About B Corp

Thinking about certifying as a B Corp business? This interview with B Corps Europe, Marcello Palazzi, explains the what, why and how...

Thanks to Erasmus University's Driving Business Towards Sustainable Development Course for the content

"I am Marcello Palazzi and I've for many years, 30 years, been on the journey of what I call human progress through  entrepreneurship. So entrepreneurship, business as a creative force in all we do in our lives and our society. So B Corps is a movement that I co-founded in Europe. It's a global movement, started [in the US in 2006]. It's a movement of companies that strive
to have the highest positive impact to all they do.

"So, thinking about this question, I mean I'm an economist so I go back to economics. We used to say that there are four factors of production, Land, Labour, Capital, Enterprise. I would also add knowledge, but some people put knowledge in enterprise. So land always was in economics, going back to Alfred Marshall, Adam Smith, was the first factor of production. So it's a very key connection with the SDG 15 and land as the first factor of production.

"So basically, B Corps, we have our philosophy of interdependence. So what we say is everything we do in economics, affects someone else and somewhere else, meaning, people, planet, etc. In a global economy, this is all connected. Philosophy is interdependence and the practice is impact, and impact really means towards a regenerative economics.

"We, in the B Corp movement, we think the economy we have now, is what we call extractive capitalism. So it's about externalities, this is again, in economics, one of the key challenges. How do you account for negative externalities. So that means what, we pollute, the social costs, the environmental costs, human costs of economic activity.

 

"The second is, the exclusions, so many people are excluded from the global economy. Thirdly is what I would say is, there is all extremes, extremes for us means profit above everything else. Also at the costs of course of planet and society. So I would say, the externalities, exclusions, extremes, is what defines this extractive capitalism. And regenerative basically means the opposite. It means instead of subtracting and taking from planet and people.

"How do you regenerate? I'd say that maybe one of the most interesting is a company in Chile, Argentina, but selling in California called Guayaki. So Guayaki is about 100 million dollar company, they sell what is called yerba mate. Which is basically a natural leaf that grows in some of the areas in Argentina. And you can make it into either a hot drink or a cold drink. So farmers started to farm, and of course they needed to have a product in the market. So they created this product, sold it in California, And now, I would say, majority of the profits are reinvested back in actually regenerating the land in Argentina.

 

"There's a similar example, but perhaps more widely perceived, which is Patagonia. Patagonia the clothing company in California, they decided to start a new business, it's called Patagonia Provisions. And Patagonia Provisions aims at, well, obviously selling, but more than selling, helping to produce the best organic regenerative food in the world. Which is the food they used to supply in
the canteens for Patagonia employees. So there is a whole movement, Patagonia, Guayaki, about a sort of agriculture, and of course food and land use, that is regenerative.

"So this is what we do with the B corp impact assessment. We start looking at what is the purpose of the company, do you have a positive purpose? Pretty important, you know, so, if you're making cigarettes or arms, you're not going to become a B corp,
you know. Do you have to have a positive purpose? Then, there's question of governance, who governs, how they govern,
transparency, ethics, etc. I wouldn't say thirdly, maybe it's even firstly, but it's definitely about what is the product you make? So these are the more less, every three years the standards get sort of, not revamped so much, but we add new things. Like now we're adding privacy, corruption, taxation, etc. So companies that become B Corps, need to recertify every three years. Sometimes it's not so difficult if a company hasn't changed too much, sometimes it is very difficult if it is different, you know, it is more work because the company has changed. But basically, the first time you certify is the critical moment and we have a very high, 96% of the B Corps stay B Corps, year after year.

"What we find, particularly the bigger companies, is that we give them a language and KPIs, indicators they could use. So for example, we started with Sodexo, Sodexo has a 500,000 employees. They have 24,000 sites around the world where they work and they need to have a consistent language, consistent indicator for their managers to be able to all move in the same direction. So this is also why they use it is a very powerful language and discipline, I would say, for prioritizing issues, following up, measuring them and then improving on where you may not be as good as you wanted to be. But so this is just the certification, but
the reality is that now we have built a global network with 3,000 B Corps, so it is also a learning network. Companies can learn from each other, that's one of the first things they do. They call Patagonia, they call Ben & Jerry's, they call Triodos, they want to learn how they have been able to be score so high. Learning network, it is becoming a business network, B Corps can do business with each other, because they have an implicit trust. They know that it has not been so easy to become a B Corp, so they trust that the people behind B Corps take it seriously.

"Fifthly, I would say, we grew up next to the impact investing movement. So when Rockefeller foundation funded B Lab, at the beginning they also funded the Global Impact Investing Network, GIIN. So, many of these impact investors are looking to invest their money in these companies, so it's also an opportunity to attract impact investment capital.

"One answer is, many students leave university a little bit brainwashed, in thinking that self-interest, profit maximization, is the only way to go about and that is not true. Second thing is, it is running a business in a traditional way which means more, we say, in an extractive way. You try to cut corners, and you pay people as little as you can and with kind of, maybe sometimes you sell products that you don't think that are really good enough but you sell them anyways. So cutting corners is an easy way to do it. To run a business in a regenerative way, the way that we are talking about now here, requires certain discipline. It's a human discipline, so that is a real, potentially a real challenge that it's sometimes easier to let go and not be so disciplined, about what you do. And then maybe the final point is, just a very important point, is that this sort of called financialization of the economy, that many companies are now in the hands of their investors. And their investors don't really know, or sometimes they are investing for the short term, so they're not really looking beyond next year or the next quarter. And that makes it very difficult for companies to be so holistic and integrated.

"So the connection is very simple, if you think about the next five to ten years, you seek, do you imagine that companies will become less sustainable and less diverse and less transparent? I think anyone would say, no, we don't, we think that the world
is moving the other way. The company will become more sustainable, will strive at least, to become more diverse and more transparent, etc. And therefore, if this is the journey, there's no time to wait. We better start now, instead of waiting until the last possible minute. So for people who're starting careers and working in business, this is the same answer, that this is going to be the future, of at least the future of respectable business. So you join the two things; doing good and doing well at the same time. So, I think it's a very exciting time to be in business."