Episode 7

Show Notes

What Does Responsible Business Really Mean? 

It’s 1985. If you’re like me, you’re 12 years old, Knight Rider is on TV, you’re knocking back a bottle of Orange Shasta, and cracking jokes with your imaginary friend, Reginald, when a commercial comes on.

We open on a warm sunset just off the California coast, it’s serene orange and pink glow shimmering on the ocean surface. Cut to a lone butterfly, sitting atop a flower.

“One of the smallest endangered species quietly reaches for its dinner,” the narrator says softly. “The el segundo blue butterfly lives on wild buckwheat on land that’s part of an oil refinery.” Now in dreamy slow motion, the butterfly flutters off its perch, and lands on a finger.

“It’s not much bigger than a fingernail,” the warm voice explains, “yet people who work there protect the area and plant buckwheat.” Cut to the final frame: “Do people really do that so a tenth of a gram of beauty can survive? … People Do.”

The Greenwashing Gold Standard (1:00)

Those two words “People Do” mark the final frame, nestled under the logo for... Chevron, the 150 billion dollar, multinational oil company. In the mid 1980’s, Chevron’s “People Do” campaign was designed to highlight projects that demonstrated the company’s care and commitment to the environment. One featured a hibernating bear and her cuddly cub returning to spring in Montana, thanks to the efforts of Chevron employees through the winter. One celebrated artificial coral reefs made from old storage tanks.

While initially successful, the ads were swiftly condemned by environmental groups. Why? Well to start - the ads left out a key fact. The “People Do” projects, while real, were LEGALLY MANDATED in order to mitigate the collateral damage caused by oil drilling. Researchers also found that the El Segundo butterfly program cost the company just $5,000 a year, while the production of the ad TOUTING IT was estimated well over $200,000.

The “People Do” campaign has since become a sort of “gold standard” for what’s referred to as “Greenwashing” - the misleading or even deceptive PR efforts to insist a company’s environmental impact is positive, regardless of what reality shows. Unfortunately unlike Knight Rider, Greenwashing is still alive and well today. And it’s just one of the ways we’ve become inundated with messages about brands making the world a better place. Whether it’s combating climate change, supporting movements like Black Lives Matter, touting how well they treat their employees, or just a good old fashioned “In these unprecedented times, we’re in this together,” it feels inescapable. Many companies actually do the things they say, but not all. 

So who’s for real? Can businesses actually be a force for good? And if so, how can we know when they are doing what they say they will do?

This week, we’re putting the spotlight on two organizations working to answer exactly that question. One is B Lab - a nonprofit organization who has catalyzed a movement through its B Corp certification. And DoneGood - a company aiming to make it quick, easy and affordable to use your purchasing power for good.

I’m Scott Hermes. This is working better.

What is the purpose of business? (3:18)

Okay, briefly we’re going to go even further back - to 1970. The Beatles just broke up, IBM unveiled the first ever FLOPPY DISK, and an economist by the name of Milton Friedman published an essay in the New York Times called “A Friedman Doctrine: The Social Responsibility of Business is to Increase its Profits”.

Friedman’s argument was as clear as his head was bald: profit matters above all else. Friedman economics and the idea of “Shareholder primacy” - that the shareholder always comes first, became foundational principles of free-market capitalism.

Not surprisingly, over the years more and more economists, investors and business leaders have to come to believe that Friedman’s model is at least….incomplete.

Chris Marquis is a Professor at Cornell and author of Better Business: How the B Corp Movement is Remaking Capitalism.

“You have these things like massive environmental degradation, rampant discrimination, inequality, and many people sort of tie those issues to problems with our companies, polluting more or who they hire, who they promote, etc.

Many believe we’ve entered a new era - one where consumers demand not just quality products and services, but also transparency, accountability and action in terms of how they impact the world.

Was a product made sustainably? Who made it, are they being treated and compensated fairly? Where did ingredients come from, are they fair trade? How are employees treated? What are you doing to make your company’s leadership more diverse?

So when demand for perceived responsibility goes up….We don’t need Milton Friedman to tell us - supply goes up too.

