A Community for Change: B Lab and Certified B Corps

10 Pages Posted: 4 Sep 2019

See all articles by Mary Margaret Frank

Mary Margaret Frank

University of Virginia - Darden School of Business

Elena Loutskina

University of Virginia - Darden School of Business

Gerry Yemen

University of Virginia - Darden School of Business

Abstract

Founded in 2006, the B Lab, a nonprofit organization, created the certified B Corporations (B Corps). B Corps are businesses that satisfy a set of standards and benchmarks defined by social and environmental impact. B Corps and their supply chains are assessed on their policies and procedures around governance, workers, community, environment, and disclosures to the public. Certification means the company is a "purpose-driven" business that creates benefits for its stakeholders. By the end of 2018, over 2,700 companies across 60 countries and 150 industries have been certified as B Corps. This technical note discusses the founding of the B Lab and its certification process, including public disclosure; legal requirements and US state laws governing benefit corporations; and B Corp self-assessment. It explores benefits to B Corps and criticisms of the process as well as additional endeavors that resulted from the B Lab's collaborative efforts, including Global Impact Investing Network (GIIN), Impact Reporting and Investment Standards (IRIS), and Global Impact Investing Ratings System (GIIRS).

Excerpt

UVA-F-1878

Aug. 27, 2019

A Community for Change: B Lab and Certified B Corps

Certified B Corporations (B Corps) were the creation of Coen Gilbert, Bart Houlahan, and Andrew Kassoy, who together founded the B Lab in the summer of 2006. All three had experience with organizations striving to improve society and generate successful financial performance. Gilbert and Houlahan had started AND1, a basketball footwear and clothing company that gave at least 5% of its profits annually to charity. Kassoy worked in private equity and joined the board of a global nonprofit called Echoing Green, considered by many to be the earliest and longest-standing angel investor in social entrepreneurship. They had all been successful, and when it came to thinking about another career, they acknowledged they were able to explore options without the burden of worrying about pay.

Gilbert, Houlahan, and Kassoy thought it was often too difficult for consumers and investors to know which businesses were “doing good while doing well.” Some companies were highlighting their socially responsible business operations, but, below the surface, their efforts at promoting sustainability, performing acts of charity, or treating employees left much to be desired. Some businesses would publicize the benefits of one attribute, like environmentally friendly packaging, while the factory making their product dumped toxins into the river behind it. Others added vaguely worded claims like “all natural” or “green,” which didn't really mean much—many poisons were natural—or noted that products were packaged in 100% recycled paper when they had plastic elsewhere.

The more due diligence Gilbert, Houlahan, and Kassoy conducted with social entrepreneurs, the more convinced they became that the existing infrastructure for businesses that wanted to carry out a social mission was lacking. The trio decided that the system needed to adapt to allow businesses to serve shareholders and society. According to Gilbert, the problems that needed to be addressed were twofold: (1) unsupportive corporate law, and (2) the lack of a capital market for social entrepreneurs. In 2006 they founded a nonprofit organization dedicated to addressing these issues and called it B Lab. As Gilbert described,

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Keywords: B Lab, certified B Corporation, B Corp, purpose-driven business, impact investing, benefit corporation, social entrepreneurship, environmental and social mission Global Impact Investing Network, GIIN, Impact Reporting and Investment Standards, IRIS, Global Impact Investing Ratings System, GIIRS, triple bottom line

Suggested Citation

Frank, Mary Margaret and Loutskina, Elena and Yemen, Gerry, A Community for Change: B Lab and Certified B Corps. Darden Case No. UVA-F-1878. Available at SSRN: https://ssrn.com/abstract=3445949

Mary Margaret Frank (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4432 (Phone)
434-243-5021 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty/frank.htm

Elena Loutskina

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-243-4031 (Phone)

Gerry Yemen

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

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