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A sustainable alternative to the financial meltdown

Although the global financial problems are causing trouble for investors now, they could lead to something better – for investors and the environment.

The point for investors is still growth. "We want to invest in things that really scale up," says Wes Selke, an investment manager at Good Capital, a firm with a stake in Adina for Life, a juice company with a fair-trade bent. One day, Selke hopes, Adina juices will be in every Wal-Mart.

If that ruffles some socially responsible feathers, so be it, says Álvaro Rodríguez Arregui. He runs Ignia, a venture fund in Mexico City that makes microloans. He and other mission-driven investors ­believe the bigger a business grows, the more impact it can have on social problems. But growth requires capital, and to get it from the marketplace necessitates a competitive rate of return, measured in dollars, not the fuzzier metrics of social capital. A perfect world would contain a more comprehensive measurement, but "we can’t wait for that," says Rodríguez Arregui. "Our mission is fighting poverty. Should we say, ‘I can’t give you a loan today because the capital markets don’t measure us correctly. Let us change the world, and then we’ll give you a loan?’ We think that’s immoral."

As of now, corporate law is little help. Owners and partners in an organization are legally required to act in the best interests of shareholders, which usually means making them wealthier. And while some courts have ruled that corporate directors can consider the interests of employees, customers and communities to make day-to-day business decisions, when it comes to a change of control, selling the company, there’s a single directive: Sell to the highest bidder.

So Griswold is embracing a new, as yet untested, legal theory: He’s joined the ranks of the 'B Corps,' one of a growing number of 'beneficial corporations' that write their social and environmental commitments into their charters. The idea, developed by Portland-based money manager Leslie Christian and promoted by Coen Gilbert and B Lab, is that by including a social mission in the company’s bylaws, directors have a legal responsibility to consider more than money if they want to sell the company. And investors understand that the commitment to social and environmental factors isn’t negotiable.

Coen Gilbert and his partners developed the B Lab model after their experience selling their own athletic shoe company, called And 1. Under its founders’ control, And 1 enforced a code of conduct in its shoe factories and gave millions to support youth and educational organizations in Philadelphia. But the day after they sold the company, "those things were gutted," Coen Gilbert says. It prompted them to wonder what they might have done differently. Their research led them to create B Corporations, a network of companies that volunteer to meet social and environmental performance standards, and legally expand their responsibilities.

The result is a first stab at a unified set of standards for socially responsible companies, and a serious branding effort. As 'sustainability' grows more popular, it becomes hard to distinguish a mission from a marketing push. Becoming a B Corp. is, essentially, a certification process. What the LEED certification is for eco-friendly architecture and the Fair Trade mark is for chocolate, coffee and textiles, B Corp. hopes to be for a range of enterprises. In just two years, 134 companies have become B Corps, and while food and clothing companies would seem the most obvious fit, law firms, investment managers, advertising agencies and restaurants have embraced the label, too.

The ultimate challenge to the B Corp. model is yet to come: When an owner decides to sell, will the investors be willing to consider more than the price? And if they don’t, and there’s a lawsuit, how will the courts rule? Meanwhile, B Corps are finding other ways to grow, and Coen Gilbert has his own novel idea about attracting investors: create a B Index, a fund to funnel money to certified companies.

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