New Certification Scheme Aims to Protect Socially Responsible Companies

More and more businesses across the globe are finding that they can be successful while also being environmentally and socially responsible. But in some cases, the companies are so successful that they end up being bought out by larger conglomerates, some of which then cut out the socially beneficial aspects of the original business. So how can consumers and investors tell which companies are truly responsible? A new nonprofit organization called B Lab is hoping to address this challenge by creating a set of strict standards to protect companies and consumers that seek to work for the greater good.

Because of pressure to maximize shareholder profits, many successful socially responsible companies, such as Ben and Jerry’s and The Body Shop, have been acquired by larger companies that do not always maintain the founders’ standards for social good. To avoid this outcome, some companies, like the philanthropic office products company Give Something Back, have refused outside investment opportunities that could otherwise help their bottom lines. “We couldn’t offer an investor an opportunity to invest in us and feel in any way that our social goals were protected,” founder Mike Hannigan told Inc. Magazine.

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But a company that seeks certification to become a B Corporation (the B stands for “beneficial”) is required to amend its articles of incorporation to say that managers must consider the interests of not just shareholders, but also employees, the community, and the environment. Companies are also ranked on their answers to a survey of more than 100 questions, covering topics that include the company’s policies on the environment, philanthropy, diversity, and transparency.

Other “corporate social responsibility,” or CSR, groups, such as the Natural Capital Institute, are developing standards for responsible businesses as well. But Jeffrey Hollender, CEO of the non-toxic home products company Seventh Generation, who has rejected at least 10 other rating systems, thinks B Corporation is offering a vital tool for the social responsibility movement. “There is a tremendous potential for the idea to lose credibility because of a lack of standards,” he says. “I don’t want to say this is perfect, but this is desperately needed right now.”

Jay Coen Gilbert, who helped launch B Lab, hopes the group’s certification scheme will be a reliable signal for businesses to identify themselves to investors and consumers as socially responsible. “We want to help consumers separate good companies from good marketing,” he says. But he admits the scheme is a work in progress. “You run into fundamental problems in trying to grow good because neither for-profit nor nonprofit is set up to do what new entrepreneurs and others are trying to do—namely, harness the power of private enterprise to create social benefit.”