B Corps step up environmental, social standards for businesses

 

Moka Joe’s Trudy Scherting poses with a bag of Café Feminino, which is coffee sourced from a network that supports thousands of women farmers in seven countries across the globe.

Trudy Scherting, owner of Moka Joe Coffee, is the kind of business owner who doesn’t care too much about the bottom line — and it has gotten her into plenty of trouble. But it’s also what has made her one of the most respected members of Bellingham’s sustainable business community.

“To me, it’s more about what we are doing with our passion for coffee, our passion for the people who grow our coffee and our passion for the people who drink our coffee,” Scherting said.

Scherting has created a business that is Fair Trade certified, certified organic, a member of Sustainable Connections, a member of the Toward Zero Waste Initiative, part of the Whatcom Watershed Business Pledge and a supporter of an international network of women coffee farmers.

“Those certifications are definitely something that you put your money behind,” Scherting said.

Now, the local coffee company has also stepped up to the newest level of socially and environmentally conscious business standards: becoming a B Corporation.

 

A new certification that walks the walk

B Corporations, or B Corps, are the vision of three men: Jay Coen Gilbert, Bart Houlahan and Andrew Kassoy, the founders of B Lab, a Pennsylvania-based certification body that certifies B Corps.

B Corp is a business organization certification that defines an entire company’s economic, social and environmental responsibilities directly in the business’s articles of incorporation.

“The problem is that people couldn’t tell the difference between a good company and good marketing,” Houlahan said.

The certification is not a corporate structure recognized by the IRS, however, like limited liability corporations (LLCs) or S corporations — but B Lab is working on that.

Houlahan said most certifications out there are great but they tend to focus on a single business practice.

“B Corp is the only corporate certification that accounts for the entire business, not just a part or a process,” Houlahan said.

Houlahan said the United States has all the right ingredients for an emerging market: 65 million Americans are willing to purchase products based on globally conscious business practices, 30,000 U.S. businesses have sustainable and eco-conscious business models and nearly $2.7 trillion is already invested in socially responsible ventures.

“We realized what was needed most was an infrastructure for the overall market,” Houlahan said.

Houlahan and his partners began to craft a set of fundamental standards and a legal framework that would support companies and help consumers know which businesses are walking the walk and which ones are just talking.

“The vision of the legal framework is to create a new sector of the economy that contains a new type of corporation that uses the power of business to create benefits for all,” Houlahan said.

 

A step up for responsible businesses

Scherting said she first heard about B Corporations from Michelle Long, director of Sustainable Connections, who asked her if she would be willing to hold Moka Joe up to a new business standard. Scherting enthusiastically agreed.

“We are always trying to be leaders of sustainability and in social and environmental issues,” Scherting said. “Moka Joe will always step it up in any way we can. We always have; we always will.”

Bellingham has three B Corporations: Moka Joe Coffee, A-1 Builders and Village Books. All three are members of Sustainable Connections.

Long said she first heard about B Corps through the Business Alliance for Local Living Economies (BALLE), which is a business network of 15,000 businesses that allows communities to share toolkits and sustainable approaches that have worked across the country.

So Long invited one of B Lab’s founders, Jay Coen Gilbert, to speak at Sustainable Connection’s 2006 spring business conference where Gilbert launched B Lab’s national campaign to rally businesses to the B Corp call.

“Now they are making rounds all over the country,” Long said.

Houlahan said B Lab is currently working in several states to create B Corps. Houlahan said before taking the B Corp idea to the federal level, however, B Lab needs to create a “legion of B Corps” all across the country to get the necessary political support to create a new corporate entity.

“Our approach is that we first need a constituency that legislators want to recognize,” Houlahan said.

Long said B Lab has some great tools, such as a free survey that can really help a business to begin to take stock of its explicit business goals.

“It’s common for a business to have been doing a lot of these things already but they have no set policies about impact, purchasing or benefits,” Long said.

The innovative thing about B Corps, Long said, is that the organization structure requires that policies be explicit so the priorities of the company can continue in perpetuity, which is a simple but novel thought that Bellingham and Sustainable Connections are helping to move forward.

“NPR Marketplace called Bellingham the epicenter for a new economic model,” Long said. “This is a hotbed of activity.”

 

From AND 1 to B Corp

Before founding B Lab, its founders were no strangers to business.

Houlahan and Gilbert were the president and co-founder, respectively, of AND 1, a $250 million international basketball footwear and apparel company.

Kassoy spent his career as a private- equity investor working most recently as a partner at MSD Real Estate Capital, the investment vehicle for the assets of computer mogul Michael Dell and the Michael and Susan Dell Foundation.

Houlahan said after building up AND 1 from a $4 million venture to a $250 million business over 13 years, both he and Gilbert sold the company in 2005.

The three knew they wanted their next venture to be dedicated to sustainable business but they wanted to do something that would have the greatest impact.

“What became clear to us was that the corporate formations that existed were designed to maximize shareholder value,” Houlahan said.

However, Houlahan said, even if a business starts out committed to social and environmental bottom lines, as those organizations grow it becomes harder to maintain commitment to them.

“We need a new legal framework that moves companies from a shareholder focus to a stakeholder focus,” Houlahan said.

 

To B or not to B

B Lab has now been certifying B Corporations for about two years and there are more than 130 B Corps in 20 states stretching across 30 industries and representing more than $900 million.

Businesses that qualify to become B Corps are able to use the B Corp seal, which is a marketing campaign to let consumers know the fundamental nature of the company.

“The entire integrity of the certification rests on the credibility of the standards,” Houlahan said.

Businesses are surveyed, asked to provide documentation as proof of claims, and every assertion is rigorously validated. In addition, every two years 20 percent of all B Corporations will be audited by B Lab.

B Lab just recently concluded its first audit of Moka Joe, and the coffee maker received the highest rating off all B Corps involved in the audit across the nation.

“What I found out is that we are actually a leader in the nation for structuring a company around social and environmental issues,” Scherting said. “It was everything that we were naturally doing.”

Scherting said B Lab has assigned her a financial coach, helped advertise her business’s efforts and is getting her access to structured loans from financiers who want to back a socially and environmentally responsible product.

“We have had financial challenges all along and [my husband and I] have been footing the bill, but as you grow as a company it’s sort of like growing this beast,” Scherting said. “Now I’ve grown this thing and I’ve got to keep going.”

Houlahan said businesses like Moka Joe are part of a nationwide movement that will only have maximum impact once the proper business channels have been opened.

“Because of the wonderful people who have come before us to create this marketplace, I think the time for this idea has arrived,” Houlahan said. “Right now, there needs to be an infrastructure that will allow that market to really accelerate.”

Related Stories