This is a great argument, because while Corporate Social Responsibility (CSR) is admirable yet widely acknowledged from a wide array of large scale companies and enterprises, we have to actually take into account what the company’s Corporate Social Performance is. Operationally and structurally is one aspect of CSR, but impact performance is another—what is the product or service impact on the triple bottom line?
Thank you for the great article John. It is my opinion that we have to start thinking about “impact” as the product. In the case of The Honest Company, this is what they say is their intended impact:
Our vision of health & sustainability is to:
* Reduce the ubiquitous presence of toxic chemicals in our our natural environment (air, soil, oceans, etc), man-made environments (homes, schools, offices) and our personal environments (industrial pollution inside our own bodies);
* Protect natural resources by minimizing waste and maximizing use/re-use;
* Support peace, security, and social justice; and,
* Promote diversity and productivity through all facets of life – from cultural to ecological.
So, this is their Theory of Change (or at least the change they intend to create) so their reporting should be explicit to these items and I would like to see data trends or change over time. So, how much product did they sell and what are the reasonable assumptions of why - based on their explicitly intended change - is the world is better because their product was purchased as opposed to another product? From my perspective, “Health & Sustainability” is their product and they do a good job of describing it as such. Would be great to see the statistics about their ability to deliver this product in near real time right on their site. It is my opinion that we need to let go of the grand unifying measure of good and simply: 1) declare the change we intend to create; 2) count the outputs that we believe will create that change, 3) describe (and tweak over time) the logic that connects the outputs to the change we intend.
I think the Social Impact Calculator is excellent but I am a bit wary of reducing social impact to dollars. In the case of what is measured in the Social Impact Calculator, the context is largely economic so expressing the impact in dollars makes sense. The trick will be to get a lot of people to use the calculator over a long period of time so we can normalize the data. The Disability-Adjusted Life Year (DALY) is another great metric for impact and it is based on many years and large amounts of health data.
John Anner states, “Benefit corporations should share their performance against social impact goals.” We agree.
Benefit corporation legislation was drafted to require transparent, third party holistic standards and shareholders and stakeholders should hold these companies accountable for complying with the law. The law was constructed in away that the media, consumers and investors can easily identify those following the law and those that are not. Your article is proof of this. To help move this forward, B Lab will begin highlighting those companies that have completed their third party reporting on benefitcorp.net. Additionally, B Lab will continue to provide a free, confidential tool, the B Impact Assessment, to make it easy for all companies to report on their impact using a credible third party standard. Anyone, benefit corporation or not, can measure and manage their social and environmental performance at bimpactassessment.net.
B Lab believes that to measure the impact of a corporation you must look comprehensively at the organization. You cannot exclusively look at the impact of the product on a single beneficiary. For this reason, the B Impact Assessment has two halves - one focused on the operations of the business; the other focused on the impact business model. The impact business model evaluates the outcomes of the organization focused on a specific beneficiary, including scale, efficacy, intentionality, and intensity of impact. Additionally, though we ask questions about company policies, the assessment weights actions above intent.
We’d also like to clarify an important point about how many of the more than 1,100 registered benefit corporations are in compliance with their statutory transparency requirements.
- Delaware does not require benefit corporations to make their benefit reports transparent to the general public, only their shareholders.
- Nevada, which is home to 40 % of all benefit corporations, does not require any reporting until at least February of 2015.
- The laws in several states have not yet gone into effect and many benefit corporations have been registered within the last 12 months and have not yet ‘missed’ their statutory deadline for publishing their benefit reports.
However, requests from the general public for more transparency, both to benefit corporations and to policy makers, like those being made by John Anner, are helpful as B Lab continues to work with policy makers in those states to amend their laws to better serve companies and the public interest.
