In the world of social businesses and impact investing, B Lab is the man behind the curtain.
With social businesses growing and new impact investment options opening up daily, one might wonder how much of this is being organized. Well, there is at least one organization with a mission to bring order to the nascent community. B Lab, an organization which works with more than 600 businesses (including Ben and Jerry's as of last week) and just scored a partnerships with USAID, seems to be the frontrunner in the field. What does a brief look at the nonprofit quietly structuring this landscape reveal?
B Lab started as a part of apparel entrepreneur Jay Coen Gilbert's 2004 Henry Crown fellowship from the Aspen Institute. In 2006, Gilbert, Houlahan Bart and Andrew Kassoy founded the nonprofit in order to provide “a LEED for social businesses.” A business which “amends its articles of incorporation to say that managers must consider the interests of employees, the community, and the environment,” along with other stipulations such as occasional audits, can receive B-Corp certification.
B Lab has been pushing state legislatures to recognize the Benefit Corporation as a distinct corporate structure. According to a white paper on the B Corp website, a Benefit Corporation is distinct in three main ways:
1) A requirement that a benefit corporation must have a corporate purpose to create a material positive impact on society and the environment; 2) an expansion of the duties of directors to require consideration of non-financial stakeholders as well as the financial interests of shareholders; and 3) an obligation to report on its overall social and environmental performance using a comprehensive, credible, independent and transparent third-party standard.
The argument is that by creating a distinct class for social businesses, investors and consumers could act with assuredness that the company they are supporting is required to adhere to a socially-responsible charter.
However, there is some difficulty with this approach. The legal necessity of a new structure has been debated and doubts exist about whether someone could successfully sue a company for failing to be socially responsible. At this point, the majority of states do allow some form of non-financial stakeholder interest to be expressed in the articles of incorporation. That's a solid base for B Lab to expand on through concerted legislative effort to reach full recognition of the Benefit Corporation.
In recent years B Lab has branched out from the world of certification and moved into impact investing. In 2011 B Lab launched GIIRS, the Global Impact Investment Rating System, one of the few rating tools in a booming field. GIIRS received a considerable boost in September from a $6.5 million dollar investment by the Rockefeller Foundation, USAID and the Omidyar Network.
While B Lab has done much to publicize and bring transparency and analysis to the market, it would be nice if the organization itself was more visible. Most news pieces, interviews, and blogs tend to focus on the programs B Lab has spawned. Underscoring the background role B Lab assumes is the fact it doesn’t even have a distinct website. Instead, information is spread throughout the websites for B Corp and GIIRS. Some of these sections are currently under construction, so hopefully critical information such as 990’s, B Lab's annual reports, and board member listings will all be centralized soon.
B Lab has come a long way, from fellowship project to an organization affecting billions of dollars of annual revenue. As the organization grows and more attention turns to its operations, anonymity will no longer be an option. Get ready for your close-up, B Lab, because it’s on the way.