B Corp Certification in the Spotlight

B Corp Certification in the Spotlight
Founder: Beatriz Acevedo is gaining B Corp certification for her company, SUMA Wealth. (Photo by David Sprague)

Beatriz Acevedo wanted to obtain the coveted B Corp certification for her wealth-building advisory business, Culver City-based SUMA Wealth. At the downtown office of Mayer Brown, attorney Stephanie Hurst wanted to help businesses in their quest to get that label, as part of the firm’s pro bono initiatives.

So it was to be – and not just for Hurst and Acevedo, but for Hurst’s team and nearly a dozen others. Through a combination of initiatives, a handful of Mayer Brown’s attorneys are connected with small-business owners like Acevedo who otherwise lack the time and resources to go through B Lab’s rigorous evaluation process.

“If you have to do it alone, that would be hard,” Acevedo said. “That’s why we hadn’t done it. We would have definitely pursued it, but I wasn’t rushing to it.”

B Corp certification, broadly, indicates a company’s commitment to certain sustainability, accountability and transparency practices. This involves bringing stakeholders on board, amending company bylaws and, frequently, converting the operation into a benefit corporation. Once attained, the company must obtain a recertification every three years or be decertified by B Lab.

So, gaining B Corp certification represents much more than simply checking a few boxes on a demographics or sourcing survey.

“The certification is a much different animal, in essence, because it’s a rigorous process to go through and it’s not one-and-done,” said Robert Bikel, director of the Socially, Environmentally and Ethically Responsible program at Pepperdine University’s Graziadio Business School. “It’s a commitment to recertify every three years. It’s not that you get this badge and get to coast on it. And the standards, in theory, get more rigorous over time.”

Building a conscious business

In forming SUMA Wealth, Acevedo sought to develop a digital platform to provide tools and guidance to help a Latino audience build and sustain wealth.

The market was strong, she explained, as Latinos were entering the workforce at record levels and had more opportunities to build wealth on a generational basis. The nature of the venture, Acevedo explained, made her more conscious of the advisers and institutions she partnered with, and that vigilance aligned well with B Corp certification.

“We want to make sure everything we do aligns with our goal of closing the wealth gap. That’s why we need to be really careful about which products we suggest,” she said. “For us, it made a lot of sense to be a B Corp, because we already were a mission-driven company and we’re super aligned in that it is possible to do good and do well at the same time. We didn’t want to just say it – we wanted to make sure that everybody from our investors to our board were aligned.”

Acevedo is converting SUMA Wealth into a benefits corporation and has submitted her B Corp application. Some of the modifications she has carried out were relatively simple – such as switching to less environmentally harmful cleaning supplies – while others, like adjusting pay scales to reduce salary disparity, were more intensive. There is also a fee based on the company’s annual revenue.

Committing to these practices creates a wide chasm between the startup, venture capital-backed world and a maturing business, Acevedo noted.

“It’s hard when you’re a startup. You pay yourself nothing and you’re careful about burn and cash being king. As much as you want to be generous, that’s not how a startup works,” she said. “In B Corp world, people need to make, at a minimum, what a family of four would make to live. That is something that we had to reassess and rethink.

“Things that we never really thought about, now they’re front and center,” Acevedo added.

Other L.A.-area B Corps include Santa Monica-based Beautycounter, Sherman Oaks-based ocean + main, Beverly Hills-based Butterfly Equity and downtown-based Erewhon.

A chance collaboration

Luckily for business owners like Acevedo, Pennsylvania-based B Lab was seeking participants for its Levels Program, an initiative to bring in businesses facing “systemic challenges to economic empowerment.” Simultaneously, Chicago-based Mayer Brown was looking for avenues to advance its own Project Equity, a program designed to provide pro bono legal support to small businesses helmed by minority women. Hurst had previously helped companies like Bay Area restaurant brand Amy’s Kitchen obtain the certification.

A nonprofit, B Lab seeks to create a network of sustainable-minded businesses and leaders who actively contribute to bettering their communities, customers and employees – as opposed to just shareholders or investors.

“It seemed to align perfectly with what we were doing with the firm and with what we’ve collaborating with B Lab on generally,” said Hurst, who is a partner based at the firm’s downtown location.

While B Lab keeps specifics close to the chest, a basic requirement is that out of 200 possible points, a company or organization seeking certification must score at least 80 on B Lab’s evaluation. Standards cover a variety of ESG – environmental, social and governance – topics, how employees are treated and compensated, where products and materials are sourced, and, overall, what impact the operation has on its community.

“It’s a holistic certification, so it covers everything,” Bikel said. “If you’re a manufacturing business it can get complicated, because of all of your suppliers. The environmental supply chain and labor questions on the impact assessment become much more challenging to meet the standards.”

Certification serves as a desirable challenge for some entrepreneurs, Hurst said, because of the standards it calls for. For mindful investors, it can also help identify where they might put their dollars, she added.

“Companies like this because it allows them to build their mission statement in their governing documents,” Hurst said.” If a shareholder wants to invest in that company, they know right away what the boundaries are and what the governing body is taking into account.

“If you’re an early-stage company,” she continued, “the owners of a company are able to build into their corporate governance these beliefs and values that they hold in a very material way. It helps companies protect their view of how the company should act.”

According to its website, B Lab has certified more than 8,400 businesses covering 162 industries in 96 countries. Those companies employ more than 770,000 workers.

Is it worth it?

Broadly, the value of B Corp certification seems to correlate with the mindset of the business owner.

“The benefits, if you’re just looking at this from a business instrumental perspective, there’s not a clear picture. You can’t draw a straight line of getting certification that leads to revenue growth,” Bikel explained. “There’s some data that B Corps were better positioned to weather the financial crisis, which suggests there’s a little more resiliency to B Corps, but that’s sort of an isolated example. I don’t know that we have the same data from the pandemic.”

And that’s probably fine, Bikel said, for B Lab, which touts the slogan “Leaders build communities, not just profits” on its website. Around 8,400 certified businesses is a tiny number of businesses when you consider the world’s supply of them, he added, although it still represents an impressive growth from just 1,200 certifications a decade ago.

It demonstrates a good “born or made?” question, Bikel added. Your typical C Corp exists ultimately to generate returns for its shareholders, and it’s not likely it would suddenly seek a more mindful approach to business.

“I think it’s a hard proposition for a company born of operating to generate a profit to suddenly pivot into being a B Corp,” Bikel said. “But there are a significant number of B Corps that were already mission-focused companies. Patagonia is a great example. They were already committed to environmental sustainability, social commitments within the company and within the companies they operated in, and radical transparency before B Corps was really a thing. It makes sense for them, a company that was already doing the work, to get the additional badging.”

Likewise, Acevedo said she was driven to seek the certification because it’s how she approached forming the business to begin with. If you’re not already someone who would immediately commit to that, she said, you shouldn’t pursue it.

That being said, she added, more entrepreneurs might start to come around to it once they consider who they’re going to be employing soon. She circled back to the younger generations entering the workforce.

“For the people who don’t care, but whose consumers are young and whose workforce is getting younger, you do need to think about what company you’re building and what values it has. You’re going to have a harder time recruiting the top talent when it comes to youth, and particularly in Los Angeles,” she said. “They’re not just about the profit. They’re a lot about the purpose. Saying ‘We’re a B Corp’ is a massive perk that our parents and grandparents wouldn’t have thought about.”

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