Business with benefits
Local Companies Promote Their Values as Well as Their Value
The seasoned shellfish farmers at Hog Island Oyster Company in Marshall have long maintained that doing good is not only the right thing to do, it’s also good for business.
They practice the three Ps: People. Planet. Profits. That laser-like focus has worked out pretty well for them. Hog Island co-founders John Finger and Terry Sawyer have created a workplace culture that reflects their progressive values and environmental stewardship. The two farmers, with marine biology backgrounds and 60 years of shucking between them, turned a small seafood startup into a successful, sustainable $20 million enterprise. Now, the oystermen, both in their 60s, are immersed in succession planning and long-term strategizing to ensure the continued prosperity of the company.
In May 2016, Hog Island formalized its workplace philosophy into its corporate structure. In doing so, the company added another conscientious commerce notch to its belt. It became a California Benefit Corporation. Unlike traditional companies, benefit corporations are required as part of their mission to consider the impact of their decisions on all of the stakeholders connected to their business, not just investors. Such stakeholders include employees, supply chain partners, the local community and the environment. This expanded legal obligation also comes with important legal protections. That’s key because in conventional companies, shareholders could sue for breach of fiduciary duty if owners pursued more than just profit as their business objective.
Before converting the company to a benefit corporation, Hog Island first “measured what matters” through a self-assessment tool provided by the nonprofit B Lab, headquartered in Berwyn, Pennsylvania. Hog Island scored 87 points out of 200, according to its B Impact Report. Companies must reach a minimum of 80 to qualify for consideration for B Lab’s B Corporation (B Corp for short) certification. B Corps are a relatively new class of for-profit companies, which are required to meet a rigorous set of standards and practices on the social, environmental, accountability, transparency and governance fronts.
“This isn’t some industry-funded seal of approval,” says Finger. “Companies work hard for that B Corp logo.” Hog Island earned its B Corp certification in December 2015. B Corp businesses are reviewed every two years and must show signs of improvement to keep their certification. In addition, in states like California where it’s legally possible to do so, B Corp–branded companies must also commit to a structural switch, by becoming a benefit corporation, within two years of earning their B Corp certification. Hog Island decided not to wait.
MAKING MONEY AND MAKING A DIFFERENCE
Further proof that B Corp certification isn’t a pushover process for companies keen to stand out in a crowded marketplace? Of the half dozen or so food and beverage businesses in Marin, Napa, Sonoma and points farther north that have made the grade, five have earned in the 80s range. Turns out, it’s tough to land a B grade. Still, no environmentally and socially responsible label worth boasting about comes without real effort, action and documentation. In that way, think of the B Corp certification as similar to the USDA Organic certification for milk, Fair Trade certification for coffee or LEED certification for green buildings.
Local corporations in the B Corp club include Equator Coffees & Teas based in San Rafael; Petaluma’s McEvoy Ranch, makers of olive oil, wine and body care products; herbal tea maker Traditional Medicinals in Sebastopol; Guayaki Brand Yerba Mate also in Sebastopol; beer producer North Coast Brewing Company in Fort Bragg; Thanksgiving Coffee, also in Fort Bragg; and organic winemaker Fetzer Vineyards based in Hopland. These businesses maintain that the benefits of this independent, third-party review are worth the extra work of documenting their do-gooder credentials.
“For the companies, it’s confirmation of where they’re doing well and where there’s room for improvement, and there’s a set of metrics to measure that,” says Samantha Dorsey, general manager at McEvoy Ranch, which earned B Corp certification in 2014. “Going through this process helped us identify gaps in items like our employee handbook, our local community engagement efforts and how we communicate our environmental programs.”
Dorsey adds: “And for customers, there’s a level of confidence in the products they’re purchasing and a trust that these companies are doing the right thing by their employees, the community and the planet.”
This is a global movement. More than 1,900 companies worldwide wave their B Corp flag proudly. B Corps can be found in more than 130 industries and 50 countries. More than half of these businesses are based in the United States. Well-known U.S. B Corp brands include ice cream maker Ben & Jerry’s; baby food maker Plum Organics; and outdoor clothing company Patagonia (the Golden State’s first company to sign up for B Corp certification and one of the first to become a California Benefit Corporation in 2012). This means Patagonia Provisions, Patagonia’s sustainable food venture based in Sausalito, can also sport the B Corp logo. Other popular companies in the B Corp community: online glasses retailer Warby Parker, the hipster specs brand of choice; artsy-craftsy e-commerce site Etsy; web-based crowdfunding site Kickstarter; eco-conscious cleaning product manufacturer Method; earth-friendly household goods maker Seventh Generation; and San Rafael’s EO Products, crafter of personal body products featuring essential oils and botanicals.
