HerbalEGram: Volume 15, Issue 6, June 2018

By Karen Raterman

Consumer demand for transparency surrounding product ingredients, sourcing, processing, and manufacturing is growing. Recent studies by Nielsen and Label Insights indicate that consumers are now willing to pay more for products with ingredients that they perceive as cleaner and that they will be loyal to brands that provide transparency about their supply chain.¹ Now, the movement is progressing a step further, with growing numbers of Americans, especially younger ones, saying they want to feel good about their purchases, and that means consumers are spending more with companies with high ethical standards that support causes like fair trade, sustainability, social responsibility, and environmental stewardship.²

Companies across the consumer packaged goods spectrum are responding by paying more attention to their ingredients, fixing problems in their supply chain, taking on social and environmental causes, and being more transparent about it all.²

Cause-related initiatives are prevalent in the natural products industry, with many companies in the industry being among the first to establish employee-rights initiatives and to champion social and environmental issues. But like companies in other industries, natural products brands face the challenge of communicating these efforts to their customers in a meaningful way. While there are now many third-party certifications that help authenticate such programs, B Corporation (B Corp) certification is considered one of the higher standards because the certification requires biannual validation and verification of programs in all aspects of business operations, from employee rights and community support to environmental and legal performance.

B Corp certification has a relatively high profile, and several well-known companies such as Patagonia and Ben & Jerry’s have the designation. According to B Corp statistics, more than 100 natural products companies in many different sectors also have the certification, including Dr. Bronner’s, Traditional Medicinals, KeHE Distributors, Seventh Generation, New Chapter, Garden of Life, and Pukka. Others are jumping on board, such as MegaFood brand supplements, which received the certification in March 2018, and Bioforce USA, which represents numerous European natural products companies and is currently obtaining its own certification (one Bioforce brand, the Italian-based personal care company Herbatint, is already B Corp certified).

What Is a B Corp?

By definition, B Corporations are for-profit companies that are certified by the non-profit organization B Lab for their standards of social and environmental performance, accountability, and transparency.³ Since its founding in 2006, the organization says it has certified more than 2,500 B Corps from 50 countries and in more than 130 different industries.^3,4 B Lab founders, entrepreneurs Jay Coen Gilbert and Bart Houlahan, and investor Andrew Kassoy, envisioned the organization as a way to redefine success in business and to help companies do well by doing good.⁵

The certification process involves a comprehensive “B Impact Assessment,” which measures the overall impact of a company on its stakeholders. The specifics of each assessment vary depending on the company’s size, sector, and primary location of operation.⁶ The candidate company must then follow up with a review of the assessment and provide supporting documentation.

Companies that achieve B Corp status need to score at least 80 points out of a possible 200 in the B Impact Assessment to receive the designation. Companies receive a score for their practices in five areas: environmental initiatives (e.g., use of renewable energy, emissions, water, and waste); worker treatment (e.g., compensation, benefits, and work environment); customer relations (e.g., products and services and serving those in need); community practices (e.g., job creation, diversity, and engagement); and governance (e.g., accountability and transparency practices).⁸

Companies also pay a membership fee based on their annual revenues that helps support the activities of B Lab, such as improving the assessment tool and providing third-party auditing services. Once certified, B Corporations are able to join the B Corp community, which includes opportunities to collaborate with other B Corps and play a role in policy and legislation in countries where B Corps are located.⁷

B Corp Status — A Natural

“B Corporations are becoming very represented in the industry and it makes sense,” said Sara Newmark, vice president of social impact for MegaFood (email, May 21, 2018). “As a community, we are known for pushing the envelope and being thought leaders on ways of doing things. Organic came out of our industry as did the Non-GMO Project. So you would expect natural products businesses to take the lead on B Corp [certification], and they have.”

Robert Craven, CEO of MegaFood, expressed similar thoughts. “Natural products industry companies were founded on passionate leaders with an inner calling to change the world,” he said (email May 30, 2018). “Becoming a B Corp just standardizes what it means to be best for the world. Natural products companies are also continuously improving the assessment to keep pushing all B Corps to become better — we will certainly be one of the pioneers for improvements.”

Although B Corp certification resonates with many natural product companies, Pierce Sioussat of Bioforce USA said he believes that many companies in the industry are still behind the curve, especially in areas like employee compensation, gender issues, and supply chain management.

The sheer number of certifications a company can consider may be another reason that some industry companies are not pursuing B Corp status. “I think one of the challenges for this industry is that there are so many certifications with really good reasoning behind them, like certified organic and non-GMO. These certifications are relevant and important,” Sioussat said (oral communication, June 4, 2018). But, he added, “I think in this era where people have begun to distrust companies, B Corp addresses broader issues and shows that a company is one you can feel good about doing business with.”

