News from the Field

Q&A with B Lab, winner of this year’s John P. McNulty Prize

Over the past eight years, the annual John P. McNulty Prize—awarded by the McNulty Foundation—has celebrated individuals who are using their exceptional leadership abilities, entrepreneurial spirit and private sector talents to make an impact on the world’s toughest challenges.

Selected by a jury chaired by former Secretary of State Madeleine Albright, the winners of the 2015 award were Jay Coen Gilbert, Bart Houlahan and Andrew Kassoy, entrepreneurs who left the private sector with ambitions to transform corporate culture and business as usual. The trio now head a nonprofit called B Lab, which supports for-profit companies to meet rigorous standards of social and environmental performance, accountability and transparency.

What does that mean, exactly? B Lab sums it up this way: “B Corp is to business what Fair Trade certification is to coffee or USDA Organic certification is to milk.” Some of the more well-known 1,700 certified B corporations include Etsy and Patagonia. “The capacity for large-scale systemic change through the B Corp movement is tremendous,” says Nina Sawhney, communications manager for the McNulty Foundation, on why the foundation chose B Lab as last year’s winner. “That’s the kind of change that we aspire to as a foundation and seek to inspire in others.”

We talked to B Lab about their new storytelling initiative B the Change Media, why media companies like This American Life are becoming B Corps, and their strategy for world domination.

Media Impact Funders: What are the world’s toughest challenges, from B Lab’s perspective? Can you give us some examples of how these challenges are being tackled by any of these certified B Corps?

B Lab: With over 1,700 B Corporations in over 50 companies and 100 industries, there’s a business model tackling almost any problem you could imagine somewhere in the community. Here are two examples of the kinds of questions that B Corps are answering:

  • How can vulnerable and marginalized communities be given opportunities for employment that are meaningful and not exploitative?

Greyston Bakery is a B Corporation in Yonkers, New York, with an open hiring program. For people with barriers to employment like histories of incarceration, homelessness, or drug addiction, Greyston Bakery offers an opportunity to re-enter the workforce with the support and resources necessary to succeed. Triciclos is a B Corporation in Brazil and Chile that hires former “street waste pickers” to operate their Puntos Limpios—public stations where over 20 different materials can be recycled. Prosperity Candle employs women recently resettled in the United States from refugee camps, offering them a living wage from the start and opportunities for advancement.

  • How can we produce goods without creating waste, using unnecessary resources, or otherwise doing environmental harm?

Thread LLC creates a textile from plastic bottles collected in Haiti that uses half the water needed to make traditional cotton cloth. MUD Jeans in the Netherlands uses an innovative business model to “lease” their denim to customers; once the jeans are worn out, the customer returns them; the customer gets a new pair, and MUD upcycles the old pair into new items. WasteZero partners with cities to implement municipal waste management programs that incentivizes residents to throw out less and reduces the amount of waste sent to landfills by 44 percent.

The most important challenge that B Lab tackles, however, is that the world’s markets are not set up to allow or encourage companies to operate this way. How can we create the infrastructures and incentives to help entrepreneurs build these kinds of business models? How can we remove the impediments currently standing in their way?

MIF: Typically, huge foundations such as Gates and Open Society are the organizations leading these large-scale social change missions. Obviously, that dynamic is shifting now that businesses are getting more vested in social change initiatives. How do you see the nonprofit and for-profit sectors collaborating to achieve these common goals, if at all?

B Lab: We definitely see them collaborating; they’ll have to collaborate. We don’t think that social enterprise and business as a force for good should replace the work of nonprofits. We think that we’ll need every sector—nonprofit, for-profit, governmental—firing on all cylinders to create long-lasting social change.

We often see B Corps (which are all for-profit) working very closely with nonprofits. That can range from partnership models like glasses company Warby Parker working with the nonprofit VisionSpring as part of their one-for-one model, to ownership models where a for-profit entity is partially or wholly owned by a nonprofit. The ability of a for-profit business to grow and earn revenue can be a great asset to nonprofits looking for steady funding. We’ve even seen nonprofits spin off for-profit arms for the exactly that reason, and then certify those companies as B Corporations as a way to maintain their mission and communicate to their communities that their values aren’t changing.

For-profit businesses are able to grow, change, and innovate in a way that isn’t always easy for nonprofits. That can make businesses valuable partners—as long as the business is fully committed and accountable to the mission in question. We’ve also seen the economic power that businesses can flex with governmental institutions. A business that employs thousands of people brings a card to the table that nonprofits don’t always have. B Corps in North Carolina are currently working with Equality NC to pressure legislators to repeal HB2 in that exact way.

MIF: What can these two sectors learn from one another?

B Lab: So much! When it comes to taking mission and stakeholder impact seriously, nonprofits obviously have more experience. One of our main goals is to help companies understand that measuring and reporting on their stakeholder impact and mission-related goals is as important as tracking their financial performance. Nonprofits are way ahead of the business world when it comes to that kind of commitment to reporting—partially because their funding structures demand it.

