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Certified B Corporation

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The Secret is Out: Transparency is In

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Last fall, Kellogg’s acquired a protein bar startup called RXBAR for $600M dollars. The significance of that deal is twofold. First is the story behind the company: two childhood friends built the business out of their kitchen with $5,000 each and no outside funding. Second, their brand was built on transparency and candor: each bar neatly lists a handful of ingredients on the front packaging followed by their signature motto: “No B.S.”

The market took notice.

In an era where food labels list hard-to-pronounce ingredients like “tartrazine” and “disodium inosinate” and include vague statements like “may contain” (which we wrote a separate blog post about), consumers are unsurprisingly gravitating towards products like RXBAR.

But the trend isn’t limited to food. Increasingly, shoppers are looking to company values—including a company’s commitment to transparency—when making purchase decisions. More consumers are looking beyond price tag and factoring in product origin, reputation, and quality and ethical standards. The rise of fair trade, organic, and Certified B Corporations (“B Corps”) is a testament to shifting consumer preferences. Consumers are also looking at where companies donate politically: with a new app from startup Goods Unite Us, consumers can run political background checks on products to see what political party their purchase indirectly supports.

Corporate candor is a hot commodity right now. That much is clear.

A Label Insight study looking at consumer behavior around food and personal care products found that nearly 40% of consumers would switch from their preferred brand to one that offered more product transparency. A quarter of respondents indicated that transparency was the leading reason they remained loyal to brands.

We live in a digital age where consumers have access to unprecedented levels of information. In turn, they are using that information to scrutinize company decision-making and hold companies accountable for those decisions. The businesses that are quickest to adapt will likely outperform and outlive their peers.

Investors see the appeal.

Investors routinely evaluate the risk of any potential deal or transaction. Transparency helps mitigate these risks by identifying blind spots, which can in turn reduce reputational, compliance, and financial risk. Transparency also fosters trust: the foundation of any business relationship.

The metrics of business success do not always account for intangibles like transparency and trust—but they should. Facebook is learning that the hard way this month, as user numbers drop and #DeleteFacebook becomes a trending hashtag.

Trust is hard to earn, difficult to quantify, and easily lost. For these reasons, trust is arguably the most valuable commodity a company holds. The precursor to trust is transparency.

- Abi and the Allergy Amulet Team

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B the Change: The Future of Business

 

Occasionally, our blog content may depart from its typical focus on food allergies to discuss topics related to business and entrepreneurship. We are a start-up, after all. In this post, we examine the role of corporate social responsibility in today’s world. This piece also coincides with a guide I wrote for entrepreneurs on the same topic, which Yale and Patagonia jointly published today.

In a recent column in The Week, William Falk discusses the loss of civility in America. He starts with a story of his pregnant co-worker standing in a crowded NYC subway car, waiting for someone to offer her a seat (spoiler alert: no one did), and segues into what he sees as a “me-first” mentality overtaking common decency in America. I was reminded of a recent experience at an airport, where I witnessed two disabled men and a member of the military waiting until the platinum, gold, and first-class passengers boarded before they were invited on the plane. Capitalism at its finest.

Falk attributes this culture shift partly to our “brutally Darwinian” workplace culture, in which overtime is encouraged and vacation is a luxury few can afford. Falk submits that this workhorse mentality fuels an economic struggle of survival that leads to competition and hostility, both inside and outside the workplace. I think few would dispute the considerable amount of economically motivated resentment in our country right now.

So how did we get here? Why the Darwinian corporate culture? I think the problem started, in part, with one man; and the solution, I believe, lies partly in the guide I mentioned at the start of this piece.

Let me explain.

In 1970, Nobel Prize-winning economist Milton Friedman, a champion of free market economics, famously stated: “There is one and only one social responsibility of business[:] to increase its profits.” In other words, companies must value profits above all else and are not bound by a commitment to the communities and people they employ and serve. This ideology came to be known as the doctrine of shareholder primacy. But the problem with this theory is that profits often come at the expense of worker well-being, community health, and the environment.

Now, say your businesses decided to consider employee well-being on par with shareholder profits in corporate decision-making. What then?  

In 2006, the nonprofit organization B Lab launched a certification process aimed at supporting just those kinds of stakeholder-driven business decisions. The objective was to separate the truly “good” companies from those that merely had good marketing departments by implementing a standard vetting process. B certification created a system that measures social and environmental impact, and ensures reporting compliance through more stringent measures of accountability and corporate transparency. In 2010, states began implementing statutes under which companies could incorporate as Benefit Corporations: an alternative to a C-Corp or LLC that builds the same values of Certified B Corporations into the company’s charter and articles of incorporation. The same principles inform both certification and incorporation: to place stakeholder interests (shareholders, employees, community, and environment) on equal footing in corporate decision-making. The guide I mentioned offers a detailed roadmap for businesses interested in securing either B certification or incorporation status.  

If all of this B stuff is new to you, you’re not alone—though you’ve probably heard of Patagonia, Etsy, or Warby Parker, all of which are either a Certified B Corporation or a Benefit Corporation. To date, there are nearly 4,000 Benefit Corporations and 2,000 Certified B Corporations in existence, and these entities are just the tip of the iceberg. According to a recent report, “social impact has evolved from a pure PR play to an important part of corporate strategy to protect and create value.” JP Morgan estimates that the market for socially responsible investing stands somewhere between $400 billion and $1 trillion.

We live in an increasingly interconnected world, one in which we are (ironically) becoming more and more disconnected from the communities and people around us. We often don’t know the people who sew our clothes, the farmers who grow our produce, and the manufacturers who assemble our electronics. Globalization and interconnectedness have increased trade and communication between countries, but they have also fueled income inequality and transferred millions of jobs overseas. 

Our nation’s businesses and economy are only as healthy and as strong as the communities, environment, and employees they serve and on which they depend. Milton Friedman was wrong. The rise and popularity of Certified B Corporations and Benefit Corporations is largely a response to that realization. Now, more than ever, businesses must build social values into their bottom line. It’s not just good for society—it’s good for business.

-Abi, CEO & Co-Founder

 

Allergy Amulet is neither a Certified B Corporation nor a Benefit Corporation. Our company is currently pre-revenue and does not yet have a product on the market. Because of this, it is too early for certification and too costly to reincorporate. The company plans to pursue both designations at the appropriate time.

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