According to B Corp statistics, this latter concept is a valid notion. In a comparison to other sustainable businesses on the B Corp website, certified B Corporations are 68% more likely to donate at least a tenth of their profits to charity; 55% are more likely to cover at least some health insurance costs for employees; 47% more likely to use on-site renewable energy; and 45% are more likely to give bonuses to non-executive members.⁹

Ari Goldsmith, executive director of marketing for KeHE Distributors LLC, a wholesale distributor of natural products that received its initial B Corp certification in February 2016, said she believes that B Corp certification is trending because of the changing consumer and retail environments.

“Consumers are looking for advanced transparency and want to know a company’s story, not just the product but the brand behind it and that includes [companies like] KeHE,” Goldsmith said (oral communication, June 5, 2018). “In the past, sourcing and supply chain issues were quiet and underground. Now, customers want to understand how a product is made and who touched it.”

Newmark is seeing similar trends. “We just completed a consumer brand study where transparency and advocacy were the most important reasons to believe in our brand. That is exactly on trend from what we hear in other sectors as well,” she explained. “Consumers want us to move beyond just quality and efficacy; they expect us to take action and make a difference.”

It Takes a Mission

For most companies, it starts with a mission supported at the top of the organization and filters down to business operations, processes, and people. MegaFood, for example, has a mission to nourish a world in nutritional crisis and has a vision of a world without nutritional poverty. The company believes it must take bold action to ensure that this vision becomes a reality, Newmark said. “We believe that it takes more than a product to cure this crisis. Our social impact aspiration is to transform ‘agri-culture’ by empowering communities, revolutionizing food systems, and committing to radical transparency,” she explained. “We have to tackle all aspects of human and planetary health to see our vision become reality.”

“It starts at the top,” she continued. “There needs to be leadership that believes a successful business means more than just healthy financial returns. And that does start with a clear mission, that North Star that everything else lines up to. At MegaFood, we all know that all of the actions should lead up toward curing nutritional poverty in our lifetime. Knowing that, it’s not hard for us to make sure we make the right decisions.”

This has led MegaFood to create a supportive employee and community environment, including programs that give employees 20 hours of work time a year to volunteer at nonprofit organizations, 12 weeks of paid family leave, as well as a company commitment to pay workers 20% above the living wage in New Hampshire, where the company is based.

Bioforce USA was inspired to pursue its B Corp certification by the efforts it saw from Herbatint, which is a founding B Corp company in Italy. “We saw that what they were doing was consistent with what we do as a company, so we wanted to take up the mantle and move forward and promote value,” said Sioussat. “Like a lot of other B Corp companies, we were already doing a lot of these things, so we thought why not document and formalize it. It was kind of a no-brainer for us,” he said.

As a distributor, Bioforce USA has to consider its own “supply chain”: the branded products it chooses to represent. Sioussat said the company has specific criteria in choosing the brands it works with. “We want heritage brands that have been in the industry for a long period and are in alignment with concepts of sustainable agriculture and environmental responsibility,” he noted. “Each has a different way they get certified and express their responsibility as a company.”

Part of Bioforce’s B Impact Assessment was to document these criteria and show that their brands meet them. Key Bioforce brands, such as Herbatint and AnneMarie Börlind, have been recognized with a B Corp certification in their own right or the comparable Certified Sustainable Economic (CSE) designation.^10,11*

Another key goal for Bioforce USA is to support its employees and the local community. “Because we are based in a small rural community, I want our employees to be the fabric of that community,” Sioussat said.

Ten percent of Bioforce’s profits go to charitable social services and cultural institutions, according to Sioussat. The company also has a very specific compensation plan in which the minimum wage is the published living wage in its home state of New York, which is almost twice as much as the federal minimum wage. “We also have a policy to address income equality in which the highest paid person in the company cannot make more than 10 times that of the lowest paid person,” he said.

The Value of the Process

Those who have been through the B Corp certification process say it is both arduous and enlightening.

“The process took a full year to complete,” said Goldsmith of KeHE. “If our leadership had wanted a better dollar value, it might have stalled out, but our mission is to make a better company for all and that pushed it to the finish line,” she said. “Every team had to be part of the process and to align with the business.”

Newmark agreed. “It is not easy being a B! And it shouldn’t be,” she said. “But when you are done you have an accurate and thorough look at your business practices. You know where you excel, and where there is room for improvement.”

Craven added: “The process was incredibly detailed for multiple departments, but [it was] worth it to really get to know where we measure up against some of the best companies out there. For us, the biggest challenge was obtaining the legal status change to B Corporation, a step that we underestimated in the approval process of our stakeholders.”

For KeHE, these challenges and miscalculations were an important learning experience that Goldsmith characterizes as defining moments for the company. “We did have to go back and change things,” she said. “I can’t say all the things we changed, but it changed how we operate. Now it’s not just operations for operations sake. It was definitely a rigorous process, but we learned more and more as we moved forward.”

After completing the initial steps of the process, Sioussat said he hired a dedicated employee to take the company through the documentation process. “If you are a small company, it’s a good idea to get someone to help do this. We are not big enough for a chief corporate responsibility officer, but we are all responsible to walk the walk.” However it is structured, he added, “it is important to have someone who can focus on these tasks and knows the nuts and bolts of how your business operates.”

