B Lab’s first annual report: Much progress made, much work left to do

The influential social enterprise-ratings group B Lab recently came out with an annual report. I took the occasion to interview co-founder Jay Coen Gilbert about its achievements and goals.

–There are now more than 200 companies in 54 industries that are certified as B Corporations. (B stands for “beneficial”).  Since they’ve been doing this for only around two years and the certification process is rigorous, that’s pretty good. More than that, over 1,000 companies are using the rating system to benchmark their social and environmental activities. So they haven’t taken the full leap of getting certified, but they’re interested enough in the triple-bottom-line approach to assess their performance using the B Corp model.

(Turns out, it’s not uncommon for companies to try to get certified, but fail.  So, B Lab works with the business to pinpoint and fix their areas of weakness.  A company’s green building, say, might not be green enough and has to be LEED certified. Or they may need a different code of conduct for overseas suppliers. That type of thing.)

–The B Corp rating system was adapted by a group of major institutional investors–JPMorgan Chase and Prudential, for example–to evaluate not just individual companies, but entire portfolios.  The new rating system, called Global Impact Investing Ratings System, (GIIRS), was unveiled in September and is a pretty big deal, because it could drive a lot more capital from heavy hitters to the sector. You can’t invest for impact unless you can measure that impact.

–Three or four states are working with B Lab to  propose model legislation to create an official new corporate form including  a requirement that the company must consider stakeholders other than shareholders, a vital tool to avoid falling into the proverbial Ben & Jerry’s trap.  And a group in California, which is working closely with B Lab, is coming close to devising a model for that state.

–They’re about to introduce the next version of the ratings system after a year of development, several months of private beta testing and a month of public testing.

The new version, of course, includes the stipulation that  companies have to certify that they will take into account the interests of all stakeholders (employees, community, environment, for example). Which made me wonder:  Wouldn’t there be more B Corporations if they allowed a B Corp-lite, one that didn’t have that requirement? Gilbert, in fact, acknowledges that’s true. And, seems his board  has discussed it. But, they ultimately decided such a move would weaken the certification and its impact. “It means the company hasn’t really changed the DNA of the business,” he says.

Their ultimate goal is nothing if not ambitious.  Here’s what Gilbert says about it:  “What we’re concerned with is making sure the next generation of Fortune 500 companies are legally accountable to create value not only for their shareholders but also for society, that they’re equipped with the legal right to be able to withstand the pressures of the public marketplace and focus on the long-term health of the business.”

They’re off to a good start, that’s for sure.