B-Lab co-founder Andrew Kassoy visited the Yale School of Management on Tuesday October 1, 2013 to discuss his work with B-Lab promoting and standardizing B-Corporations, which are companies that voluntarily commit to increased standards of accountability, transparency, and social and environmental performance.
“Business is one of the most powerful tools on the planet—it can be used for social good,” posited Kassoy. “In the 20th century, business focused on maximizing shareholder value; in the 21st century we must focus on maximizing shared value.”
To make this high-minded goal a reality, Kassoy and his co-founders, Jay Coen Gilbert and Bart Houlihan, focused on creating the infrastructure in which a new market and a new economy based on these broader values could flourish. Even though a smattering of values-oriented companies existed at B-Lab’s inception, no legal structure existed through which these companies could incorporate. Without a tax structure and legal documentation, values inscribed in the culture of socially and environmentally conscious businesses could easily slide as a result of changes in leadership, ownership or revenues.
In order to address these issues, B-Lab “identified three key levers,” said Kassoy. “Lack of corporate law, lack of standards to separate good companies from good marketing, and without norms and institutions, there was no way to scale.”
After creating an integrated set of standards for B-Corporations, B-Lab went on the road to campaign for the adoption of B-Corp legislation throughout the United States. Because corporate law is governed on a state by state basis, B-Lab concentrated on more amenable states first. Most recently, in July of 2013, it succeeded in passing B-Corp legislation in Delaware, where over 50% of all publicly traded companies are incorporated. To date, 20 states have adopted laws and 18 are in progress. Legally incorporated firms can apply to B-Lab for the additional B-Corp certification, which serves to reaffirm the company’s social and environmental standards and performance.
Now that the legal framework has been implemented, what started as a small movement founded by three entrepreneurial colleagues has ballooned: B-Lab now boasts 840 registered B-Corporations in 28 countries, and 23% of those countries are headquartered outside of the United States, where trends in social entrepreneurship, particularly in Latin America, favor B-Corporation growth.
Kassoy began his journey with B-Lab after a 16 year career in private equity, where he worked most recently for MSD Real Estate Capital, which is part of Michael Dell’s investment fund. “Back when I graduated in ‘91” said Kassoy, “you either went to D.C. or checked your values at the door in business.” Kassoy hopes that the new generation of millennials—who aspire to better integrate their consumer, citizen, and employee identities—can succeed in choosing a more deeply integrated work life, and that the B-Corporation movement can be a primary component of that choice.
While B-Corporations are by definition for-profit ventures, B-Lab is not. As a nonprofit, B-Lab is able to maintain a degree of objectivity as a standards-producing third party that answers to its own independent standards advisory committee. Despite their own nonprofit status, Kassoy and the rest of the B-Lab team are ambitious about the economic impact of B-Corporations: “We’re moving into a new model of capitalism,” ventured Kassoy.
Kassoy’s visit was made jointly hosted by SOM’s Program on Social Enterprise and chapter of Net Impact.
Written by Jancy Morgan Langley