“It takes one passionate leader and one passionate executor to get it done, with the help of the whole village of course,” said Craven. “Find the right people in your organization who will cascade the passion and inspire others to come along with them.”

Why B Corp Certification Is Worth It

Companies that are B Corp certified believe the certification has multiple benefits, from helping to recruit top employees to promoting customer loyalty. While the supplement category is a relatively new category for B Corporations, Newmark believes that having the certification helps distinguish MegaFood’s products in customers’ eyes.

“The supplement aisle can be overwhelming with choice,” Newmark said. “Our bottles are small, so the ability to communicate what we stand for in a short amount of time and space is important. That is what the ‘B’ does. It gives people trust that not only are we saying, but we are doing, good, and that someone else has come in and evaluated us against a standard. It helps with trust and transparency.”

The certification also assists a company in prioritizing activities and showing progress, Sioussat noted. Companies have to operate within the confines of their financial capabilities and the certification process can help a company focus on its priorities. “You don’t have to be all things. But you can look at the assessment and where you are scoring well, and where you are not and then move the needle,” he said.

B Corp certification also helps companies prepare for the cultural shift that is already in progress, Goldsmith said. That more than half of US consumers now say they will pay more for products they know well speaks volumes, she said. “Millennials don’t have much money, but they are choosing to use it support companies that they trust.” However, the story is not just about millennials, Goldsmith added; it is just more evident because they now have the most buying power.

Craven agrees. “People want to work for companies that are mission-driven and always have ALL of their stakeholders in mind when making decisions,” he said. “Quite frankly, they are demanding it, and it’s changing the course of how the world is doing business.”

* The CSE is a standard for certification of sustainable business management developed by the German-based Society for Applied Economic Ethics and the working group Living Sustainability. The CSE standard requires an independent sustainability performance audit and an assessment of the ecological impact and social economy of a company.^12,13

References

1. 2016 Transparency ROI Study. Label Insights. Available at: www.labelinsight.com/transparency-roi-study. Accessed May 28, 2018.
2. It’s Clear Transparency is Winning in the U.S. Retail Market. The Nielsen Company LLC. Available at: www.nielsen.com/us/en/insights/reports/2017/transparency-is-winning-the-us-retail-market.html. Accessed May 28, 2018.
3. What are B Corps? B Corporation website. Available at: www.bcorporation.net/what-are-b-corps. Accessed June 4, 2018.
4. B Corporation History. B Corporation website. Available at: www.bcorporation.net/what-are-b-corps/the-non-profit-behind-b-corps/our-history. Accessed June 4, 2018.
5. About B Lab. B Corp website. Available at: www.bcorporation.net/what-are-b-corps/about-b-lab. Accessed June 7, 2018.
6. How to become a B Corp. Performance Requirements. BCorp website. Available at: www.bcorporation.net/performance-requirements. Accessed June 4, 2018.
7. Storper J. What’s the difference between a B Corp and a Benefit Corp? Conscious Company Media. Available at: https://consciouscompanymedia.com/sustainable-business/whats-the-difference-between-a-b-corp-and-a-benefit-corporation/. Accessed June 7, 2018.
8. B Impact Report for Dr. Bronner’s. B Corp website. Available at: www.bcorporation.net/community/dr-bronners/impact-report/2018-02-09-000000. Accessed June 6, 2018.
9. B Corp Community. B Corp website. Available at: www.bcorporation.net/b-corp-community. Accessed June 7, 2018.
10. Herbatint website. Available at: https://usa.herbatint.com/en. Accessed June 7, 2018.
11. AnneMarie Börlind website. Available at: www.boerlind.com/ab/us/company/sustainability/. Accessed June 7, 2018.
12. CSE Certified Sustainable Economics; Quality Standard for Certification of Sustainable Business Management. Society for Applied Economics and Living Sustainability website. Available at: https://gfaw.eu/wp-content/uploads/2017/10/en-5.0-Certified-Sustainable-Economics-Standard-1.pdf. Accessed June 11, 2018.
13. CSE: The Credible Way into Sustainability. Society for Applied Economics and Living Sustainability website. Available at: https://gfaw.eu/en/cse-information-for-enterprises/. Accessed June 11, 2018.
14. State by State Status of Legislation. Benefit Corporation website. Available at: http://benefitcorp.net/policymakers/state-by-state-status. Accessed June 12, 2018.
15. Field S. The difference between Benefit Corps and Certified B Corps (and deciding what’s right for your business). US Small Business Administration website. Available at: www.sba.gov/blogs/difference-between-benefit-corps-and-certified-b-corps-and-deciding-whats-right-your-business. Accessed June 11, 2018.
16. Benefit Corporations and Certified B Corps. Benefit Corporation website. Available at: http://benefitcorp.net/businesses/benefit-corporations-and-certified-b-corps. Accessed June 11, 2018.