Fans of the NBC sitcom 30 rock might remember “Greenzo,” played by David Schwimmer, he was a fictional mascot created by NBC as part of a companywide environmental initiative. It’s absurd, but it’s not that far from reality. Brands use any means they can to shout at consumers “Hey, we’re not an evil corporation. Look at our environmentally conscious, naturally-derived, ethically-considered, responsibly-sourced cassava chips.

Which leaves us with at least three questions.

What does any of that actually mean?

How can we determine who’s for real when it comes to businesses doing good?
What the hell is Cassava anyway?

B Lab & The B Corp movement (6:18)

One company aiming to help answer that question is B Lab. They’re known for starting the B Corp Certification - a set of standards used to measure the positive impact a company has on the world. For the 3,500 businesses in 70 countries who have become B Corp certified, it means they’ve met those standards and use the B Corp model to guide how they do business.

Walk through the grocery store and you don’t have to look hard for the B Corp logo - Ben & Jerry’s ice cream, Method cleaning products, Danon yogurt or International Delight coffee creamer from parent company Danone….The list of Certified B Corps also includes beloved brands like Patagonia, Allbirds, and Kleen Canteen.

How the B Corp certification works

The certification means two things. First is the actual legal structure of the business - we’ll get to that in a bit. Second is the B Lab Impact Assessment. It’s a free, roughly 150 question survey that pinpoints the impact a business has across five areas: the environment, workers, community, customers, and shareholders. The assessment aims to understand how the business operates. Leaders answer questions like:

How much do you rely on renewable energy to operate corporate facilities?
What percentage of your company’s management is from underrepresented populations?
How do you prevent the exploitation of workers?
Are employees allowed to take paid-time off for community service?
How many hedgehogs work in your IT department?

Ok. That last one is NOT one of the questions but it would be pretty cool if they added it.

Based on industry benchmarks set by B Lab, the more positive the impact, the higher the score. Add each score together - and you get the Overall B Impact Score. 80 is the minimum to become certified.

Accountability meets flexibility (8:04)

There are many routes to become certified because different companies invest in different areas.

For example, Patagonia’s score of 151.4 is one of the highest of any B Corp. As a company who’s become famous for doing things like donating $10 million in tax cuts to environmental charities, scored highest on community and environment, the two areas making up for well over HALF their total score.

King Arthur Flour took a different route to the certification. The company’s Worker score was a whopping 61, way above the average of 22. Why? It’s an 100% employee-owned company, they pay at least 14% above minimum wage, they offer things like counseling and wellness services to employees, and achieved an employee satisfaction score above 80%.

When King Arthur claims to treat their employees well, you don’t have to take their word for it. It’s been quantified and verified. That’s the beauty of the B Impact assessment: it looks at these MAMMOTH problems facing the world, and says these businesses are helping solve those problems, and here’s how. Down to every last employee benefit, social program, and carbon emission.

Beyond the public perception, attracting EMPLOYEES has undoubtedly become one of the primary benefits touted by the B Corp movement. Here’s Chris Marquis again:

CHRIS:

“I've interviewed now probably a hundred I-Corps over the years... retention is way higher than their competitors. It's higher than before they went through the process because people want to work at a place where they're treated humanely and have good benefits. It just makes a lot of sense. On the other side of the employee attraction side, many companies like Athleta, Kevin O'Leary and New Belgium Brewery have all told me that in the last few years… 25 plus percent of the people that come in applying for jobs, they are on the application and we are why people want to work for us. They mentioned because you're a B Corp.”

Becoming Certified (10:06)

As anyone just about anyone who has pursued the B Corp certification will tell you, the process is no walk in the park.

JAMES:

“it's not something necessarily the companies are enjoying at the time. “

That’s James Ghaffari, Director of B Corp Certification at B Lab UK.

It's like exercise, you don't like doing it while you're actually in the process of doing it, but afterwards you get the endorphin rush of having done it….But actually, funnily enough, talking to the community afterwards, a number of companies have recently come and said one of the really valuable things that they did was that verification process itself, because it actually forced them to look under the bonnet of their company.

