Entrepreneurial friends Jay Coen Gilbert, Bart Houlahan and Andrew Kassoy have always been passionate about creating a better world through business. In the early aughts, when Jay and Bart were running AND1, their $250 million basketball footwear and apparel business, and Andrew was deep into a private equity investment career, they came up with a way to do just that: B Corps, or benefit corporations.
B Corps are businesses that have legally changed their bylaws to take into account the impact of their actions on the environment, community, workforce, as well as their financial bottom line. B Lab is the group’s nonprofit that sets the requirements and certifies businesses as B Corps. While the idea of the triple bottom line wasn’t new—many companies have long made a point to care about profits, people and the planet—what was new was the creation of a systematic way to recognize which companies are good and which just have good marketing and mobilize them as a community. Since launching in 2006, the concept of the B Corp has spread—fast. There are currently more than 520 certified B Corps and counting.
Jay spoke with us about how and why companies become B Corps, the wealth of Philadelphia-area companies that are certified, and his dream of a future in which all companies make good products that are also good for consumers, workers, and communities.
Why are you so passionate about B Corps?
The only hope we have of addressing our most challenging problems is if we use business to do that. These entrepreneurs doing that are incredibly inspiring. There’s nothing more fun or meaningful that I could do each day. And I get to do it with my best friends.
What kinds of companies are best suited to becoming a B Corp?
Any company that wants to both make money and make a difference. Small companies, sole proprietors, large corporations. Any company that can say ‘We’re about more than we make and how we interact with the people who work here, our community’ is a perfect candidate to be a B Corp.
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How does a company become a B Corp?
The first thing is, don’t worry about whether you’ll earn certification. If this resonates, spend an hour—do it on your own or have us help—and complete an impact assessment. It’s a free, confidential, pretty useful management tool to assess impact of a company on its workers, suppliers, and community. Even if you never get certified…it’s useful because it allows you to measure impact and benchmark against other folks. Imbedded in the assessment are all kinds of tools, resources, and best practices. Things like creating a local purchasing strategy, creating an environmental audit, and exploring employee-owned business. [To get certified, companies must have an] assessment verified score above 80 and determine a legal path. Certification fees range from $500 for business with under $2 million in annual sales. Companies of $100 million in sales pay $25,000 a year. Most businesses in general are under $2 million.
How many Philadelphia-area companies are B Corps?
There are 520 B Corps in the US and Canada in 60 some industries. Forty-eight are in Pennsylvania. They range from travel agencies to green builders, wealth managers, technology business, architects, and PR firms. Founding B Corps from Philadelphia include Workplace Dynamics, a company that specializes in helping mid to large companies to do workplace engagement; Mugshots, a local coffee shop; The HUB, the green meeting space at the Cira Centre; and Revision Architecture.
Once a company is a certified B Corp, how do you measure its success?
The headline is: B Corps redefine success in business. Not only being successful in terms of traditional metrics, but also successful in creating high-quality jobs and impacting lives in their community. We have to verify their performance, literally on hundreds of different metrics [via the B Impact Assessment]. B Corps are better companies—we have to back that up. For example, at the same time there were over 7 million jobs lost in the US during the last recession, more than 50 percent of B Corps increased their employee headcount by more than 5 percent. And there’s no get-out-of-jail-free card. B Corps have to recertify every two years. Assessment evolves like software; the bar has been raised as we go.
While many companies like the idea of making money and being socially responsible, getting certified can be expensive and time-consuming. What then motivates companies to become certified B Corps?
B Corps become B Corps for a variety of reasons. Some because they can save a bunch of money. B Corps are collectively saving over $2 million a year. It’s easier to attract outside capital—there are investors out there who want to invest in companies that make money and do good. B Corps get a ton of press. The companies that want to do more than just make money realize the issues they want to address, they can’t do it alone. One thing that unites all the B Corps is that they are more powerful together. They can pass legislation, drive capital, they can build a collective voice, reach more companies, and leverage small companies’ marketing budgets.
B Lab is the nonprofit behind B Corps. What do you and your 25-member team do?
B Lab works on three principle activities. First, is building a community of certified B Corps. People here are recruiting B Corps, trying to deliver services to them, helping them generate press. Second thing we do, that community of companies has become a powerful constituency. As a community we’ve passed legislation. Benefit Corps are recognized in seven states. The City of Philadelphia recently passed a tax break law for certified sustainable businesses that goes into effect at the end of this year. The reason that exists is that there is a high concentration of B Corps here that both could advocate, but also that could be the example of the kind of business we want here. Three, driving capital. B Lab has a team that has a developed a rating system and an analytical platform that helps investors find investments that are higher impact—Global Impact Investing Rating System. Without a B Corp there never would have been a rating system to inform the investor community.
As a nonprofit, where does B Lab get its funding from?
Eighty-five percent of our support is philanthropic. Fifteen percent is certification fees. Hopefully, in five years that ratio will be reversed.
What the struggles have you encountered building B Corps?
The struggles aren’t convincing people it’s a good idea to be a B Corp. We don’t spend a lot of time trying to teach businesses that need to be persuaded that sustainability matters. There’s hundreds of thousands of businesses that have this thinking. The biggest challenges is that CEO bandwidth. Being that there are legal requirements, the only person that can make a decision that a company will become a B Corp is the CEO. Even if feelings are totally in alignment, just moving this to the front page is a challenge. It isn’t as important to be a B Corps as it is to make payroll.
Now that you’re six years into it, what organizational improvements are you trying to make?
Everything is about continuous improvement. One thing we’re working on aggressively now—the B Corp community wants to act collectively. I don’t think that we’ve been particularly good at creating either a culture [or a] technology platform to both inspire that collective action.
What does the future look like for B Corps?
Five years from now, [We’ll go from] 500 B Corps to 2,000 B Corps. Twenty-five percent will be outside the US. [We’ll go from] 7,500 users of B Impact to 10,000. Seven states recognize benefit corporations. In five years, [it will be] 35 states. Our end goal is by serving this global movement of entrepreneurs that we’ll redefine success in business, which will result in all companies not just to be the best in the world, but to be the best for the world.
Photos by Albert Yee-30-
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