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Company goals other than profit are hard to measure – enter Certified B Corp status

  • Sue Velez works at filling web orders for W.S. Badger, maker of a line of lotions and balms out of a new facility in Gilsum on Wednesday. The company ships around the world and employs around 90 people, and has been a Certified B Corp for a decade. GEOFF FORESTER / Monitor staff

  • A shave kit from W.S. Badger, maker of a line of lotions and balms out of a new facility in Gilsum on Wednesday, November 10, 2021. The company ships around the world and employs around 90 people, and has been a Certified B Corp for a decade. GEOFF FORESTER—Monitor staff

  • Heather Colling works at filling web orders for W.S. Badger.

  • The warehouse at W.S. Badger, maker of a line of lotions and balms out of a new facility in Gilsum on Wednesday. GEOFF FORESTER photos / Monitor staff

Monitor staff
Published: 11/15/2021 9:41:17 AM

In 1970, in a series of arguments that have become gospel in the business community, economist Milton Friedman argued that companies should focus on providing profits to their investors to the exclusion of everything else. All good things will follow, he said, as long as managers continuously increase “shareholder value.” 

This idea became solidified into the Friedman Doctrine, which has been central to industry, finance and most economic theory ever since. But these days it’s starting to get a second look.

“I run into that argument less and less. … I think it’s completely a false dichotomy,” said Fiona Wilson, a professor of sustainability at UNH. She pointed to a 2019 statement from the influential Business Roundtable which said the actual purpose of business was to “serve all Americans” rather than just the investors. “It didn’t bluntly say Milton Friedman was wrong – but that’s what they were saying.”

That kind of thinking is part of what’s known as ESG (environmental, social, governance) investing, a movement that seeks to make socially beneficial goals just as important as profits for industry. But there’s a complication.

Profits have a well-accepted method of measurement – money! – but how do you judge a business’s environmental impact, labor fairness, transparency of operations, community support or other desirable factors?

Enter the Certified B Corporation, a private certification program to quantify those very things.

“We could say that we were doing all those wonderful things … by joining the B corporation movement, we could have some evidence – not proof, but evidence – that we were doing what we said we were doing,” said Jean Fullerton, co-owner of Milestone Financial Planning, a firm in Bedford that got the certification two years ago. “Our feeling was that if we also aim to benefit, employees, clients, communities in general and more globally the Earth, the environment, it would lead toward a better company and a more profitable company in the end.”

UNH assistance

The interest in Certified B Corp status is such that UNH’s Sustainability Institute has a program where students help New Hampshire businesses apply for it, a process that starts with a huge impact analysis, which is more than companies, especially small ones, can handle.

“The first time anybody sees that, it is overwhelming,” said Wilson. “If it wasn’t hard, B Corp certification wouldn’t have any value.”

The UNH Sustainability Institute program involves more than filling out forms, however. Each team involves three students and a peer mentor who’s been through the process at least once, as well as a faculty mentor. It works with each company for at least a semester, meeting and working with senior leadership, looking at everything from employee data to supply chain practices.

“In most cases, students will help to design new policies. … They leave the company with a road map: ‘Here’s our recommendation for additional things you can implement in coming months or years,’ ” Wilson said.

Even with assistance, though, the process is a pain in the neck.

“In 2014 I thought: ‘Eh, that sounds like a lot of time and money for something that’s not urgently needed in our company,’ ” said Phil Coupe, managing partner of ReVision Energy, a Northern New England solar installation firm that became a Certified B Corp in 2015. “But it was one of the best decisions that we made.”

Little legal status

A Certified B Corporation is a company that has been certified by a private nonprofit known as B Lab as meeting various social and environmental standards. B Lab, created in 2006 by three entrepreneurs who were frustrated by existing methods of supporting what they saw as beneficial companies (hence “B”), says more than 3,000 companies around the world have gone through the process of getting certified, which takes a fair amount of time and effort. 

Ten companies are certified in New Hampshire, and some other companies that do business here are certified in their home state, including ReVision Energy in Maine. The range of Granite State’s Certified B Corp firms is fairly limited: they mostly make organic food or personal-care products or are involved in finance or similar services.

This reflects one of the concerns about B Corp status, that it could remain of interest only to niche areas, what might be considered the crunchy-granola crowd.

