B Labs notes companies with conscience

It is one thing to do good and do well. But it is quite another to tell your investors up front that not all the profit actually goes to them. In prior columns, we have written about our support of the nonprofit entrepreneur with a commitment to social enterprise. Now, a new twist in the for-profit arena has come along, and its premise is transparency to your investor of your intention that you are concerned about more than making money for them. It is called a “B Corporation,” and it requires that your company be certified by the nonprofit B Lab that independently verifies rigorous standards of social and environmental performance, accountability and transparency. In that way, you can do good and do well, and your investors know the score going in.

The emphasis on metrics in addition to profits has not hindered some of these “B” companies from raising big money — Warby Parker ($55 million), Change.org ($15 million), and Etsy ($91 million).

In San Diego, B Corporation Mamma Chia has raised several million dollars primarily from angel investors, said Janie Hoffman, the founder and CEO. The company makes organic chia-based food and beverages that use the chia seed, a grain that contains omega-3, antioxidants, protein and fiber. The products are sold in Whole Foods, Von’s, Ralphs and other retailers.

“Our investors are aligned with our mission. Having the certification was positive for them,” said Hoffman. “So many companies say that they’re doing something good for the environment and the community when they’re not, which is why the independent B certification is great.”

Like all B Corporations, Mama Chia’s rating of 88 points (out of 200) is available on the B Lab website. Eighty points is the minimum required to earn the certification. The four metrics that compose the rating are:

Governance: mission, stakeholder engagement and overall transparency of the company’s policies and procedures

Workers: compensation, benefits, training, ownership and work force environment

Community: supplier relations, diversity and community involvement

Environment: facilities, resource and energy issue

From the beginning, Mamma Chia has donated 1 percent of gross sales to support local food systems, more than 20 percent of suppliers are local and are located in low-income communities, and 50 percent of office supplies come from recycled/sustainable materials.

Another certified B Corporation with San Diego roots is Warby Parker, which was started in 2010 to create boutique-quality, classically crafted eyewear at an affordable price point. David Gilboa, one of the four founders, graduated from Torrey Pines High School in 1999 and met his three co-founders when he was earning his MBA at the Wharton School at the University of Pennsylvania.

“We were frustrated at the high cost of prescription glasses that can cost $300 or more,” said Gilboa. “A few big companies controlled the $65 billion industry. We thought that by creating our own brand, dealing direct with manufacturers and consumers, we could disrupt the industry by cutting out the middle men and sell glasses to consumers for $95, including the lenses.”

As the son of two doctors, Gilboa said he always wanted to work in a field in which he could earn a paycheck and provide a social benefit. Seeking the B Corporation certification made sense because “as operators and owners, we want to be held accountable for actions that take into account all of our stakeholders such as employees, customers and the environment at large. In the traditional corporation, the only interests that you have to protect are the shareholders’,” Gilboa said.

Almost 1 billion people worldwide lack access to glasses, so Warby Parker has partnered with nonprofits to ensure that for every pair of glasses sold, a pair is distributed to someone in need.

“Our investors (the company has raised $55 million) are very supportive of how we’re building the business and the resources and capital that we’re using to further the development of our employees and to buy carbon offsets,” said Gilboa.

The B certification is in addition to whatever legal structure a company chooses. “Any type of legal form (LLC, LLP, or C Corporation) can become a B Corporation,” said Susan H. Mac Cormac, a partner in the San Francisco office of Morrison & Foerster.

Only 760 companies have achieved B Corporation certification since it was offered beginning in 2007, according to B Lab spokesman Andy Fyfe, who said that more than 7,000 companies are using the assessment tool to benchmark themselves. “It is difficult to pass the bar. These companies are competing to be the best in the world and for the world,” he said.

Rule No. 241: To B or not to B, that is the question.

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