Jay Coen Gilbert must be doing something right; after all, you don't get invited to the White House to advise on economic policy just because you smell good. Along with two of his brainy Stanford buddies, Gilbert has built a certifying system for business. A certified B Corporation is a new breed of company (the B stands for beneficial) that does right by its shareholders, community, and ecosystem. In the second part of our conversation, Jay shares what happened in Washington, what he's doing on the back of GOOD magazine, and shares advise for the aspiring (beneficial) entrepreneur.
Music comes from Amadou & Miriam.
Listen (or read) part one here.
Full text after the jump
TreeHugger: The Obama team asked B Corporation for suggestions on how to run various parts of its policy. What did B Corp pass on to the Obama team?
Jay: We, along with a bunch of other organizations in the sustainable business and impact investing communities, were invited to present our thoughts to the Obama transition team. I think the major take-away was that the White House Office of Social Innovations, as a result, was going to recognize that social innovation happens not just through non-profit social innovation, but also through the private sector, through for-profit organizations.
As it looked at creating social innovation through business, it was clear that there were a couple of things that would be appropriate roles for the Federal government.
The first thing had to do with creating incentives for states to pass legislation that would create new corporate forms for businesses whose primary purpose is to create both social and shareholder value. The Federal government, through the office of the president, can direct the SEC and the IRS to create a more favorable regulatory environment for capital markets, or preferred tax incentives for companies that meet certain standards for accountability, transparency, or social and environmental impact. So, one set of recommendations was around incentives for a new corporate form.
The other set of recommendations were really around driving social impact through the creation—but more importantly the use—of standards that assessed the social and environmental performance of businesses. There are a lot of corporations that want to institute sustainable supply chain initiatives—from Wal-Mart to Home Depot to Whole Foods, to their counterparts on the public side: the chief procurement officers at the GSA or at different state governments or municipalities across the country—that want to implement various sustainable procurement programs that give bid preferences to companies that exhibit a high degree of social and environmental impact.
The problem with that is: it's all well and good until everybody tries to figure out what constitutes a sustainable business. Or what constitutes a green business. Or what constitutes a community business. So all of those policy makers and all of those corporate purchasing departments are stuck with an inability to implement their programs unless there's an agreed upon set of standards that assess the social and environmental impact of that company on its employees, on its community, on the environment, etc.
And rather than having everybody creating their own set of standards (which can often lead to confusion and significant added costs) one of the roles of the Federal government is to help promote a common set of standards. This is no different than railway gauges or software operating platforms or standards for financial trading or financial derivatives. At every stage of an industry there is usually a stage where there is some setting of standards that greatly facilitates the flow of capital and further innovation in that industry, and the movement of social enterprise in a sustainable business is at that inflection point.
So, one role that the government can play—that the soon-to-be-announced White House Office of Social Innovation was interested in—was using the convening power of the White House to get both public and private sector potential users of these impact standards to get together so they could help co-create them. And then also for the government to basically create a marketplace for those standards by agreeing to use them for various parts of their procurement policies.
Those are the two areas that seem to have the most excitement from the folks in the Obama/Biden administration.
The other area they're interested in exploring is opportunities to aggregate capital to create an investment fund or an enterprise facility for social enterprise. And of course, next step number one on that memo was: "Well, geez, we have to define social enterprise, don't we?" Or else we can't figure out who will be eligible for those several billion dollars of capital.
So, again, whether it's an investment vehicle or it's a procurement officer, everything points back to the need for some objective, third-party set of credible, transparent standards, to enable everybody to accomplish their particular objectives, whatever they might be.