The Buzz About a "B"

Driving his Prius through the rolling hills of eastern Pennsylvania, with his dashboard flashing details of his current energy use, Jay Coen Gilbert is wondering how we can find an antidote to greenwashing. "It's tough to put your values into action as an investor, as an entrepreneur, and as a consumer," he says. "Everybody is saying the same stuff. How am I supposed to know who's the real deal and who's just selling me a story?"

As the cofounder of the basketball apparel company AND1, whose annual peak sales reached $250 million in 2001, Coen Gilbert was a highly successful entrepreneur himself, and he approached the problem in that spirit. After selling the company in 2005, he and his partners, Bart Houlahan and Andrew Kassoy, began searching for a new way to combine enterprise and philanthropy. They briefly considered starting another business or a venture fund. Instead, they decided to build the infrastructure to support a new sector of the economy: capitalism with a social or environmental mission.

"Right now business is the only institution in society that is capable of solving the social and environmental challenges in front of us at the speed and scale required," Coen Gilbert says. "We're trying to create the standards, the legal framework, and the branding to make it easier for businesses to do that."

Thus was born the B Corporation, or B Corp. The B stands for benefit and is inspired by Gandhi's famous line, "We must be the change we seek." The name also fits nicely into the existing lexicon of tax designations, alongside C Corporations and S Corporations.

Certification as a B Corporation is granted by B Lab, a nonprofit organization that Coen Gilbert and his partners founded in 2006. The stamp of approval is intended to function as a sort of S&P index of social responsibility. To become a B Corp, companies must fill out a detailed questionnaire and meet dozens of performance standards in areas such as environmental impact, employee relations, and the benefits they bring to local communities. They must revise their articles of incorporation to specify that officers will consider not only the financial interests of shareholders but also the interests of other stakeholders and concerns such as employees, the environment, and the community. They must agree to pay one-tenth of 1 percent of sales revenues to B Lab.

If they meet these standards, businesses can market themselves with the B Corp logo, embed their values into the corporate legal structure so it survives changes in management, and use B Corp criteria to benchmark their own performance.

According to Coen Gilbert, about 20,000 companies belong to some kind of responsible or sustainable business organization -- a $40 billion market. Yet these associations remain fragmented and industry-specific and rarely speak with a unified voice. Similarly, many groups offer certifications for specific categories -- fair trade, organics, LEED standards for green buildings, to name only a few -- yet there are no universal standards that look at the conduct of the whole company. Coen Gilbert hopes the certified B Corp logo will fill that void and become a trusted seal of approval.

So far 134 companies have signed on as certified B Corps. Based on current trends, Coen Gilbert expects that this community will grow within a generation to the size of the nonprofit sector (now about 5 percent of GDP) and win legal recognition as a new class of corporation with its own tax regulations and government incentives.

"The twentieth century was the century of the shareholder corporation," says Coen Gilbert, "and the twenty-first century will be the century of the stakeholder corporation."