Finally, to correct a mis-statement in the article, while the Honest Company is not a registered benefit corporation yet, they are a Certified B Corporation. All Certified B Corporations must expand the legal responsibilities of their corporation to take into consideration the interests of all stakeholders, not just shareholders, to the greatest extent possible within the laws of their state of incorporation and for their particular corporate structure. As a Certified B Corp incorporated in Delaware, the Honest Company is required to register as a benefit corporation by August 1, 2017 (within four years of the first effective date of the Delaware benefit corporation law). This on-ramp period exists to give existing Delaware corporations reasonable time to educate their directors and shareholders, and, for companies like the Honest Company considering public offerings, to work with B Lab and others to educate the various public market players, about the efficacy of benefit corporation governance for the creation of long term value for shareholders and positive impact for society.
We are proud to work with these early pioneers to help them raise the bar for generations of entrepreneurs to come.
B the Change
Andrew Kassoy, Bart Houlahan, and Jay Coen Glibert
B Lab Cofounders
Thanks to the B Lab Cofounders for these important clarifications and corrections. They are right to be proud of their pioneering work.
I think it’s a very positive step forward for B Lab to start identifying those companies that are in compliance with whatever requirements exist to report against impact standards. This will certainly be helpful for investors and the general public as we attempt to separate the relentless hype from sober reality.
Publications like SSIR and academics studying the field have a great deal more work to do in terms of evaluating the impact of social enterprises. For example, no business operates in such a way as to have only positive impacts. But it’s rather misleading to report only about what the company is doing to improve the world, while ignoring direct negative impacts or negative externalities (uncompensated third-party effects). Even a stellar corporate citizen like the Honest Company produces waste, pollution, traffic, noise, etc.
Another useful exercise would be to conduct a statistical exercise comparing the performance of B-Corps with regular businesses over time. As far as I can determine, there is no generalizable evidence demonstrating either that B-Corps fare better financially, or are better at improving social conditions, as compared to either SMEs or large companies. I am by no means arguing against B-Corps or any other form of social enterprise or social business. I am only advocating for much more empirical work to be done. This can only help the cause.
COMMENTS
BY Wendall N. Chin
ON September 26, 2014 12:06 PM
This is a great argument, because while Corporate Social Responsibility (CSR) is admirable yet widely acknowledged from a wide array of large scale companies and enterprises, we have to actually take into account what the company’s Corporate Social Performance is. Operationally and structurally is one aspect of CSR, but impact performance is another—what is the product or service impact on the triple bottom line?
BY steve wright
ON September 29, 2014 10:48 AM
Thank you for the great article John. It is my opinion that we have to start thinking about “impact” as the product. In the case of The Honest Company, this is what they say is their intended impact:
Our vision of health & sustainability is to:
* Reduce the ubiquitous presence of toxic chemicals in our our natural environment (air, soil, oceans, etc), man-made environments (homes, schools, offices) and our personal environments (industrial pollution inside our own bodies);
* Protect natural resources by minimizing waste and maximizing use/re-use;
* Support peace, security, and social justice; and,
* Promote diversity and productivity through all facets of life – from cultural to ecological.
So, this is their Theory of Change (or at least the change they intend to create) so their reporting should be explicit to these items and I would like to see data trends or change over time. So, how much product did they sell and what are the reasonable assumptions of why - based on their explicitly intended change - is the world is better because their product was purchased as opposed to another product? From my perspective, “Health & Sustainability” is their product and they do a good job of describing it as such. Would be great to see the statistics about their ability to deliver this product in near real time right on their site. It is my opinion that we need to let go of the grand unifying measure of good and simply: 1) declare the change we intend to create; 2) count the outputs that we believe will create that change, 3) describe (and tweak over time) the logic that connects the outputs to the change we intend.
I think the Social Impact Calculator is excellent but I am a bit wary of reducing social impact to dollars. In the case of what is measured in the Social Impact Calculator, the context is largely economic so expressing the impact in dollars makes sense. The trick will be to get a lot of people to use the calculator over a long period of time so we can normalize the data. The Disability-Adjusted Life Year (DALY) is another great metric for impact and it is based on many years and large amounts of health data.
BY B Lab (Jay, Bart, & Andrew)
ON October 3, 2014 12:16 PM
John Anner states, “Benefit corporations should share their performance against social impact goals.” We agree.
