Balancing purpose and profit through good governance

B Corporation movement has implications for boards of emerging Australian companies.

Onya Life managing director Hayley Clarke was determined to achieve B Corp Certification for her venture. “There’s so much ‘greenwashing’ these days from companies pretending to be environmentally friendly,” she says. “We wanted independent certification to stand out.”

Onya, a maker of reusable shopping bags, coffee cups and other alternatives for single-use plastics, embarked on B Corp Certification last year and achieved it in early 2018. “The certification process was incredibly rigorous, as it should be,” says Clarke. “It forced us to think about every aspect of our business.”

The Perth-based company is part of a new breed of Australian and overseas companies seeking B Corp Certification – a process that has implications for boards around corporate social responsibility and the delineation between commercial and social enterprises.

The B Corp movement began in 2006 in the United States through B Lab, a not-for-profit enterprise that certifies commercial organisations that meet high standards of verified social and environmental performance, public transparency and legal accountability.

B Corporation describes a B Corp Certified company as a new kind of business that balances purpose and profit, using business as a force for good.

B Corp companies are distinct from social enterprises, which intentionally tackle social problems. B Corps typically have a strong commercial imperative and social mission. They see no trade-off between these goals: high standards of corporate social responsibility are good for corporate profits, shareholders and the community.

B Corporation had certified 2,959 companies worldwide at August 2018, across 60 countries and 150 industries. The long-term goal is creating a connected global community of companies, business leaders and boards that help redefine the notion of business success.

The B Corp movement, small in Australia, is growing quickly. The B Corporation website shows more than 80 certified Australian companies. Most are privately owned small or mid-size companies that typically have advisory rather than fiduciary boards of directors.

As B Corp develops greater awareness in Australia, it is likely that larger organisations will consider certification and that more boards will use it as a framework to better understand, maintain and govern corporate social responsibility standards.

Hayley Clarke says independent verification of Onya’s approach is valuable. “Lots of companies say they do the right thing and are environmentally friendly, but how do you really know? Having our company’s standards certified through a detailed process gives our customers, suppliers and staff peace of mind that we stand for something and do what we say we will.”

Clarke says B Corp Certification has added to Onya’s momentum. She and her partner bought Onya in 2015. At the time, the business was struggling. “We saw a huge unmet need for people to use responsible packaging in their daily life,” says Clarke. “And an opportunity to build a profitable business that helps the community.”

Onya’s revenue has more than tripled under its new ownership. “We see no reason why you cannot become a large, profitable business, and do lots of good for the environment at the same time,” say Clarke. That focus is absolutely fundamental to Onya’s DNA.”

Little Tokyo Two, a leading start-up incubator, is also B Corp Certified. The Queensland for-profit venture is encouraging other firms in its rapidly growing community to consider B Corp Certification.

“Little Tokyo Two’s ethos from the start has been about doing good for others,” says founder and director Jock Fairweather. “We very much see ourselves as a commercial enterprise with a strong social mission. B Corp Certification is a way to put structure around that.”

Launched in December 2014, Little Tokyo Two has grown to six sites and a community of hundreds of firms. Fairweather says: “B Corp is a really good fit for our community because we tend to attract fast-growing commercial ventures and social enterprises that believe that doing the right thing for stakeholders, the community and the planet is the future of business.”

Little Tokyo Two began its B Corp Certification process last year. “It’s not easy to get,” says Fairweather. “We spent about a year working on our application and the certification process. We were already ticking a lot of the boxes, but the process made us think through our approach to corpoate social responsibility (CSR) across all aspects of the business.”

Fairweather says B Corp Certification provides useful CSR boundaries without being too prescriptive. “For example, it helps us put more structure around how we choose buildings that are energy efficient, our carbon footprint and what we give back to the community. In some ways, the certification sharpens your emphasis on long-term decision making and business sustainability.”

Fairweather says the Little Tokyo Two advisory board, which consists of four directors and meets quarterly, supported the certification process. “If Little Tokyo Two can encourage other firms in its community to consider B Corp Certification, then we’re helping the movement gain more traction in Australia and the B Corp community grow. That’s a good thing.”

Intrepid Group is among the larger Australian companies that have achieved B Corp Certification. The privately owned travel group became B Corp Certified in August 2018.

Like others interviewed for this feature, Intrepid CEO James Thornton believes “greenwashing” is prevalent in his industry. “Lots of travel operators talk about the importance of responsible, sustainable business but do not always follow that up with their actions. Intrepid saw B Corp Certification as a way of demonstrating that our focus on responsible business is not just a marketing statement. It’s something we live and breathe every day.”

Thornton says Intrepid is using B Corp Certification as a continuous improvement process. “It took us three years to achieve the certification. During that journey, we introduced several initiatives: for example, an expanded parental-care policy and integrated financial report. The certification, in effect, became a health check for Intrepid that management and the board uses.”

Organisation legacy is another benefit of B Corp Certification, says Thornton. “It helps secure Intrepid’s long-term mission. If another CEO comes in tomorrow, Intrepid’s corporate social responsibility focus will not change because we have the B Corp structures in place. We see the certification as a long-term investment in Intrepid’s sustainability.”

The hard work is paying off. Intrepid grew its revenue by 17 per cent to $341 million in 2017 and has 1,800 staff in 23 countries. The medium-term growth target is annual revenue of $400 million.

Intrepid intends to expand its fiduciary board to support future growth, adding two independent non-executive directors to its current three-member board (which includes two founders and Thornton). The board wants to add skills in digital marketing and finance.

Thornton says the board wants directors who understand the balance between commercial and social outcomes. “We really believe in business changing its focus from short-term profits to becoming a long-term force for good for customers, staff, the environment and shareholders. It’s not enough for companies to say they are acting responsibly in their industry; they need to show it through independent verification and be accountable for it.”