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Power Lunch: Growing Interest in Public Benefit Corporations

June 1, 2017
Companies and consumers are noticing public benefit corporations and especially B Corps.

When Danone in April announced the merger of its Dannon USA unit with new acquisition WhiteWave, the French parent also noted the new business, DanoneWave, was being incorporated as a public benefit corporation; in fact, the largest in the U.S.

Public benefit corporations are relatively new in the business world, although they've been gaining attention in the past year. They're intended to operate in a responsible and sustainable manner, balancing shareholders’ financial interests with the benefits they bring to people, the planet and broader society.

While most forms of incorporation put an emphasis, even a legal requirement, on maximizing shareholder value above all else, this new legal tool protects a company's mission. Corporate law in Delaware, where many companies are incorporated, and many other states now recognizes the public benefit form of incorporation and the emphasis it places on social responsibility. The company's social mission remains in effect even as that company raises capital and changes leadership.

Take a step further up the ladder, and there are "certified B corps," with the certifying body being B Lab (www.bcorporation.net), a nonprofit organization that sets the general rules and certifies if companies are living up to them.

Every B Corp is a public benefit corporation first, but not every public benefit corporation is a B Corp. Public benefit corporations self-report their performance. B Corps must prove their performance to B Lab.

As Lorna Davis, DanoneWave's inaugural CEO, explains it: “From our beginning we aspire to create economic, environmental and social value in our everyday decisions about how we operate DanoneWave. We’ll do this in the interest of our shareholders, employees, consumers, customers, and suppliers, and improve the impact of our activities on the environment." She was, by the way, Danone’s "Chief Manifesto Catalyst" before being named CEO of the North American company.

"B Corp is to business what Fair Trade certification is to coffee or USDA Organic certification is to milk," says B Lab.

As those two metaphors hint, B Corps have penetrated the food and beverage business deeply. And there are more in the U.S. and Canada than in the rest of the world.

B Lab was created in 2006, and a year later its first class of 19 B Corporations was certified. B Corps are for-profit companies that meet B Lab's standards of social and environmental performance, accountability and transparency.

At last count, there were 2,133 certified B Corps from 50 countries and 130 industry categories working toward one unifying goal: to redefine success in business.

Until DanoneWave gets certified, Patagonia, the outdoor clothing company, is the largest B Corp, having become one in 2012. “We want to share how to transform a conventional business model to ensure that every decision we make as business leaders reinforces our commitment not only to generating profit for our shareholders, but equally so to the environment, our workers, our customers and our communities," says Rose Marcario, Patagonia's CEO. "And in the end, profits can and will still be made, perhaps at greater levels than ever before, as in Patagonia’s case.”

Many B Corps have names like One Village Coffee, The Tea Spot Inc. and 100km Foods. But included in the rolls are Ben & Jerry's, New Belgium Brewing Co., Plum Organics (owned by Campbell Soup), Cabot Creamery, Fetzer Vineyards and KeHE food distribution company. Danone subsidiaries Stonyfield Farm and Happy Family Brands also belong.

"We find that progressive consumers are increasingly seeking B Corp food and beverage businesses as a way to participate in what might be best termed an edible civic process," said a B Corp spokesperson.

B Lab has an Impact Assessment tool against which companies can measure their goals and actions. The assessment takes 2-3 hours to fill out and is just the start of a 6-8-week process of certification. A company must prove to itself and to B Lab that its goals are worthy and that it's sufficiently working to reach them.

As an example, here are DanoneWave's goals, as stated in its articles of incorporation:

  • To encourage dietary practices in line with Danone’s longstanding mission to “bring health through food to as many people as possible.”
  • To promote a model of sustainable growth with a view to creating economic and social value in the interest of key stakeholders such as employees, customers and suppliers and improving the impact of its activities on the environment.

While DanoneWave immediately incorporated itself as a public benefit corporation, that's different than becoming certified by B Lab as a B Corp. As potentially the biggest B Corp, DanoneWave is forming an advisory committee to provide guidance and insights on achieving its mission. The company figures it will probably be 2020 before it's a certified B Corp.

"In 10 years, it is my hope that it will be inconceivable that business will be done in any other way," addes DanoneWave's Davis, "and all businesses will work to make the world a better place by making environmental and social responsibility an integral part of, and contributor to, business success."

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