“We do very well in the employee area largely because we’re employee owned, but B Corp is also a tool for us to look at our lower scores and start to move the needle on those.” In the case of King Arthur Flour, that meant making improvements in terms of their environmental impact over the last 18 months. “Having B Corp as a tool is reinforcement to people internally as to why we are making these changes.”
Pull up , and you can see exactly how they are doing; where they excel – employees and leadership; and where they need work – environment, consumers and community.
Looking at all of these areas together is what differentiates B Corp, Houlahan says:
“There are plenty of deeply green or employee-centric certifications out there, but this is the only corporate certification we know of that is looking at the whole company and its impact on consumers, employees, the environment and the community.”
But becoming a B Corp really moves beyond that.
“Becoming a B Corporation intentionally interferes with a company’s obligation to maximize shareholder profits. That’s why we exist,” Houlahan says.
To find out how far the additional obligations to non-shareholder stakeholders goes, I asked Houlahan to speculate whether, if Burt’s Bees had been a B Corp, its sale to Clorox would have been prevented.
His answer was an emphatic no, but the way he sees it, being a B Corporation does give companies additional options at the point of sale.
“At the moment of liquidity when selling a company, the fiduciary duty of directors is heightened under current corporate law so that they must maximize shareholder value,” Houlahan explains. “Our legal framework changes that. Directors and executives have more options at the point of sale; they can consider the sales impact on other stakeholders, it isn’t only about maximizing shareholder value.”
As a B Corporation, the company can consider a lower offer if they feel it better maintains the integrity of the company vis a vis its stakeholders.
Houlahan also sees B Certification as a way to assure consumers that a company’s practices are still sound after acquisition.
“If you talk to Burt's Bees,” says Houlahan, “they would tell you that they are unequivocally not only maintaining their old practices but have enhanced them. But the problem is that consumers have no way of knowing or verifying that. B Certification is a way to answer that question for consumers.”
To get another perspective on whether B Certification is important, I talked to Paul Herman of , a company that provides indices and research for investors who seek to make money by doing good and consults to corporations looking to realize sustainable, profitable growth by having a positive impact. Herman was in the same analyst cohort 20 years ago at McKinsey as B Labs co-founder Jay Coen Gilbert.
Herman rattles off a number of companies that are moving toward sustainability without a change in their bylaws – Starbucks, GE, Cisco, Alcoa, Wal-Mart – all because they see customer needs shifting.
But he still sees value to the B Certification process.
“It’s significant in that it helps differentiate a company to be part of an association that has common interests and goals that may be different from traditional corporate goals,” says Herman. “For an investor, it’s a helpful indicator that the company is seeking a positive environmental or social outcome, but the company still has to pass a number of other tests; do they have a great management team, a growing market, and the ability to beat the competition. It’s one indicator of a company’s strategy, but it won’t tell you whether the investment will be a home run or not.”
Herman also sees it as a way to create a community of like-minded businesses but worries that becoming a B Corp may also place restrictions that stifle ingenuity.
“B Corp is very prescriptive about the practices of the certified companies, but American ingenuity is about innovation.”