Kassoy: B Corporations Benefit All Stakeholders

Kassoy

When I became a Truman Scholar back in 1989, my vision of a
career in public service was narrow:  I
would work on policy issues in Washington, DC, then run for office and serve my
society.  When politics started to seem
bitter and ugly, I kind of gave up and joined the private sector.  As a private equity investor for 16 years, I
came to believe more in the power of markets than the power of government.  But the pull of social justice issues kept me
engaged, and as an engaged citizen, I also recognized the limitations of the
market and its frequent misuse and destructive effects.  Business accounts for more than 75 percent of
our nation’s GDP.  What if this power
could be harnessed to serve a higher purpose than the accumulation of personal
wealth?

It was this question that made me decide to leave Wall
Street and to co-found the nonprofit organization, B Lab, an organization dedicated
to using the power of business to solve social and environmental problems.

Today, there is a critical mass of entrepreneurs,
investors, consumers, workers, and policymakers seeking to create social and
environmental impact through business. However, they face two systemic
obstacles: 1) the absence of transparent standards which allow all of us to
support “good companies” not just good marketing, and 2) the legal concept of
shareholder primacy which makes it difficult for corporations to include
employee, community, and environmental interests in decision making.

To address these problems, B Lab works on three interrelated
initiatives:

Following is a little more info on each of these
initiatives.

Certified B
Corporations

Progress requires that we educate the public and business
community that there is more to business than just financial profit. B Corporations meet rigorous standards of social and
environmental performance, legally
expand their corporate responsibilities

to include consideration of the interests of workers, community, and the
environment, and build collective voice through the unifying
B Corporation brand
. As of July 2010,
there are more than 320 Certified B Corporations from more than 50 industries working
for positive change.  Each of us, in
all of our roles in life, have a responsibility to support this transformation in the
way we view business
. We must demand a more comprehensive approach
to profit.

Policy

B Lab has two policy
initiatives: 1) create benefit corporations in all 50 states and 2) promote tax, procurement, and investment incentives for businesses that create benefit for society as well
as shareholders. Unlike traditional corporations, benefit corporations
must create a material positive impact on society and the environment; consider
how decisions affect workers, community and the environment; and publicly
report their social and environmental performance using established third-
party standards. We have seen recent success in our policy efforts at the
municipal, state, and federal level. In 2010, Maryland and Vermont passed legislation
to recognize benefit corporations. By 2011, seven other states may follow. Last
year we achieved the first tax break for
certified sustainable businesses in the city of Philadelphia
,
which will accelerate the growth of sustainable business. It is our hope that
this policy will spread to other cities and reach the federal level.

Capital

Finally, to create real change, we must drive capital to
businesses that provide a return on a triple bottom line performance.  We
have developed the Global Impact Investing Rating System
(GIIRS)
, which acts as an independent, third party assessment
of the social and environmental impact of companies and funds. This ratings
approach is similar to Morningstar investment rankings or S&P credit risk
ratings. There are twenty-five private equity and
venture capital funds, representing approximately $2 billion in assets, that
have become GIIRS Pioneer Fund Managers and to have their funds and underlying portfolio
companies rated in 2010. Using GIIRS, it will be possible to drive
investment towards positive enterprise and strengthen this new sector of the
economy.

A Call to Action

Despite these great accomplishments, there is a
generation’s worth of work to be done. By harnessing the scale and talent of
our business community and looking beyond short-term profit, we can rebuild
local living economies, restore the environment, alleviate poverty, and create
better working environments. Corporations that are purpose-driven and benefit
all stakeholders, not just shareholders, are the key to a better, more
sustainable future.

This brings me full circle to my Truman Scholarship and
public service.  The social and
environmental problems we face today require the kind of social innovation and
rapid change that will only come from business and government working together
to remove impediments and change the rules of the game.  I invite all of my fellow Truman Scholars,
with their vast experience and leadership in both the public and private
sectors, to reach out and offer their expertise. We need to leverage all our
resources if we are to see systemic change. 
There is so much important work to be done; now is the time to do it.

Andrew Kassoy (NY ’89)
co-founded B Lab.

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