To my fellow Americans, "under the bonnet" does not mean "under a lady's fancy Easter hat" but rather what we call the "hood" of the car - so under the bonnet means under the hood.

My favorite difference between English and American is that, in England, knock up means to wake someone up and rubber means eraser. So it is possible in the UK to knock someone up with a rubber, while in America this would signify a terrible job of quality control by the good people of the Trojan corporation.

So speaking of going “under the bonnet” - we asked James: if the assessment is self-administered, how are answers verified?

JAMES:

There is an external verification or validation aspect to that in which our standards team are going to reach out to you to ask you to provide supporting evidence to back up the claims that you've made on that assessment…

If you're claiming something that's really impactful,...if you're making beer for instance, and you've got an environmentally innovative process that uses half the water that a typical beer company uses. Then it's actually a huge amount of work that our analysts then have to do to go and research the beer industry and how much water typically gets used by those companies in making beer in that process typically. And then the company itself, it is upon them to provide all of the evidence to back up the claims that they've made and to show their working basically.”

Changing Behavior (12:20)

During our research for this episode, two things kept coming up again and again.

The assessment and verification process is hard.

Sometimes the best case for the B Corp movement, is made not by companies who crossed the finish line, but by the ones who didn’t.

“Even though there are like 3,500 B Corps, it is used by over 100,000 companies as a management tool.”

There are all kinds of ways to benchmark yourself as you go through it, to understand how to actually manage the company better. This is why I titled the book Better Business, because so many companies told me, "We got into this for the social and environmental reasons, but actually we came out of it as a better business because it just leads to think about things that you haven't thought about before."

There's one relatively well-known environmentally focused company that I've talked to. I won't name their name. They've been doing this work since the 1990s, and they learned through going the assessment that actually many of their employee benefits were really lagging.”

It seems one of the most effective things about the B Corp model is it takes away the ambiguity about how to “do the right thing.” You’re never starting from scratch. You have this clear set of benchmarks to base decisions on, particularly when the unexpected happens. For example, when COVID hit, and many companies were criticized for abandoning suppliers often from lower income countries, it was companies like Paris-based Danone being praised for extending payment terms and credit to small farmers and suppliers.

CHRIS:

Which I think Danone cases are really, a great example of COVID hits and they continue to pay the dividends but also found ways to, in short, employment for a number of their employees, work with their suppliers and supply chain to make sure that those folks were being taken care of as well.

Making a Movement (14:25)

For people seeking businesses doing good and being held accountable, B Corp is a really helpful guide, a shorthand for “they’re not destroying the planet and its people.” But only if people know what “Certified B Corp” means, right? While B Lab and the B Certification are still relatively new to the general public, folks like Chris and James are encouraged by growing levels of awareness.

“It's a real shame, I haven't been on the tube for about nine months or eight months now, for obvious reasons. But just before lockdown, I was just seeing loads of tube adverts coming up in Central London from Mindful Chef to ODDBOX, and all these different people using the B Corp stamp on their adverts. Customers want help with that decision-making process and they will give more of their time and more of their loyalty and more of their engagement to companies that give them that helping hand in making those decisions along with their values. “

It all comes back to the fundamental definitions of what businesses are for. Milton Friedman said they’re for making money. And even if growing numbers reject that mindset, it’s still entrenched in our thinking, our habits as consumers, and perhaps most importantly, the law.

For the vast majority of businesses, particularly large corporations who affect the world the most, their legal responsibility is first and foremost to shareholders. Decisions are made and regulated based on impact to the bottom line. In the UK, B Lab is saying it’s time to change that.

JAMES:

“One of our big aims as B Corp, is something that we call the Better Business Act, where we are going to build a coalition of companies to ask the government to change the Companies Act in Section 172, so that the responsibility for directors everywhere in every company in the UK, is to think about all of their stakeholders when they make key business decisions, and not just their shareholders...So stay tuned and be hearing hopefully in 2021, a lot more about that.”

