PA Leads B Corporations Push, But Will It Become Official?
Friends from college, Jay Coen Gilbert and Bart Houlahan founded the basketball shoe and apparel company, AND1, in Paoli, Pennsylvania, in 1993. They donated part of the company's profits to charity and created good conditions for employees and suppliers.
When they sold the company, however, they saw those practices change because most states' laws require corporate boards to act only in the monetary interest of shareholders--maximizing profit is legally protected but helping society in other ways is not.
Gilbert and Houlahan saw the same thing happen to other corporations that changed hands, so they recruited another former classmate and invented the non-profit B (for benefit) Lab in 2006. B Lab pushes for legal changes and also certifies companies as B Corporations
if they meet criteria for corporate transparency and accountability and positive relationships with their employees, customers, local community, and the environment.
Certification helps with marketing, recruitment, and other tasks, but in many states has no legal significance. Slowly, though, states have been changing their laws to recognize B Corporations, thereby protecting corporations' ability to pursue the so-called triple bottom line: economic, social, and environmental. In the last week, South Carolina became the ninth unanimous floor vote for benefit corporation legislation and Colorado passed legislation through the judiciary into appropriations with a vote of 5-2.
Pennsylvania, second only to California in the number of B Corporations, may soon become the 10th state to add B Corporations to its laws. On Wednesday, the state House unanimous approved House Bill 1616 that would allow companies to legally gain benefit corporation status.
About 10 percent of the 591 certified B Corporations are in Pennsylvania. Many are in Philadelphia, unique among municipalities in the country because it gives up to $4,000 in tax credits for B Corporations. Yet B Corporations are scattered across the state and reap benefits outside of tax breaks, even if they see varying degrees of value in legal status.
A Village of Responsibility
One of the original B Corporations, One Village Coffee
is located in Souderton. Sales director Rob Altieri and a friend "started with the desire to start a social business with ramifications more than just making money." After finding coffee growers in Nigeria, the pair founded One Village Coffee and began roasting coffee in the basement of a farm house in 2007. They sold the beans to local businesses and at farmers markets at first, and by 2011, the company had grown to about nine employees and revenues of $1.2 million.
One Village became a B Corporation after Altieri ran into Houlahan at Whole Foods. That decision has paid off: "People who apply," says Altieri, "are more driven and more motivated and more aligned with our mission. That gives us a leg up. It also makes us hold ourselves to a higher standard and that bleeds into all our relationships." Altieri believes legal changes would help other business realize the value of B Corporation certification. "When doing good becomes part of doing business, that’s a good thing."
Eric Schnell, co-founder of the nutritional drink company I AM enlightened nutrition
near Scranton, agrees that the triple-bottom line is "the way of the future." Consequently, he wrote B Corporation standards into I AM's articles of incorporation from the outset in June 2010. An experienced entrepreneur, Schnell wanted "to make sure wherever the business ends up, whether with these partners or someone else, that we have the values in our DNA." Nonetheless, he isn't sure customers would notice a change to state law as many live outside the state.
In Allentown, Ben Wiener tells a similar story of the DNA of the company he co-founded, Tees at Risk
"Social benefit," explains Wiener, "was part of our corporate DNA--we started the company in order to help at-risk kids express themselves through art that could reach a wide audience, and also to generate revenue for worthy youth non-profits of our choice."
Becoming a B Corporation was a natural, and valuable, step. "There are all sorts of tangible, direct benefits such as free press releases, and other discounts or free offerings by other B Corps or vendors. But I'd say the greatest benefit is intangible--the B Corp certification tells people that you're legit and gives them a framework for understanding your dual corporate and social benefit missions." Hence, he supports changing the law to increase B Corporations' legitimacy.
On the Docket
Senator Daylin Leach, who represents Delaware and Montgomery Counties, introduced a B Corporation bill last year with other Democrats and Republicans. Leach's chief of staff Zach Hoover describes the rationale for the bill as such:
"We want to give people more options. People are increasingly voting with their dollars, looking into the practices of companies, being loyal customers in ways influenced other than by product quality. We want to be able to give companies a way to capitalize on that."
Senator Mary Jo White, a co-sponsor whose district includes Erie and Clarion, also believes "investors would be interested in this kind of activity," but notes the bill "isn't getting much attention. It's a fundamental change in corporate law, and people are usually resistant to that. But it's out there for people to talk about."
Pennsylvanian's socially responsible companies welcome the discussion.
MARK MEIER is a writer, independent consultant, and part-time professor who lives in Dunmore and plants butterfly gardens in Scranton (which is his backyard). Send feedback here.