“People who were early proponents … say it’s still moving, but I think they would say, ‘Honestly, we had hoped to be a little further along,’ ” said Curtis Welling, clinical professor of business at Dartmouth’s Tuck School of Business.

Note, by the way, that Certified B Corp is different from the confusingly similar Benefit Corporation, an incorporation status allowed in more than 30 states, including New Hampshire. Benefit Corporation is an easier designation, requiring little more than changing some aspects of the business charter and making a few new business decisions, and it has little oversight. New Hampshire, for example, maintains a list of benefit corporations but doesn’t check on their practices.

There are 16 New Hampshire companies listed as benefit corporations covering a broader range of industries, including construction and trucking.

Becoming a Certified B Corporation takes the idea much farther than benefit corporation. It requires interviews and often hefty paperwork and usually an annual payment for regular followup by B Lab, the private company that does the certification.

However, the designation has no legal standing for private companies in most states, including New Hampshire, although it does provide some legal protection for directors of public companies facing shareholder lawsuits. It carries no obvious benefit such as access to different financial markets or ability to sidestep regulation. So why do it?

Partly for messaging, both internal and external.

“The return has been powerful from the standpoint of being able to attract and retain the type of talent we need to execute a clean-energy transition … and attract clients and partners,” Coupe said. “It also helps spread the ReVision name. Companies that are not B Corps are expressing interest – there’s more potential to meet allies.”

But Coupe said there’s more to it. Publicly becoming a B Corp holds a company’s feet to the fire, ensuring that it sticks to its principles even when tempted to stray in pursuit of lower costs or higher profits.

“There’s a substantial amount of paperwork, also interviewing. … You have to demonstrate how transparent you are as a company – with employees, the community, with the general public. You can’t hide anything,” Coupe said. “It is a credible, legitimate way to create positive change in the world, because it is the antidote to the winner-take-all capitalism that has produced a lot of the societal problems that we struggle with today.”

W.S. Badger, maker of a line of lotions and balms out of a new facility in Gilsum that employs around 90 people, has been a Certified B Corp for a decade. 

“It’s part of who we are,” said Dee Fitzgerald, brand manager for W.S. Badger. “We talk about it all the time. It’s part of employee training. It’s on our packaging.”

She pointed to the 486-kilowatt solar array in the adjoining field, which provides 100% of the company’s electricity, as an example of an action that was done partly to meet B Corp standards.

Does it work?

That’s all well and good, but does the designation really make a difference?

Welling of the Tuck School noted that although a lot of companies have become Certified B Corporations, they are mostly small and almost entirely private.

“These tend to be consumer-facing, brand-oriented companies. The reason for that is pretty obvious: It tells customers we share your values, so you should like our product,” said Welling.

But Welling says “there’s not a lot of evidence yet” that the designation translates into significant sales, more market share or other standard business metrics.

“When talking to fairly significant B Corps, they will tell you they think it’s a nice enhancement to the brand … but few of them have built a campaign around it,” he said.

Notably, the big, stock-exchange-listed firms that drive American industry have almost entirely given a pass to Certified B Corp status. The most damning move happened in 2017 when Etsy, the e-commerce firm focused on crafts, dropped B Corp status after five years to focus on profits, with the CEO saying that Certified B Corp status was an “untested process for existing public companies.”

Despite that, Wilson of UNH says evidence is growing for the value of Certified B Corp status.

“Studies say that companies paying attention to their environmental impact, (that) are ethically and transparently governed, are outperforming companies that are not,” she said.

Concern about the climate emergency is making certainty about company behavior more valuable to customers and employees, Wilson said – something that shows up in her students.

“They want a new kind of economy. They want to buy from, work for, invest in companies they think are aligned with their values.”

 

(David Brooks can be reached at (603) 369-3313 or dbrooks@cmonitor.com or on Twitter @GraniteGeek.)
David Brooks bio photo

David Brooks is a reporter and the writer of the sci/tech column Granite Geek and blog granitegeek.org, as well as moderator of the monthly Science Cafe Concord events. After obtaining a bachelor’s degree in mathematics he became a newspaperman, working in Virginia and Tennessee before spending 28 years at the Nashua Telegraph . He joined the Monitor in 2015.



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