad and transparent social and environmental performance standards; they possess higher legal accountability standards; and they do good while making it good business.

A focus on the three Ps causes a company to re-evaluate its business role in the community. Or as Willis Harmon says in his book The Sustainable Company, “Business has become…the most powerful institution on the planet…he dominant institution in any society needs to take responsibility for the whole-¦”.

What is a B Corp. and does it matter? B Corp. status involves creating a new sector of the economy involving a new way to do business using the power of capitalism to address pressing social and environmental issues.

There are three major types of companies. The first is the ‘business as usual’ company that deploys Corpoate Social Responsbilty (CSR)/Sustainability as a communications/public relations tool. “Try to behave better” is the company mantra. The second type of company is one that attempts to transform business operations according to CSR/Sustainability Principles -“ ‘make business out of the problems’ The third type of company is a market focused, collaborative/transformative company. Socially transformative businesses profess to the development of Social Equity (SE). SE benefits are realized by creating societal value and achieving business goals.

With a focus on Social Capital, a Socially Transformative Business builds effective relationships internally between the employees and the managers, and externally between the company and the community at large. Socially Transformative Businesses understand the importance of Corporate Social Responsibility (PEOPLE) and potentially good impact on the PLANET as they willingly incur cost in society’s best interest that may not be related to the factors of production. “Doing Good and Making IT GOOD Business” as Fred Keller, founder, CEO and chair of Cascade Engineering, a leading sustainability based company likes to say. In quoting John Wesley an 18th Century social reformer, Keller ponders that the driver of Social Capital Involves:

“Do all the good you can,

by all the means you can,

in all the ways you can,

in all the places you can,

at all the times you can,

to all the people you can,

as long as you can.”

According to B Lab, B Corp. status enables consumers to tell the difference between a “good company” and just “good marketing.” The B Corp. bills itself as “A new kind of company, for a new sector of the economy” that uses the power of business to solve social and environmental problems by:

• Meeting higher standards of social and environmental performance, accountability, and transparency

• Amplifying voice for a diverse marketplace through the power of the unifying B Corp. brand

There are 454-plus Certified B Corp. companies in a $2.8 billion marketplace including a diverse group of leaders involving 54-plus industries at the local, national, global levels that address diverse needs including poverty, climate, health, education, community, environment, etc.

The theory behind a B Corp. is that every action taken by a business has two impacts:

1. An impact on profit, and 2. An impact on society. B Corp.s stake out a path to where profitability and social benefits blend. This is what Cascade Engineering likes to refer to as the Sweet Spot. The Sweet Spot is where companies should aim for when they want to remain successful in the long term by using the positive power of business to create public benefit.

Cascade Engineering (CE) of Grand Rapids, Mich., became the first B Corp. in Michigan and the biggest in the world. CE has a “triple bottom line” business model focused on financial, social and environmental sustainability -“ the three legged stool. CE desires to be able to measure its performance as it relates to all its stakeholders. The 1,000-plus employee company feels that the B Lab B Corp. certification benchmarks CE against likewise intentioned organizations.

B Corp. certification will help Cascade Engineering to benchmark its sustainability efforts. Most importantly, in the words of CE founder and Chairman Fred Keller, B Corp. certification has enhanced the company’s identity as “passionate advocates for the positive impact business can make economically, socially and environmentally”.

B stands for BENEFIT! Not to be confused with the Certified B Corp. is B Lab’s new Benefit Corporations, which are a new form of incorporation that is legally recognized in Maryland, Vermont, New Jersey, Hawaii and Virginia and will eventually become a corporate structure as common as C, S or LLC corporations. Other states moving forward in 2011 to pass benefit corporation legislation include New York, Pennsylvania, Michigan, North Carolina, Colorado & California.

Benefit Corporations adopt higher standards of corporate purpose, accountability, and transparency and are required by law to create general benefit for society as well as for shareholders. Benefit Corporations must create a material positive impact on society; consider how decisions affect employees, community and the environment; and publicly report their social and environmental performance using established third-party standards.

At the heart of a B Corp. certification or Benefit Corporation is the assurance that a company stands for more than just a focus on financial viability; as an environmental focus based on social responsibility emerges as a focus. When aske, “What is a company’s reputation worth?” Dave Barrett CM, director of Talent Management at CE responds to this question with a one word answer -” “Priceless!”

Ebenezer Scrooge is the principal character in the 1843 classic Charles Dickens’s novel, A Christmas Carol. In this tale, Scrooge is confronted by the ghost of his dead former business partner Jacob Marley. Marley appears to Scrooge and is reproachful over “-¦life’s opportunities misused,” Scrooge says: “But you were always a good man of business, Jacob.” Upon which Marley’s ghost cries out in anguish: “Business! Mankind was my business. The common welfare was my business; charity, mercy, forbearance, and benevolence, were all my business. The dealings of my trade were but a drop of water in the comprehensive ocean of my business!”

Marley’s ghost was on to something. The business of business should never have been just about business.

J.L (Tims) Vernon says it best –

“Footprints in the sands of time

Is all that you have left behind.

Winds have blown these shifting sands,

Concealing works done by your hands.

And I, like you will leave behind

More footprints in the Sands Of Time…. “

Jack D. Cichy Ph.D., CM is a Professor of Management at Davenport University in Grand Rapids, Mich. He can be reached at [email protected].