By David Oetken
You’ve probably heard of the new kind of corporation that’s using business as a force for good. NPR, The New York Times, Entrepreneur Magazine, Fortune, the Atlantic Monthly and many other major media outlets have covered these Benefit (B) Corporations.
Yet, even with all of the media coverage, many consumers and even investors still wonder what sets B Corps apart from other businesses, how much difference B Corps make and whether it’s possible to make a profit while doing what’s right.
What Makes B Corps Different
B Corps are for-profit companies certified by the nonprofit B Lab to meet rigorous standards of social and environmental performance, accountability and transparency. Globally, there are more than 2,500 Certified B Corps from 50 countries and over 130 industries working to redefine success in business.
Certified B Corps are audited by the nonprofit B Lab on numerous criteria “for social and environmental performance, accountability, and transparency,” B Lab explains. Certified B Corps must be incorporated as a Benefit Corporation or Public Benefit Corporation (not a C or S Corp) with the applicable government organization (the state level in the U.S.), which provides the company with the legal protection to consider all stakeholders, not just shareholders. This is critical, since traditional corporate structures compel companies to put shareholders ahead of other considerations, including social or environmental values.
Ultimately, what makes a B Corp different from and more impactful than a traditional corporation that’s trying to do good (by giving away some money every year, volunteering, etc.,) is that for B Corps, doing what’s right is the reason that they exist. It’s built into their legal structure, their mission and their values. It’s why the investors bought into the company. It’s why employees and customers stick around. And it’s what’s required of B Corps during the B Lab annual audits.
B Corps and Their Positive Impacts
Here are a few examples of B Corps:
Facilities Management Services PBC (FMS) was one of the first B-Corps in Kentucky. Scott Koloms, resident and owner of FMS, envisioned “a company that worked just as hard making the world a better place as it did being efficient and profitable. We want to show that positively affecting people’s lives beyond a paycheck and positively affecting communities can lead to long-term financial success … for everyone.” FMS drives a number of social benefit programs including food-access initiatives, college-level educational opportunities, paid volunteer time and financial literacy assistance for its employees. Further, FMS works to create healthier, safer and cleaner neighborhoods where it does business. In the end, FMS enjoys lower turnover and consistent growth thanks to like-minded customers that believe in and share FMS’ values.
B Corps and Profits
Says Ben Reno-Weber, founder of Kentucky-based B Corp MobileServe: “I get super-heated by people who say, ‘Well, you know, you reduce your profit margin.’ Bull. It (operating as a Certified B Corp) is not reducing my profit margin. I intend to absolutely have a 90-percent margin company selling a tech product that makes the world a better place — there’s no trade-off there.”
Koloms says that FMS has an easier time with employee recruitment, lower employee turnover and more engaged employees. The company’s turnover went from 120 percent to 69 percent in 2.5 years since implementing the B Corp mission — phenomenal compared to the industry’s average turnover of 250 percent. He also says companies have hired FMS specifically because of FMS’ B Corp status.
As of January 2018, there were five Certified Benefit Corporations and six Public Benefit Corporations in Kentucky.
To leverage the power of do-good businesses, Koloms, Reno-Weber and others have worked to create Canopy, a nonprofit that supports socially responsible businesses in Kentucky by growing their impact through education, certification and advocacy. Canopy is creating a strong network of socially-conscious and impact-driven businesses that work to make lives better in Kentucky. Koloms envisions working with the state of Kentucky to solve real social issues: “We know the list of social ills that we face in terms of poverty, education and addiction — all around our state.” He says that Canopy-Certified companies, will align “with the needs as identified by our governor and our mayors … to focus on social ills and measure the impacts of what we can do together as a team.”
David Oetken is Director of the Louisville affiliate of the Kentucky Small Business Development Center network, the Louisville Small Business Development Center, which is funded in part through a cooperative agreement with the U.S. Small Business Administration, University of Kentucky, Louisville Metro Government and Greater Louisville Inc. He can be reached at [email protected].