Not all these companies started as or are still small-scale locavore endeavors: The Campbell Soup Company acquired Plum Organics in 2013; and Unilever bought Ben & Jerry’s in 2000. While these international conglomerates have (yet) to become B Corps, the subsidiaries have maintained their B Corp bona fides.
GOING THE WHOLE HOG
In shellfish circles, Hog Island Oyster Co. has long been an industry standout. One of the first Food Alliance Certified Sustainable Shellfish producers, Hog Island has earned a reputation as a leader in ocean acidification research, in partnership with UC Davis’ Bodega Bay Marine Labs. Ocean acidification, a caustic cousin to climate change, has wreaked havoc on shellfish hatcheries and farms. Finger and Sawyer are also known for their education and public policy outreach on shellfish-related issues.
That’s not all. Even though the business has grown, the farm, especially, maintains a small-business, family-like feel. Both Finger’s and Sawyer’s wives are actively involved in the business and their sons have prominent roles in the company, as well; there’s a husband-and-wife pair on staff; several long-term employees have clocked 20 years with the company; some of their children work there now, too. Hog Island’s 200 employees receive competitive pay and health insurance, along with wellness plans and vacation and retirement packages.
Doing the right thing has been good to Hog Island. In 1983, with a $500 loan from family and friends, the founders bought a boat and planted oyster seed on a five-acre lease in Tomales Bay. Their Pacific oysters on the half shell were an instant hit: Restaurants such as Chez Panisse in Berkeley and Zuni Café and Hayes Street Grill in San Francisco were early fans. Hog Island’s signature oyster, dubbed the Sweetwater, its known for its sweet oyster liquor, smoky finish and deep-cupped fluted shell.
Today, the oyster company can barely keep up with demand at its three retail locations: at the farm in Marshall; in downtown Napa at the Oxbow Public Market; and at its recently expanded restaurant in San Francisco’s Ferry Building Marketplace. Currently the company leases 160 acres in Tomales Bay and sells over five million oysters, Manila clams and mussels a year. In 2014, as part of their commitment to both sustainable farming practices and a sustainable business model, Hog Island began implementing plans to create the first California-based oyster seed hatchery and nursery in Humboldt Bay.
For Hog Island, going B Corp was a no-brainer. Finger thinks it will help the company in the future, too. “I see a long-term benefit in hiring to being a B Corp,” he says. “This generation coming up, the Millennials, really care about being part of something meaningful, including a workplace that does good.”
In September, Finger hosted a day at the farm for other B Corp members from around the globe. “It made me realize how we’re part of this larger movement that’s gaining momentum and that we have stories and wisdom to share with each other,” says Finger, who found a kindred spirit in Kim Jordan, the former owner of New Belgium Brewing Co., who sold her business to her employees. “Being part of something that’s bigger than your company is an important part of what being a B Corp is all about.” To that end: Hog Island has long banked with San Francisco–based New Resource Bank, itself a B Corp financial institution that only invests in other B Corps.
Finger, an avid basketball player, is familiar with the back story of two of the co-founders of B Lab. Jay Coen Gilbert and Bart Houlahan ran a socially responsible company called AND1, a $250 million basketball footwear and apparel business. When the company was sold in 2005, preexisting commitments to employees, overseas workers and the local community were stripped from the brand within a matter of months, says Finger, who sees it as both a cautionary tale and an example of how talented entrepreneurs, faced with a bad blow in business, went on to create something for the greater good.
“We don’t want to get tripped up like that as we look ahead and make transitions,” says Finger, who hopes that one day there might even be a tax benefit for B Corp companies.
Hog Island is exploring ways it can improve its B Corp rating: The company is looking at adding benefits for employees, upgrading its fleet of cars to more environmentally friendly choices, expanding its employee-ownership program, adding solar panels at the farm and exploring ways to use water and energy more efficiently across the company. As a consumer, Finger understands the benefits of a B Corp tag. “I pay attention to how a company produces its goods, as well as the end product,” he says. “I shop that way: How does this business impact the world? In addition to caring about where your food comes from, consumers care about how companies conduct business.”