It’s no small feat. B Lab’s website states the intention of the campaign very clearly: “Change the law so that every single company in the UK, whether big or small, takes ownership of its social and environmental impact. “

Bridging Political Divides (16:57)

Could something similar happen here in the US? It may sound far fetched, but Chirs Marquis says there’s actually more common ground politically than you might think:

CHRIS:

“Even Marco Rubio has come out against shareholder primacy. He wrote a report, not that long ago, about how shareholder primacy and cancer that's killing American companies, because it is so short-term oriented. Elizabeth Warren, is another from the left, that actually many of the ideas of the spend Bennett Corporation Law where you'd have our accountable capitalism act, which she put forth as part of her presidential planning.”

That’s about as encouraging as anything. The list of things Marco Rubio and Elizabeth Warren agree on is short, and includes things like “the sky is often blue,” “water is wet” and “David Hasslehoff - HOT.”

Candidly, the first time I learned what B Corp was, it was from Kin + Carta, my employer who graciously hasn’t yet told me to stop swearing on this podcast. J Schwan, our CEO, announced at a quarterly meeting that Kin + Carta was pursuing the B Corp certification, to hold ourselves accountable to the things we say we believe in.

It’s been years in the making, but we’re damn close! Which is awesome. Since I first learned about the B Corp certification, the thing that’s been most encouraging is learning more about what it’s meant to other companies. The stories about what other certified B Corps have done to earn the distinction.

WHICH brings me to America’s favorite 2-3 min podcast segment - Business Class - Midwest Division - More than one and less than three podcasters: Cooler Terms w/ Pooler & Hermes.

COOLER TERMS: Carbon Neutral (18:40)

DONEGOOD (22:13)

Alright - so what is a “responsible business” and how do we find them? B Corp is offering a compelling answer to that question. But if you listened to our most previous episode, you know that consumer demands for free and fast shipping, and seamless ordering has never been higher. Or, arguably, delusional. So for people wanting to support businesses making a clear positive impact on the world - could it ever be as simple as the Buy Now button on Amazon?

Cullen Schwarz is the founder of DoneGood. His answer is an emphatic YES.

Deemed by Forbes as “The Amazon for Social Good,” DoneGood is an online marketplace featuring over 200 ethical and sustainable brands. Now offering a mobile app and full eCommerce site, the company’s flagship product is a free chrome extension that instantly recommends sustainable and socially conscious brands based on your searches in Amazon, Google or other retailer sites.

Doing Good Made Easier (23:24)

For example… I searched for “fuzzy slippers” on Google, and a list of five companies popped up, including Kyrgies, a company that hand-crafts slippers from wool grown on family farms, and is becoming Certified Climate Neutral. With a click of a button, it takes me to their page on DoneGood where I’m just a few clicks away from whisking my feet to soft, sustainable heaven.

DoneGood evaluates businesses based on their impact on people and the planet. So what specifically are they looking for?

CULLEN:

“Are you paying living wages and safe conditions? Are you investing in communities? Are you fighting climate change? How are you more environmentally sustainable than the big name counterparts in your industry? How can you demonstrate that? How can you back that up? What can you provide us?

Cullen says they also rely on data from independent non-profits like B Corp, 1% for the Planet, Fairtrade organizations and the Rain Forest Alliance.

DoneGood features men and women’s clothing, home goods, cleaning products, office supplies, coffee, tea, self-care products, even electronics - you name it, DoneGood has likely found a responsible alternative worth supporting, each with their own unique story and ambition to do things differently.

Such as Dear Survivor, who offers upcycled jewelry made ethically by women refugees in the US and donates proceeds to restorative programs for survivors of sex trafficking.

Or Gorongosa Coffee, who donates 100% of profits directly to wildlife conservation, girls education and rainforest restoration in Mozambique.

Cullen says there’s nothing as rewarding as watching these partner brands grow over the years.

CULLEN:

We're helping consumers who want to find those brands to find them, which then means these companies will have more sales, be more successful, which then means they'll be around longer and grow and be able to do more of the good it is that they're doing. And it means other people, more and more other people will be inspired to start companies like theirs because they see that companies like these can be successful. 

