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Monday, March 26, 2012

Strategic CSR - Patagonia

The article in the url below reports Patagonia’s recent decision to re-structure itself as a Benefit Corporation (http://www.bcorporation.net/). It is the first company in California to do so:

The legal status affords a company’s directors legal cover to consider environmental and social benefits over financial returns.

In particular, Benefit (or B) Corporations are required to:

1) Have a corporate purpose to create a material positive impact on society and the environment.
2) Redefine fiduciary duty to require consideration of the interests of workers, community and the environment.
3) Publicly report annually on its overall social and environmental performance using a comprehensive, credible, independent, and transparent third party standard.

California is one of seven states that has passed legislation allowing B corporations (http://socentlaw.com/tag/ben-jerrys/, while similar legislation moves forward in a number of other states http://www.benefitcorp.net/state-by-state-legislative-status):

1.  Maryland        effective Oct. 1, 2010
2.  Vermont         effective July 1, 2011
3.  New Jersey    effective March 7, 2011
4.  Virginia           effective July 1, 2011
5.  Hawaii            effective July 8, 2011
6.  California        effective Jan. 1, 2012
7.  New York      effective Feb. 10, 2012

The B corporation certification is awarded by B Lab, a nonprofit organization that acts:

“… the same way TransFair certifies Fair Trade coffee or USGBC certifies LEED buildings.

To date, B Lab has awarded Benefit Corporation certificates to 517 firms, with $2.9 billion in revenues in 60 different industries and an ambitious mission:

B Corporations are a diverse community with one unifying goal: to redefine success in business.

Rather than the end of a process, therefore, Benefit Corporation status is the starting point for firms to operate at higher standards of transparency and accountability. In order to enable this, B Lab places specific reporting requirements on firms to ensure accurate information about operations is disseminated to stakeholders:

Through a company’s public B Impact Report, anyone can access performance data about the social and environmental practices that stand behind their products. … As a result, individuals will have greater economic opportunity, society will move closer to achieving a positive environmental footprint, more people will be employed in great places to work, and we will have built stronger communities at home and across the world.

The evolution of the B Corporation reminded me of the Ben & Jerry’s case that I teach in my strategy course (Ben & Jerry’s: Preserving Mission and Brand within Unilever, 9-306-037). In particular, it reminded me of the “Ben & Jerry’s law” that was passed by the Vermont legislature in the run-up to Unilever’s acquisition of the firm in 2000. The law allowed the Boards of Vermont firms to consider factors in addition to shareholder value when deciding whether to accept a takeover offer (http://www.businessweek.com/smallbiz/content/apr2010/sb20100421_414362.htm).

More background information on this case, and broader issues related to B Corporations, can be found at: http://socentlaw.com/tag/ben-jerrys/