Benefit corporations offer a new standard for businesses that want to be socially responsible, and tech startups could be the catalysts for positive change.
When he wanted to start a technology business that centered around farming, Benzi Ronen knew he needed trust. Trust from the public, trust from investors, and most importantly, trust from farmers. He was a tech guy — Ronen had worked for large corporations, analyzed data, he had been an entrepreneur. He wasn't well-versed on agriculture. But he wanted to serve the farming community.
So, Ronen founded Farmigo, a software system on which farmers can organize and sell their produce, and an online farmer's market for consumers. It cuts out the grocery store chain as the middle man — the large corporation in the middle that takes much of the profits — and replaces it with a simple web platform that connects consumers directly with farmers.
To start Farmigo, Ronen worked hard to gradually gain those farmers' trust. He knew farmers, who take hundreds of risks a season in order to progress their business, were weary of corporations whose intentions were often not altruistic.
"I would spend hours legitimizing our values, proving our value, and over time, I built a brand of who I was and farmers started to trust me," Ronen said.
But the farmers didn't have much faith in the motives of corporate investors, and they were asking very good questions about them that Ronen had a hard time answering. He needed a way to prove that if his values were aligned with the farmers', so were the values of all involved in his company.
That's why Farmigo became a benefit corporation, a new type of corporate entity with altruism in mind.
In short, benefit corporations are for-profit entities that use their business for the good of the world. They meet high standards for consideration of environmental, social, and philanthropic issues in their decision-making processes. Though many states' laws allow companies to become benefit corporations, the real seal of approval is from B Lab, which is a non-profit with a rigorous "B Corp" certification process. Farmigo is one the companies now certified.
"There's a new channel that's not just profitable but celebrating best interests, and it's generic but we believe in goodness, of a new way of doing business...every company has their unique interest in how [being] benefit corp [is] servicing them," Ronen said.
What is a B Corp?
It's the start of a movement to redefine success in the business world. The goal of B Lab, a Pennsylvania-based nonprofit, is to support entrepreneurs and companies who are using a business as a force for good by promoting community involvement, employee salaries and benefits, sustainability, and philanthropic work.
B Lab believes benefit corporations are to businesses as what fair trade certification is to coffee. Benefit corporations and certified B Corporations are often times confused for one another and simply called B Corps, though benefit corporations in general do not have to be certified — it is just a status administered by each state in US. Currently, 23 states have legislation to enact benefit corporations, and about 15 other states are working on laws.
B Lab, which promotes the power of business to solve social and environmental problems, is the only organization that can confer the certification process. For instance, Warby Parker, an eyewear company that serves the poor; a food service company, Revolution Foods, that serves meals to low-income public school students; a manufacturer, Cascade Engineering, that goes green and helps workers move from welfare to a career. To date, there are nearly 1,000 certified benefit corporations from 32 countries and 60 industries.
"There's not a specific industry that's most likely to join," said Katie Kerr, who works in communications at B Lab. "We have lawyers, tech firms, green tupperware, Method, Ben and Jerry's, Patagonia, financial investing firms and funds, real estate, anything you can think of. That's really what is so interesting and exciting for me, that there's this growing feeling and movement."
To become certified, a company must undergo a free B Lab assessment and earn a minimum score of 80 out of 200. The assessment is customized by company size, industry, and location. The questions are about governance, workers, community, and environment. For example, one of the questions in governance is: "What portion of your management is evaluated in writing on their performance with regard to corporate social and environmental targets?" One of the questions for workers is: "What % of the company is owned by full-time workers (excluding founders/executives)?"
The B Lab site states it typically takes one to three hours. After an initial score is given, B Lab gives a review, a comparison to other companies in that industry, another assessment, and then, if they pass, the company can provide support documentation if the score is above 80.
More than 16,000 businesses have taken the assessment, Kerr said, though it may take months or years for them to get the right documentation to become a certified benefit corporation. It takes a lot of work to become certified. The standards are high.
The certification must be renewed every two years, and 10% of the businesses are audited each year, just to make sure they are continuing to do what they said they do in the original assessment.
B Labs also has a "B The Change" campaign, which is the first focused community initiative on social media and on the web to reach out to people, Kerr said. It is to "celebrate those that are a part of this movement."
Growing awareness is the most important focus right now, Kerr added. So many people are unaware of benefit corporation certification, and she said she would love to see more social media pressure. There are many companies out there claiming to do great things for the world, which is wonderful if they are, but this could raise the standard.
"It takes people being dedicated to seeing it out, and more individuals taking the initiative to tell others," Kerr said. "There's so much passivity — people may agree with an idea, but that doesn't mean you are going to join the moment, be a part of the team. That's when it will really start gaining some traction."
YIKES, Inc. is an award-winning web design company that was founded by three women in 1996. They were involved in technology in the late 90s and thought it should be accessible to everyone, and helped people develop early websites. Today, they do custom design and development.
Sustainability has been a part of the company's platform since inception. In 2003 YIKES joined the Sustainable Business Network of Greater Philadelphia. In 2010, YIKES became one of the first companies in Pennsylvania to become a certified benefit corporation, and the company is an example for B Corps around the world. For example, YIKES has excellent benefits, the office is LEED Platinum certified, the company recycles and pays employees for volunteer days. It also sponsors community events involving technology and sustainability.
"Benefit Corporations prove that ethical companies with high standards can help make the world better. We can thrive as successful businesses while using the triple bottom line - People, Planet, Profits," said YIKES co-founder Mia Levesque.
Gaining real momentum
Technology companies have a great opportunity to be catalysts for this movement, Levesque said. "Although there is this idea of 'paperless' being good for the environment, technology uses a tremendous amount of resources," she said. "Technology companies can switch to sustainable energy sources like wind and help to develop new technologies. Through our websites, social media, and the information age we live in, technology companies are poised to create trends."
Ronen believes that this movement is gaining traction, and soon, the early adopter companies will pave the way for other companies to adopt this standard. He compared it to the Verisign logo on e-commerce sites. During the online checkout process, we used to be weary of giving out our credit card number. But when we see that the source is verified with a specific company like Verisign, we feel confident it is trusted.
"That reinforced the consumer's confidence they could complete this transaction," he said. "If we truly start to attribute that reputation and logo, it's all of a sudden have a tipping point. All of a sudden we will get to this tidal wave, and by not being one, they now at a disadvantage, they will make significant changes to become one."
For Ronen, doing good all comes back to the farmers — they are the reason he started the company, and a big part of the reason he made sure it became a benefit corporation.
"What [being a] B Corp allowed me to do is institutionalize values I have already been [saying] to farmers," he said. "Farmigo is only as good as the network of farmers we represent."
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