That’s one of the upsides to the B Corp process, says Ryan Honeyman, a sustainability consultant with the impact consulting firm Lift Economy and author of The B Corp Handbook, who has worked with both Hog Island and McEvoy Ranch on their B Corp certification process. “This isn’t like going through a tax audit, which feels very compliance oriented,” he says. “A B Corp assessment helps you think about your business in new ways. It helps you identify blind spots and implement changes that can have significant societal and/or environmental benefits.”
BALANCING PROFIT AND PURPOSE
Curious about the B Corp process? Here’s how it works: Companies first fill out an online assessment. The assessment looks at everything from wages of the lowest-paid workers to whether the business has a company-wide recycling program. There are five categories that each generate a number; when added together, this becomes a company’s combined assessment score. After this assessment, if a business scores 80 or more it can elect to continue the process of a company-wide review by a B Lab staffer. The assessment tool to determine eligibility for review is free and B Corp business leaders recommend that companies at least take this first step to gain a snapshot of how their company stacks up on the social and environmental responsibility front.
Certification has its price: B Lab levies yearly fees on a sliding scale. Companies with annual revenues of less than $1 million pay $500; a company making $100 million forks out $25,000; a $1 billion company coughs up $50,000.
Of course, socially responsible businesses have been around for decades. But the concept of B Corps has really taken off in recent years with the passage of laws in several states—including startup-friendly California and New York—which allow mission-based companies with altruistic underpinnings to reincorporate as benefit corporations and protect themselves from shareholders who might not prioritize values such as employee wellness or eco-friendly composting. The 2008 financial meltdown, the 2011 Occupy movement, bank bailouts and Fortune 500 companies that pay no federal income taxes, these phenomena have all helped fuel support for the mainstreaming of socially conscious enterprises which care about more than the bottom line.
Conventional companies are viewed by many skeptical consumers as being largely responsible for crippling the economy, trashing the environment, gutting communities, exploiting workers and preying on the poor. For such consumers who are fed up and want to vote with their hard-earned cash, supporting a B Corp is an easy sell, and a welcome alternative to the dominant ideology in corporate America: profits and ever-higher investor and shareholder returns at any cost.
For entrepreneurs who traditionally might have gone the nonprofit route, B Corps represent a way to do good on a larger scale, with greater impact, yet retain all the resources that a for-profit entity has at its disposal.
“The rise of B corps is a reminder that the idea that corporations should be only lean, mean, profit-making machines isn’t dictated by the inherent nature of capitalism, let alone by human nature,” wrote James Surowiecki in a 2014 New Yorker story. “As individuals, we try to make our work not just profitable, but also meaningful. It may be time for more companies to do the same.”
IN GOOD COMPANY
Hog Island is just the latest local business joining the B Corp bandwagon. Equator Coffees & Teas became a certified B Corporation in 2011, the first roaster in the San Francisco Bay Area to do so. The company, which has cafés in Marin and San Francisco, has long used the power of business to address societal and environmental challenges. The women-owned, green-certified business works directly with farmers in coffee-growing regions and was one of the first roasters in the U.S. to back the Fair Trade Certified label to ensure overseas farmers a better standard of living. In addition, at the company’s own coffee farm in Panama, Equator built eco-friendly worker housing—complete with clean-burning cook stoves. The company also looks for ways to lessen the impact of most Americans’ breakfast beverage of choice: Equator installed a Loring Smart Roaster, which has relatively lower emissions and energy use, at its 5,500-square-foot main production facility. It implemented a massive composting program for all those coffee grounds, too.
Going through the B Lab assessment was a valuable process that pushed the company to articulate policies around issues it previously hadn’t, such as employee volunteerism, says Maureen McHugh, Equator’s vice-president for operations. “We now have metrics to establish performance improvement benchmarks in diverse areas of our business like energy use and minority hiring. Our employees are proud and excited about the certification. It offers us a point from which to start and push through to do more.”
