Q&A with B Corporation Co-Founder Jay Coen Gilbert
A Responsibility Revolution Extra
From authors Jeffrey Hollender & Bill Breen
During the two years they spent writing The Responsibility Revolution, authors Jeffrey Hollender and Bill Breen conducted an intensive series of interviews at key companies on the leading edge of the corporate responsibility movement. In this bonus excerpt from Bill’s conversations with Timberland CEO Jeffrey Swartz and Timberland CSR Strategy Manager Beth Holzman, they share some of the additional insights and perspectives these encounters provided.
Ambiguity is not an option. For any company that seriously intends to harness the power of the marketplace to crack society’s biggest challenges, authenticity—the capacity to do what you say you’ll do—is a core, non-negotiable attribute.
And that presents a problem.
And yet, B Corporation is more than an acid test for authenticity. It’s also a support system for an emerging category of hybrid companies that are driven by social as well as financial goals. Here, in excerpts from Bill’s interview, B Corporation co-founder Jay Coen Gilbert delivers a report from the future of corporate responsibility 2.0.
Q: What’s the problem that B Corporation seeks to solve?
Coen Gilbert: As important as the government and non-profit sectors are in addressing the social and environmental challenges that confront society, they're insufficient. More than three-quarters of economic activity consists of for-profit businesses, as measured by GDP. Business has the scale and speed to address the challenges of our time, whether its climate change, global poverty, or strengthening communities.
You really have to acknowledge that business is in the driver's seat—and then figure which direction you want it to go in. Our aim is to support the power of markets and entrepreneurship to solve social and environmental problems.
Q: Skeptics would argue that companies are responsible for shareholders, not society. Aren’t activist groups and non-governmental organizations better equipped to confront society’s challenges?
Coen Gilbert: The non-profit sector has a hugely important role to play, because there are plenty of places where the marketplace can’t reach. The problem is that structurally, 501(c)(3) organizations, or non-profits, are legally precluded from attracting the kind of capital that’s commensurate with the size of the need. So we're seeing non-profit innovators try to push their organizations to look and act more businesslike, in terms of their accountability, impact, and scale. And we're seeing more and more for-profit entrepreneurs moving their purely market-driven businesses to incorporate mission.
Both ends of the spectrum are pushing towards a middle path, where you marry the power of markets with the purpose and mission of non-profits.
Q: So what’s preventing those two trends from accelerating?
Coen Gilbert: Non-profits’ legal structure makes it really difficult for them to attract the kind of capital that can scale their good ideas. And the legal structure for a business requires it to have a single fiduciary duty, which is to achieve a maximum return to shareholders. That legal framework can have a huge chilling effect on the potential for for-profit social entrepreneurs to use their business to drive social value.
Q: How does B Corp attempt to reconcile those two impediments?
Coen Gilbert: It allows you to raise capital and create some personal wealth out of all your efforts, but it also ensures that you maintain your mission over time. The “B” stands for the benefits that are created for all of the stakeholders engaged in your business, not just your shareholders. And it ensures that there's a balanced set of interests that are considered in your boardroom, rather than just the one dominant interest of shareholders.
In a B Corp, you can do what is required to grow your business and increase your impact, and if that requires relinquishing financial control [through a merger or acquisition], you can do that without relinquishing mission control.
Q: Why not simply advocate for legislation that encourages companies to consider the needs of their stakeholders as well as their shareholders?
Coen Gilbert: We are totally not about regulatory solutions. We are a market-based solution, which says, "Empower those entrepreneurs and those investors with the tools they need to create the change they seek.” We want to have an evolved corporate form that meets the needs of an evolved set of entrepreneurs and investors.
Q:When you were designing the B Corporation template, were you also reacting to the rise in greenwashing?
Coen Gilbert: That was a huge piece of it. Any company can put out ads with windmills and pretty flowers. But only certain companies can actually say that they've been certified as meeting a higher standard of corporate purpose, accountability, performance, and transparency. That's the new bar. The new bar is not a slick marketing campaign.
Q: How are companies using the B Corp certification to re-orient their strategy or goals?
Coen Gilbert: There’s a consulting company in Philadelphia called Strategy Arts that went through the B-rating system. Because you get a higher score by serving customers that are delivering a social or environmental impact, Strategy Arts dramatically shifted its focus to working with sustainable businesses, rather than just any client who could pay the bill.
King Arthur Flour has talked about using the rating system to assess the companies in its supply chain. Private equity firms like TBL Capital are starting to use B Corp standards to help ensure that they’re investing in triple-bottom line businesses.
In fact, more than 5,000 organizations and investors that aren’t B Corps have nevertheless used the rating system to asses the underlying social-environmental performances of other businesses. It helps them move from investing in mainstream companies that are simply trying to avoid doing harm, to enterprises that are actively creating some form of positive social impact.
When you direct the flow of capital towards impact investing, you begin to influence the marketplace in a way that far exceeds the effect of any one individual company.
Q: What’s the long-range potential for this “middle path” you’ve described, where mission and markets connect?
Coen Gilbert: Fifty years ago, there was no such thing as a non-profit sector. Now it’s an entire ecosystem. In a generation, we believe this new sector will be at least as big as the non-profit sector is today, which is around five to seven percent of U.S. GDP. And unlike the non-profit sector, the B Corp sector isn’t capped, in terms of its growth potential.
The 20th century was the century of shareholder capitalism. The 21st century, over time, will be the century of stakeholder capitalism, comprised of B corporations whose job is to create both shareholder and societal value.
Jeffrey Hollender and Bill Breen are co-authors of the recently published book, The Responsibility Revolution . Bill Breen is the Editorial Director, and Jeffrey Hollender is the Co-Founder and Executive Chair of Seventh Generation. Jeffrey is also the author of The Inspired Protagonist, a leading blog on corporate responsibility.
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