The power of consumer demand (25:14)

Prior to starting DoneGood, Cullen spent years in politics, including working in the Obama administration. Cullen says he got into politics to fight for things like economic equality, living wages for workers and combating climate change. What he came to believe, though, was that of all ways to affect change, one stands alone in its sheer power.

CULLEN:

“Of all the things we do: we march, we volunteer, we vote, we donate, but we spend a lot of money and that has a huge impact on the world. Last year, Americans gave $450 billion to charity. We spent 325 times more than that buying stuff.

if just a fraction of the dollars we spend can be diverted away from massive companies with huge global supply chains that are keeping people locked in poverty that are destroying the planet, and instead we can divert our dollars to companies that are using highly eco-friendly practices, fighting climate change, paying living wages, and empowering communities. The impact is huge.”

Cullen and the DoneGood team clearly envision a world that rejects the “Friedman” ideology that businesses exist only to maximize profits. But he also insists that a more conscious form of business will only be possible by embracing a little capitalism 101.

CULLEN:

Consumer spending is 70% of our economy. Businesses want to make money, so they will follow consumer demand, and that means we can demand, as consumers, certain product specifications. We can demand certain price points. We can demand whatever, and the market will supply whatever we demand. Well, more and more consumers are now demanding more often, I want good pay with this product for the workers who made it. I want to know that my spending isn't helping to contribute to climate change, and instead might be part of the solution, and the market will supply more of that.

I do think that that's the most important movement of our time.

Reaching customers on their terms (27:17)

For Cullen, embracing principles of capitalism also means embracing what some leaders in this space deem a bad word: SALES. Back in September, DoneGood held its “Better Days” promotion - offering consumers an alternative to Amazon Prime Days.

Whether it’s promotions like Better Days, the seamless experience of the DoneGood site, the SPEED of the plugin, or the extraordinary effort to sync ALL the inventory payment data with 200+ partner Sites... EASE for the consumer is clearly the north star for Cullen and the DoneGood team. It’s about understanding what people are already going to do - and redirecting that behavior to do good without getting in the way.

CULLEN:

“I'm going to buy a shirt anyway. Right? I'm going to buy Christmas gifts at the holidays. Americans spend over a trillion dollars just on holiday gifts. What if that trillion dollars, a fraction of it, could reduce poverty, fight climate change? “

Many of the brands featured on DoneGood are certified B Corps, as is DoneGood itself. And just like the B Corp movement, DoneGood is aiming to be an answer to the problem of greenwashing and quote-”wokewashing”. Cullen says misleading marketing and PR claims from big business is absolutely a problem, but he insists there’s another way to look at it.

CULLEN:

“The fact that greenwashing is a problem, first of all, let's recognize that that's a sign of huge progress. The fact that big corporations at least feel like they have to pay lip service to these things, and that they need to talk about these things at all, or are trying to fudge what they're actually doing. That means they're starting to understand that a large number of people, a large number of consumers care about these issues and they better start talking about it. So while it sucks that corporations are trying to make us all think that they're doing good and it makes it tougher to separate fact from fiction, it's progress that they even feel the need to do that.”

WRAP: Catalyzing change (29:00)

Cullen was also nice enough to extend an offer to Working Better listeners!

Go to DoneGood.co, and use promo code WorkingBetter20 for $20 off a purchase of $100 or more. That’s WorkingBetter20 - no spaces. Huge thank you to Cullen Schwarz of DoneGood for talking with us.

Also thanks to Chris Marquis - go buy his book Better Business at chrismarquis.com.

We’ll link to all of this on our website.

Finally a huge thank you to B Lab’s James Ghaffari for lending your time and expertise.

So when you’re shopping, and you want to use your purchase power for good, look for the B Corp logo. If you’re online, download the DoneGood browser extension and make it a breeze. They’ve done a lot of the work for you. But as Cullen said - it comes down to what consumers demand, what WE do, that affects change and can reframe what we expect from businesses. Because who makes real change happen? To quote a 1985 classic:

“People Do.”