Benefit corporation legislation was drafted to require transparent, third party holistic standards and shareholders and stakeholders should hold these companies accountable for complying with the law. The law was constructed in away that the media, consumers and investors can easily identify those following the law and those that are not. Your article is proof of this. To help move this forward, B Lab will begin highlighting those companies that have completed their third party reporting on benefitcorp.net. Additionally, B Lab will continue to provide a free, confidential tool, the B Impact Assessment, to make it easy for all companies to report on their impact using a credible third party standard. Anyone, benefit corporation or not, can measure and manage their social and environmental performance at bimpactassessment.net.
B Lab believes that to measure the impact of a corporation you must look comprehensively at the organization. You cannot exclusively look at the impact of the product on a single beneficiary. For this reason, the B Impact Assessment has two halves - one focused on the operations of the business; the other focused on the impact business model. The impact business model evaluates the outcomes of the organization focused on a specific beneficiary, including scale, efficacy, intentionality, and intensity of impact. Additionally, though we ask questions about company policies, the assessment weights actions above intent.
We’d also like to clarify an important point about how many of the more than 1,100 registered benefit corporations are in compliance with their statutory transparency requirements.
- Delaware does not require benefit corporations to make their benefit reports transparent to the general public, only their shareholders.
- Nevada, which is home to 40 % of all benefit corporations, does not require any reporting until at least February of 2015.
- The laws in several states have not yet gone into effect and many benefit corporations have been registered within the last 12 months and have not yet ‘missed’ their statutory deadline for publishing their benefit reports.
However, requests from the general public for more transparency, both to benefit corporations and to policy makers, like those being made by John Anner, are helpful as B Lab continues to work with policy makers in those states to amend their laws to better serve companies and the public interest.
Finally, to correct a mis-statement in the article, while the Honest Company is not a registered benefit corporation yet, they are a Certified B Corporation. All Certified B Corporations must expand the legal responsibilities of their corporation to take into consideration the interests of all stakeholders, not just shareholders, to the greatest extent possible within the laws of their state of incorporation and for their particular corporate structure. As a Certified B Corp incorporated in Delaware, the Honest Company is required to register as a benefit corporation by August 1, 2017 (within four years of the first effective date of the Delaware benefit corporation law). This on-ramp period exists to give existing Delaware corporations reasonable time to educate their directors and shareholders, and, for companies like the Honest Company considering public offerings, to work with B Lab and others to educate the various public market players, about the efficacy of benefit corporation governance for the creation of long term value for shareholders and positive impact for society.
We are proud to work with these early pioneers to help them raise the bar for generations of entrepreneurs to come.
B the Change
Andrew Kassoy, Bart Houlahan, and Jay Coen Glibert
B Lab Cofounders
BY John Anner
ON October 8, 2014 05:05 PM
Thanks to the B Lab Cofounders for these important clarifications and corrections. They are right to be proud of their pioneering work.
I think it’s a very positive step forward for B Lab to start identifying those companies that are in compliance with whatever requirements exist to report against impact standards. This will certainly be helpful for investors and the general public as we attempt to separate the relentless hype from sober reality.
Publications like SSIR and academics studying the field have a great deal more work to do in terms of evaluating the impact of social enterprises. For example, no business operates in such a way as to have only positive impacts. But it’s rather misleading to report only about what the company is doing to improve the world, while ignoring direct negative impacts or negative externalities (uncompensated third-party effects). Even a stellar corporate citizen like the Honest Company produces waste, pollution, traffic, noise, etc.
Another useful exercise would be to conduct a statistical exercise comparing the performance of B-Corps with regular businesses over time. As far as I can determine, there is no generalizable evidence demonstrating either that B-Corps fare better financially, or are better at improving social conditions, as compared to either SMEs or large companies. I am by no means arguing against B-Corps or any other form of social enterprise or social business. I am only advocating for much more empirical work to be done. This can only help the cause.
John