Another place where the for-profit sector can learn from nonprofits is the world of attracting and retaining talent. For-profit businesses are starting to understand the value of having committed, mission-aligned talent—the nonprofit world has always known that an engaged, purpose-driven employee is more valuable than one just showing up for a paycheck. If for-profit companies can convince those potential employees that their mission is more than marketing, they’ll open up a whole new stream of talent that will stick around a lot longer.

On the flip side, social enterprises are always developing new ways to use their employee base as an opportunity to create more positive impact. Whether that’s through employee ownership programs, workforce development programs that teach staff valuable skills, or open hiring programs that give opportunities to people with barriers to employment, we’ve seen B Corps in all different industries use their company to serve their workers as much as their other stakeholders. Nonprofits are often (for good reason) laser-focused on one mission. Businesses may be able to offer examples of how to achieve that primary mission while serving other stakeholders as well.

MIF: Talk to me about Etsy’s recent IPO filing. This is pretty big (and good news) for you guys, right? More investors, more B corp IPO filings? Is this your plan for world domination?

B Lab: Any good plan for world domination wouldn’t rely on just one strategy! Etsy’s IPO is one great example of an opportunity to introduce investors to B Corporations. Another great example is Natura, a cosmetics company that was publicly traded in Brazil before getting certified as a B Corporation. To fulfill our certification requirements, Natura’s shareholders had to approve changes to Natura’s governing documents that allow the company’s directors to consider the company’s commitment to their stakeholders like their workers and community alongside their profits when making decisions. Natura’s shareholders voted overwhelmingly to approve the change. That happened the same week as Etsy’s IPO.

More and more investors are realizing that short-term profit maximization has a lot of downsides, both for the planet and for the company’s long-term financial success. B Corps like Etsy and Natura are showing there’s a better way to do business, but they’re also succeeding by traditional business metrics as well.

MIF: Are there any B corps that prompted high fives around the office? Were there any companies seeking B corp status that surprised you?

B Lab: The certifications that provoke the most high-fives around the office are companies that we approached early on (let’s say 2007 or 2008) and heard “no thanks,” who now see value in the community that they didn’t see before.

That’s one kind of big win, but it doesn’t normally come as a surprise. There are two areas we regularly get surprised. The first is in the world of big, multinational companies. After Natura certified as a B Corp in 2014 and Unilever CEO Paul Polman expressed interest, we’ve started getting unprompted inquiries from huge, international companies.

The other way companies can sometimes come out of left field is the world of benefit corporations. Unlike the B Corp certification, which runs directly through B Lab, companies structure themselves as benefit corporations through the state. That means we often don’t find out about companies reorganizing as benefit corporations until it hits the press. For example, when This American Life announced it was restructuring as a benefit corporation, that was big news around the office and prompted a lot of “Are you sure? That This American Life?” emails.

MIF: I’m sure you’d like to see every company in the world seek B corps status—but are there any specific companies you want to come on board?

B Lab: Having every business in the world be a Certified B Corp actually isn’t the goal. B Corps are amazing and are leading the charge, but we’ll never see seven million B Corps in the United States, for example. More urgent for B Lab right now is getting as many businesses as possible to buy into the basic idea behind the B Corp movement—that it is important for businesses to measure, manage, and improve the impact their company has on the rest of the world. That’s why the B Impact Assessment [link]—the online tool we use to certify B Corps—will always be available for free.

Our work right now is a long-term play. Our vision is to redefine success in business so that one day all companies compete to be not just best in the world, but best for the world. If a hundred years from now no one remembers what a Certified B Corp is, but every business considers impact measurement and reporting part of their basic responsibilities, we’d be very happy indeed.

MIF: What does the future look like for B Lab?

Hopefully very, very long. But in the near term:

  • It looks global. While B Lab started in the United States, more new B Corps are being certified outside the US than inside, and it won’t be long until they outnumber them entirely. We rely on partners like Sistema B in Latin America and B Lab Europe in continental Europe to help us recruit and serve those companies, and as the global community grows, so will those partnerships.
  • It looks like storytelling. B the Change Media was formed as a partnership between B Lab, the community of Certified B Corporations, and Bryan Welch, former chief executive of Ogden Publications (B Corp since 2010). B the Change Media will be a for-profit media company with a print and digital presence that reports on business as a force for good. For major social change to happen, there needs to be a way to get the stories of the movement to the general public. We can’t wait to see how B the Change Media tackles that.
  • It looks controversial. As the B Corp community grows, more types of companies are interested in joining than we ever imagined. That means we have to be thoughtful about how we evaluate those companies. We have created specific addenda to our standards over the years for particular industries like microfinance and green building—industries that really require specific metrics to be able to assess their impact. We most recently have been working on addenda for for-profit higher education institutions and educational service companies. We know there will be more on the horizon—including our work to find a way to meaningfully assess the impact of major multinational corporations. We know we won’t get everything exactly right.

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