Over 3,500 businesses around the world, including household names such as Danone, Innocent and Patagonia, have taken the journey to become Certified B Corporations– committing to the highest standards of verified social and environmental performance, public transparency and legal accountability to balance profit and purpose. B Corps are accelerating a global culture shift to redefine success in business and build a more inclusive and sustainable economy.
In their own words, “Society’s most challenging problems cannot be solved by government and nonprofits alone. The B Corp community works toward reduced inequality, lower levels of poverty, a healthier environment, stronger communities, and the creation of more high quality jobs with dignity and purpose. By harnessing the power of business, B Corps use profits and growth as a means to a greater end: positive impact for their employees, communities, and the environment.”
Andrew Kassoy is the cofounder and CEO of B Lab Global, the not-for-profit behind the B Corp movement. In this exclusive I spoke to Andrew about the role of business in society, the story of the B Corp movement and how businesses can balance profit with purpose.
Q: How is the role of business in society changing?
[Andrew Kassoy]: In the past decade, businesses have recognized that there can be a sense of purpose and meaning beyond simply making money, and that comes from people realizing they have multiple roles in society – as members of their community, as consumers, as workers, as investors. By operating to benefit all stakeholders – their workers, surrounding communities, customers and the environment – businesses can be financially successful while working to create a more inclusive, equitable, and regenerative economic system for all.
More recently, we are using the language of systems change. The system we’ve built has been successful at lifting many people out of poverty, and at creating amazing products and technologies, but it’s not solving many of the problems we face today – in fact, rules and culture of our economic have created many of those problems. In order to really fix the ‘system’ we have to start both thinking in terms of structural changes to the economic system to allow for different outcomes, and changes that create different opportunities that meet the high aspirations of individuals across all those roles that they play.
Q: What are the common blockers that prevent businesses from becoming more purposeful?
[Andrew Kassoy]: Systems change is slow because it requires consensus that there is a system failure to start with, as well as the presence of a viable alternative. This requires a combination of culture shift, behavioral change, and structural change to ultimately change the rules of the game.
One of the reasons for a lack of consensus is that the current system actually works well for certain groups and individuals – at least in the near term, it’s creating great outcomes for a few, and those people tend to be powerful. So, where’s the incentive for them to have an interest in changing? Another significant cohort also may see the system as having failures, but may not think it is the job of business to solve those challenges. This also appears to be a political problem; there are people on the right who say ‘the role of business is to make money, and the way we solve the problems you’re pointing out is to allow businesses to make money’ and there are people on the left who argue that systems change is not the province of business at all, but the role of government or civil society, through philanthropy, for example.
This is not about businesses replacing government or civil society, but about achieving a system where those sectors and the roles they play are in better balance.
Q: Can businesses genuinely play a role in systems change?
[Andrew Kassoy]: For a long time, the conversation about the role of business in addressing these systemic problems was about corporate social responsibility (CSR). CSR has come to be superficial; it’s about marketing and pseudo-philanthropic interventions. In truth, businesses have a tremendous amount of power to have impact through practices and business models that operate ethically, create useful goods and services, create jobs with dignity, and create opportunities in communities that may not have existed before. The economic development that comes from the private sector – the ability to attract capital and talent at scale – means that businesses can authentically address problems. However, I think there are some ingredients that are needed to ensure it’s done authentically and not just with marketing in mind.
This need for authenticity is literally the reason for B Corp certification – although the certification isn’t the end objective, but a means to driving systems change. Our theory of change is that you need credible, authentic leaders to drive systems change. Certified B Corporations are these leaders. They’re setting the example by prioritizing people and the planet over profits. They’re playing by a different set of rules! And they are doing so successfully.
Ultimately, we want to make it unnecessary to be a B Corp – we want it to be just the norm of how all businesses are run, but that means we have to change the rules of the game and the role of business in society.
Q: What does it mean to achieve B Corp certification?
[Andrew Kassoy]: Product certifications, while useful for very specific things, don’t tell you much about the whole company. If a company is producing organic lettuce, but is treating its workers badly, on an overall basis you may not have created a net benefit to society. We have to look at companies holistically. We also have to consider how companies are governed for the long term. Sometimes companies are doing lots of good, and having an impact, but they are doing so while playing by the ‘old rules’ from the perspective of their legal accountabilities to maximize profit for shareholders. So, while the current executives or shareholders want to be responsible, they haven’t baked it into their legal DNA; this doesn’t create long-term change either because the responsibility can go out the window when it comes time to sell or transition management.
We need companies to play by a different set of accountabilities, not just those that are related to performance. People look to the B Corp movement for a new kind of corporate governance, not just impact. It’s about creating legal accountability around the creation of value for stakeholders, not just shareholders. That’s what changes the conversation in the boardroom.
