Wharton’s Katherine Klein talks with B Lab co-founder Bart Houlahan about the soaring interest in companies seeking ‘Certified B Corporation’ status and what that means for the social impact movement.
Bart Houlahan worried about how the coronavirus pandemic would affect B Lab, a nonprofit he co-founded to certify socially responsible companies that create value beyond shareholder portfolios.
Thousands of companies around the world have earned the coveted “Certified B Corporation” title since B Lab began in 2007, but during the COVID-19 pandemic, Houlahan and his partners expected the application pool would shrink as so many businesses struggled just to keep their doors open.
“We started running our scenarios for planning what could be a pretty horrific collapse of our community,” he said “We froze hires, we cut $3 million from our budget, we prepared for just a huge drop. And what was remarkable is it never did. For our movement, 2020 was our biggest year by orders of magnitude.”
Houlahan believes the pandemic accelerated the social impact movement, which had been going strong for years and picked up speed during the 2019 World Economic Forum in Davos and the Business Roundtable announcement. The ravaging virus, coupled with demands for racial and social justice, magnified the disparities across the world.
“If there was ever a year for a proof point that we needed a different type of economy, it was 2020,” he said. “What we heard over and over and over again last year was that people were not looking to try to get back to normal coming out of the pandemic. They wanted a new normal.”
Business as a Force for Good
Houlahan spoke to Katherine Klein, vice dean for the Wharton Social Impact Initiative, during an episode of the Dollars and Change podcast. (Find more episodes here.) B Lab recently celebrated its 15th anniversary, and its mission is more salient today than when it was founded by Houlahan, Jay Coen Gilbert, and Andrew Kassoy in 2006.
Houlahan said he is optimistic and encouraged by the remarkably steep growth in firms that are seeking B Lab’s guidance because they want to do better. The numbers tell the story: In the last 15 years, more than 150,000 companies have registered to use B Lab’s free impact assessment tool to measure, manage, and improve their performance, and 60,000 of those companies registered in the last 18 months.
In the last 15 years, the nonprofit has certified 4,000 firms as B Corps. But another 4,200 have applied for certification in the last 18 months.
“You have climate change, acceleration of wealth disparity, a global pandemic, and calls for racial justice, and the end result is an unbelievable surge in interest of people trying to use business as a force for good,” Houlahan said.
Getting certified isn’t easy, and that’s why the B Corp designation is so impactful. Companies have to meet the “highest standards of verified social and environmental performance, public transparency, and legal accountability to balance profit with purpose,” according to B Lab’s website. Those standards have to go deep beyond the surface and be embedded in the company’s infrastructure, visible to all stakeholders.
Such transformation doesn’t just attract like-minded consumers and investors, Houlahan told Klein, it also helps firms attract and retain top talent. “You’ve been telling your team for years that you indeed are a different type of business. You now have a third-party validation that you’ve met this incredibly high standard,” he said.
While certification sets a high bar for CEOs to meet, getting it doesn’t mean that companies cross the finish line. Houlahan emphasized that process is a means — not an end. The work to make the planet a better place is ongoing.
“We’re trying to build an economy that will work for everybody,” he said. “One that is inclusive, equitable, and regenerative.”