For 20 years, Equator co-founders Helen Russell and Brooke McDonnell, partners in work and life, have strived to build a socially conscious boutique artisan coffee roaster brand that’s also a successful business. In March, Equator received the 2016 California Small Business of the Year Award from the U.S. Small Business Administration, the first LGBT-owned business to do so. Founded in a Marin County garage in 1995, the company now employs more than 90, roasts 20,000 pounds a week and has more than 350 wholesale customers, including chefs Thomas Keller and Traci Des Jardin. The company scored an 84 on the B Corp assessment and became a California Benefit Corporation in 2015.
“There’s a transparency in communicating our values and mission with this B Corp label,” says McHugh. “It’s the next big movement in certification and builds on what the Fair Trade label did for coffee 15 years ago. It’s an opportunity to formalize our good intentions.”
That’s particularly important for those who sell a cup of Joe. “The coffee business, like any industry where production is conducted offshore, is characterized by a murky supply chain, often leaving both the farmers and the environment in the lurch,” says McHugh. “Transparency about living and working conditions and farming practices is key for any socially conscious coffee roaster.”
Other beverage brands with a mission also see the merit of becoming a B Corp. “The best part about being a certified B Corporation is that it legitimizes what North Coast Brewing Co. has been doing since its inception: being a good neighbor, a patron of the arts, a responsible steward of the environment and a great place to work at making the best beer we possibly can,” says Joe Seta, North Coast Brewing’s visitor service marketing manager. “All while making the world a better place, one pint at a time.”
The beer brand, which supports jazz education and marine mammal research and rescue, is now working towards Zero Waste and Non-GMO certification and has partnered with a local grower on a carbon-farming project using brewery waste, as a result of going through the B Corp assessment process. The company became a California Benefit Corporation in April.
“B Corp certification isn’t an end, it’s a path,” says Seta. “Being able to use business as a force for good means never wavering in that commitment and aspiring to progress.”
Winemakers see the value in B Corp status, too. Fetzer Vineyards, which farms 960 acres of organic grapes, supports its Hopland-headquartered operation on 100% renewable energy, and lays claim to being the first certified zero waste winery in the country, earning that honor from the U.S. Zero Waste Business Council in 2014 by diverting 99.1% of its waste from landfill or incineration.
Such practices are good for the bottom line too: In 2015, the company realized more than $900,000 in savings and revenue from its waste-diversion practices. Fetzer earned its B Corp certification in 2015, one of just a handful of U.S. wineries in the B Corp fold. The company scored 36 for environmental practices (the median is 9) for a total of 80 points, the minimum required for certification on B Lab’s scale.
“Because we’ve had decades of experience leading sustainability in the wine industry, we were honestly a bit surprised when we completed the assessment and found out that we barely passed,” says Josh Prigge, director of regenerative development for Fetzer. But the company also saw it as a confirmation of the high standards set by B Lab and an opportunity to continue to improve, particularly on the supply chain side.
The benefits of becoming a B Corp extend beyond better business practices and consumer education, says Prigge. “Certification opens your business up to an entire community of like-minded businesses and leaders, which is a very valuable resource.” Fetzer has set an internal goal to increase its B impact score by more than 20% by 2020. The company will need to identify several new initiatives over the next few years, says Prigge, in order to achieve that.
Going all-organic took almost a decade for the winemaker, a conversion process that has paid off financially. Fetzer’s Bonterra brand is a top-selling organic wine in the U.S. The company, acquired by Chile’s leading wine producer in 2011 for $238 million, still holds firm to founder Barney Fetzer’s mantra from 1968: What’s good for the earth is good for the grape.
Fetzer captures rainwater for irrigation, participates in research on insect biodiversity in conservation habitats, and integrated local soil as an insulation medium in the company’s administrative building, among other notable environmental efforts. It also works to enhance the lives of its employees, more than 300 and counting. Employee benefits Fetzer covers include English classes for workers—staff can attend classes during regular working hours with regular pay. Outreach efforts include partnering with local programs on building and maintaining community gardens in the area. The company is on schedule to incorporate as a California Benefit Corporation by May 2017.
Up next for Fetzer? The winemaker wants to be net positive by 2030. In essence that means it will replenish more water, energy and other resources than it uses to make and sell wine.
For consumers trying to make sense of all the labels companies use to promote their products, the B Corp logo stands out from the pack, says Prigge. “The driving idea behind B Corps is that business can be a tool for positive change in the world, and by purchasing products from B Corps, consumers can become a part of this powerful movement,” he says.
“B Corp certification distinguishes between good marketing and genuinely good business.”