Q: How does our approach to leadership change in a B Corp?
[Andrew Kassoy]: To be the CEO of a company, particularly of a B Corp, you require a set of transformational skills and the ability to think broadly, and over long time horizons. You need to be able to consider the interplay and interdependencies between the business and its various stakeholders – workers, communities, the environment, suppliers, customers, not to mention the investors. There are many programs that have been developed by our global network of partners to help those leaders share their practices and learn from each other. And there are now B Corp curricula in over 200 global universities. All of that is helping us to start seeing the transformation happen.
Q: How can you bring B Corp certification into existing businesses?
[Andrew Kassoy]: One of the reasons we created the B Corp certification was not just to have a public facing brand that companies could utilize as a differentiator, but to create a mechanism for companies to be on a continuous journey of improvement. The B Impact Assessment (BIA) is our free platform designed to help measure and manage a company’s positive impact on its workers, community, customers, and the environment. For companies that are looking to become B Corps, they must take the assessment and score a minimum of 80 points. But even for companies that aren’t interested in becoming a B Corp, the BIA is a valuable tool in helping you measure and manage your impact. At every stage of the assessment, companies are offered best practice examples, case studies, and recommendations that create targets over time for things that are easy, moderate, or hard to do in order to improve their impact scores.
Particular groups like boards or the capital markets are often skeptical of ‘purpose-led’ business partly because of perception of it being too fuzzy, abstract, or idealistic, but the BIA is a pragmatic process and allows for concrete and data-driven engagement with stakeholders.
Q: Will capital markets ever come to integrate B Corp metrics into financial reporting?
[Andrew Kassoy]: The capital markets have gone through a transition that started with socially responsible investors screening out “bad” companies (‘sin stocks’) to now seeing sophisticated institutional investors who are concerned about the risks of poorly engaging with stakeholders, and poor environmental and social governance behaviors. This kind of pressure on businesses is leading to integrated reporting by including sustainability recording.
One of the challenges with current ESG reporting practices is that many investors focus only on the things that are financially material. If you can prove, for example, that climate risk is financially material for a company, they will report on that. If you cannot prove that the dignity of jobs, or quality of work, is financially material, the company is unlikely to report on that.
This is something we’re trying to address with our newly launched program B Movement Builders – our first dedicated program to engage large publicly-traded multinationals in stakeholder capitalism, inspired by the leadership of the B Corp community. Our first cohort of companies includes Bonduelle, Gerdau, Givaudan, and Magalu, with the mentorship of Danone and Natura &Co, who have been working closely with the B Corp movement. The idea is that we need to engage public companies in a credible and authentic way to change our economic system. By inspiring their investors, workers, and consumers to support this transformation of business, these companies could dramatically accelerate our reset to stakeholder capitalism from shareholder primacy.
Q: What can businesses do right now to become more purposeful?
[Andrew Kassoy]: Businesses can start by assessing their impact by taking the BIA at bimpactassessment.net or, if they like the framing of the Sustainable Development Goals, the SDG Action Manager. That will help them create a roadmap of activities, the gaps that exist, and the tools that may be needed along the way. Businesses must also shift to stakeholder governance; they can change their corporate charters and introduce the idea of making themselves accountable to stakeholders, what we call ‘benefit governance’. It’s a profound change, but not insurmountable, and more and more investors are supporting it. Many global businesses, such as Danone and Natura, have done this, and we’ve even seen examples of stakeholder governed businesses such as Lemonade and Vital Farms achieve extremely successful IPOs in the midst of the pandemic. Finally, I think it’s important to say that in the midst of a global health and economic crisis, in the midst of a racial justice uprising, and in the absence of effective government, business leaders must take a stand on issues that matter to society and to their stakeholders!
Andrew Kassoy, Managing Partner and Co-Founder of B Lab: Prior to co-founding B Lab with his two best friends, Jay Coen Gilbert and Bart Houlahan, Andrew spent 16 years in the private equity business; as a Partner at MSD Real Estate Capital, an investment vehicle for Michael Dell, and as Managing Director in Credit Suisse First Boston’s Private Equity Department, a founding partner of DLJ Real Estate Capital Partners. He is a Board Member of Echoing Green and LabShul. He was a member of the U.S. Working Group of the G8 Social Impact Investing Task Force and a board member of the Freelancers Union. He was raised in Boulder, Colorado and graduated with Distinction from Stanford University where he was a Truman Scholar and President’s Award winner. He is a Henry Crown Fellow at the Aspen Institute. Andrew lives in Brooklyn, New York with his wife, Margot Brandenburg, and four children, Max, Jed, Etta, and Xavier.