B Corporations Deliver on Equity, Sustainability

21 Jan 2015 |
B Corporations Deliver on Equity, Sustainability

Benefit corporations provide a way for businesses to make profit without having to slash wages or resort to environmentally destructive practices. Ben & Jerry's, for instance, is one of the world's most popular ice cream brands with an annual sales revenue of $132 million. Its lowest-paid worker makes $16.13 an hour, which is 46 percent above the living wage in home state Vermont, and the company offsets more than 50 percent of its greenhouse gas emissions. More than 40 percent of the board and management are from underrepresented populations, such as women, people of color, lower-income individuals, and people with disabilities.

In a time when U.S. corporate profits are soaring but wages remain stagnant, Ben & Jerry's and hundreds of other companies, including Cooperative Home Care Associates profiled below, are choosing an alternative business model – benefit corporations – driven not just by profits but also by fair working conditions, diverse leadership, and environmentally sustainable practice.

One of the fundamental challenges to growing more "triple bottom line" businesses is the legal requirement to maximize profits that applies to corporations. Anything that takes away from profits, such as higher wages or more sustainable environmental practices, leaves the corporation vulnerable to being sued by its shareholders. This limitation hinders companies from advancing any values beyond profit making.

In response to this limitation, a movement was started to pass legislation allowing for a new type of corporate entity called the benefit corporation. The benefit corporation provides legal protection for businesses that choose to treat their workers well, protect the environment, and invest in their communities, even if it means their annual profits are not as high. As of 2013, 19 states plus the District of Columbia passed benefit corporation legislation, including Delaware, which is home to 50 percent of all publicly traded companies and 64 percent of Fortune 500 companies.

In 2012, Ben & Jerry's took a step beyond being a benefit corporation and became a Certified B Corporation, as conferred by a nonprofit organization called B Lab. There are currently more than 1,000 registered B Corps. A Certified B Corp voluntarily meets higher standards of governance, workforce treatment, environmental impact, and community involvement. Companies must score at least 80 points on a scale of 200 to be eligible for certification.

Certified B Corps are part of a community of socially responsible companies and span a large spectrum of goods and services. In 2012, Cooperative Home Care Associates (CHCA) in the Bronx, New York, became the first home care company to become a Certified B Corp. Their overall B Score, at 154, is nearly twice the median score.

One of the reasons CHCA scores so high in the B Impact Assessment is because it is a worker-owned cooperative with the vast majority of the workers and worker-owners being from the Bronx. In an industry where good-paying jobs are hard to come by, CHCA deliberately chose a different business model, one that prioritizes workers over profits, and has flourished for nearly 30 years. The company has grown from 12 people to now over 2,000 employees, 70 percent of whom are worker-owners.

"When we started, a lot of for-profit home-care companies were established and were seen as a way of making a lot of money in a short time," said Michael Elsas, president of CHCA. "You didn't have to pay workers that much, you didn't have to train them that well, and you could move in and make a killing. And, in that environment we wanted to establish something a little different, more socially responsible."

Treating the workers well was not just a social mission, but it made good business sense. Elsas said, "Many of the people we were seeing were women, particularly women of color. The thought was if we train people longer and really spend time with them, if we prepare them for an entry-level position and get them ready to work and remove those barriers to work, and, if we provided a lot of support for those workers both before and after they were trained by us, we could create quality, full-time jobs. And then as a result of that quality job, we would be providing quality care that we could, in fact, provide better services."

CHCA has been a co-op since the company started in 1985. Going from a co-op model to also certifying as a B Corp was an easy decision and made a lot of business sense, Elsas said. "Distinguishing ourselves as a B Corp would be helpful in marketing to be able to say we are the only B-Corp certified home care company. We thought that would be helpful for those entities that want to do business with a B Corp. Quite honestly, it was a natural for us. There was very little that we had to do to get certified because we were already a worker-owned company, we already had everything in place."

Elsas said that CHCA is successful not because it is a co-op but because of the best practices they employ. Currently, 90 cents of every dollar that comes into the company goes to the worker. While paying workers less would result in higher profits and better dividends, Elsas said higher dividends is not what has made the company successful for 30 years. Instead, what makes CHCA successful is "how we train, how we supervise people, how we respect people, how we let people participate in what we do."

Companies like CHCA and Ben & Jerry's show that businesses can make a profit and embrace socially responsible practices. Higher wages and better work environments help working families reach economic security. Consumers can support B Corps and environmentally and socially conscious businesses by buying their products and services. A full list of B Corps can be found here.