In 2010, Maryland passed the first state law that allowed for a Benefit Corporation or B-corporation. The B-corporation is a for-profit business that includes “positive impact on society and the environment in addition to profit as its legally defined goals.” (See Wikipedia). B-corporations are trending. In 2014, B-corporation law became effective in Arizona; Colorado; Connecticut; Florida; Nebraska; Nevada; Oregon; Rhode Island; Utah; and West Virginia. Effective January 1, 2015, Minnesota and New Hampshire jumped on the B-corporation law bandwagon. Thirty (30) states are now on board and the wagon should be full in a few years.
Each of the SBA’s six for-profit business structures has a legal mandate to increase shareholder value. Investors expect and may demand (ask my wife) a profit. Business leaders are free to pursue additional interests, such as create a safer workplace or make a positive impact on the environment, but these actions must be secondary to the fiduciary responsibility of business leaders to achieve a sustainable profit. The conflict with these business structures is that investments to protect people, property, and the environment must be cost justified, such as reduction in workers’ compensation costs or avoidance of legal fines, particularly in the short term.
Shareholders to stakeholders
Beginning in the early 1990s, business accounting started looking at the “triple bottom line” that includes financial, social, and environmental. Internal profits for business shareholders were reconciled with the broad impact of “profit” — particularly in non-monetary terms, particularly including the public that may be impacted by some aspect of the business. “Responsible Care,” “Corporate Social Responsibility,” and “Sustainability” became vogue terms.
Companies, such as the big-three U.S. automakers, that obtained voluntary ISO 14001 environmental management system conformance in the mid-1990s mandated that tier-one suppliers join the ranks. The ranks for ISO 14001 increased beyond tier-one suppliers. ISO 26000 guidance on social responsibility in 2010 pushed the concept further. Using a variety of guidelines and standards, many for-profits, non-profits, the government, and others now seek to become more accountable for their broad impact on stakeholders. These are some brief reasons for the creation of B-corporations.
Daniel H. Pink’s book, “Drive: The surprising truth about what motivates us,” provides further evidence of changing mindsets. Pink examines why humans have moved beyond the first motivation for survival, beyond the second motivation of response to rewards and punishment, and on to the third, or current, motivation: “to learn, to create, and to better the world.” Pink is likely correct in human motivation theory but there’s space to be cynical.
This greater interest in businesses’ impact on local to global stakeholders coincides with the growth of the Internet. Vastly increased connectivity has pulled back the curtain on many business operations. Greater transparency means business must be more open in what they do – and don’t do.
For example, I run my world headquarters from my home. My office is a mess right now. There are no out-of-office business meetings today, so I haven’t shaved and I’m wearing sweat pants and a sweat shirt. If I expect a client to visit, I’ll clean up the home office and put on business clothes or arrange a meeting elsewhere. If the transparency of my home office activities were frequent and routine, I would substantially change my behavior. I’d change my behavior because I want your business. I need your business to earn a profit to stay in business. On the bigger stage, transparency forces almost any size business to behave better – to all of our benefit.
Big business example
Beginning January, 2015, Walmart, the world’s largest private business in terms of revenue ($248 billion USD) and number of employees (2.2 million), requires suppliers to provide online ingredient disclosure for items sold in Walmart stores. Beginning January, 2016, Walmart will publicly report on their progress in eliminating high priority chemicals that may harm people or the environment. Your company may be on the hook, too. By June 1, 2016, OSHA HazCom 2012 requires employers to update their hazard communication program and provide additional training for newly identified physical or health hazards. Clearly, businesses will have to be more transparent about chemical exposures going forward.
Public first, employees second?
The drivers for creating B-corporations focus more on the transparency of conditions and hazards that might impact primarily the public — and less so employee health and safety. The broad voluntarily conformance to ISO 14001 with less interest in safety management systems such as ANSI/ASSE Z10 is a prime example.
B-corporation structure can be criticized because conformance criteria appears to place greater weight on how much employees are paid above minimum wage than on how far employers go beyond minimum compliance to fix workplace hazards. Still, employee safety benefits by steering business interests to the public well-being.
Boosting employee safety and health
Safety and health pros should capitalize on the B-corporation concept of a “positive impact on society.” Determine the full effect on society of an employee injury or illness. Go beyond direct/indirect costs of an injury. Arguments should extend to impacts that an employee injury or illness has upon family life, social life, employee morale, economic security (if not fully covered by workers’ compensation), impact on promotion opportunities — everything that can have a public impact. A large ripple effect occurs when an employee is injured or ill. All the ripples should be captured, qualified and quantified. For example, what public transparency issues exist when an employee is injured or ill? Could the suspected cause or responsibility of the injury/illness be relayed, simply by people communicating to people through social media? Does this communication cost a business, in terms of reputation?
Pink may be correct that people are now motivated “to better the world.” Safety, health, and environmental pros – and the people, property, and the environment they are expected to care for – should benefit from this new era of motivation. If you’re a pro thinking about starting a consulting business, consider establishing a B-corporation. And all normal business structures should be made aware of new “benefit” expectations.