Jay Parkhill June 16th, 2008
My last post was a wonky one on changes in California law that affect company management’s ability to consider social good as well as shareholder value. Here is a complementary piece to that, courtesy of Harvard Business School’s Working Knowledge newsletter.
Spending on Happiness — HBS Working Knowledge
The jist of the piece is that we spend our lives trying to accumulate money, but succeeding at that doesn’t make us any happier. Instead, the researchers found that spending money on other people does increase happiness.
The article talks specifically about personal spending, but I am willing to bet that it holds true for companies as well. Knowing that your company gives away money to help outside causes increases loyalty toward the business.
Jay Parkhill May 18th, 2008
There’s the C corporation that most people are familiar with (what you get if you don’t specify anything else) and the S corporation that is tax free but doesn’t allow preferred stock. Both of these names come from the sections of the IRS tax code that describes them.
Add now the B corporation. The “B” stands for “beneficial”. It doesn’t have special tax rules- instead the intent is to tell people clearly that the company considers benefit to its employees, the general public, the environment etc. along with shareholder profits. The organizers have developed a community of B-corp adopters, and it includes a bunch of “green businesses” but also a couple of big law firms, a skateboard manufacturer and a handful of software companies.
The challenge of socially entrepreneurial companies is that they can do very well, get acquired or obtain outside capital and/or management, and the core principles can get diluted. The B corporation process doesn’t prevent this from happening, but it does make loud and clear that social good is a core element of the business.
So how does one become a B corporation? First, one must fill out a survey. A passing score means that one can take the next step of amending the corporation’s Bylaws and Articles of Incorporation to state the social purpose(s) clearly. I haven’t done it yet, but I am going to take the survey as it applies to my own business. I hope I score well!
There is nothing magical about any of this. It can all be changed or abandoned completely. It is, though, a way to tell the world what your company cares about strongly. That can be good for the company, good for business and- one hopes- good for the world.
Jay Parkhill February 4th, 2008
Harvard Business School’s Working Knowledge newsletter has an insightful post this morning asking whether sustainability and triple-bottom-line principles are growth opportunities or zero-sum propositions for most companies. There is great discussion in the comments as well.
I’ve mused on the same ideas previously. The idea of “service”- of adding value to society and the world that goes beyond shareholder returns- is captivating. Is it feasible?
The article speculates that there is some “low hanging fruit” that companies have already grabbed and that further integration of economic, social and environmental bottom lines is likely to be more difficult. Several commenters also point out that stock markets tend to reward the economic gains and gloss over less visible results.
True enough. Just getting any one line consistently “in the black” is hard- keeping them all there is probably more than most companies can do all the time. It helps when banks and regulators push issues like climate change onto the economic balance sheet, but the effort is still largely its own reward, which explains why even the companies really excited about the ideas consider 1% of profits to be an acceptable amount to expend on social/environmental goals.
Back to the original question- I believe there is a “balance point” for most businesses- where triple bottom line results may swing back and forth a bit over time, but stay basically stable. If each line is a pendulum, a few companies may be able to get them all swinging together most of the time, but most have to live with a certain amount of lurching when the pendulums get out of sync and then work to smooth the disharmonies. That’s what i strive for in my own business, at least.
Jay Parkhill January 24th, 2008
I wrote a piece for VentureBeat some time ago on the idea of “productizing good”, a great phrase I picked up from Terrapass’s Tom Arnold. The idea is to use capitalist/consumerist impulses to drive socially and environmentally beneficial goals. I cited Terrapass, Ethos water and Kiva.org as good examples of the trend.
Lately I have seen a number of businesses with a slightly different spin- they pay *us* to do good. I mentioned
EnerNOC the other day as one company that pays its customers to reduce their electrical consumption, and a commenter was kind enough to point out several other companies in the space as well.
On the consumer-facing end of things, I attended a VLAB panel the other night that featured RecycleBank, whose business model is to pay consumers to fill their recycling bins. RecycleBank signs contracts with municipalities, taking a cut of the amount the city saves on landfill costs as recycling increases, and passes on a portion of that to consumers as credits to be used at designated merchants. The goal is to divert recyclables out of landfill, potentially generate income for the cities by making material available to the recyclables market, and reward consumers every month for sorting their trash. I would have been really skeptical of the whole idea but for (i) learning that most people in the US don’t recycle much, and (ii) the company has a bunch of cities under contract already.
Even closer to my heart is Terracycle’s Brigade project. Terracycle’s main business is selling organic fertilizer and pesticides. They package their products in straight-from-the-recycling-center plastic bottles. More recently, they have started projects to collect used yogurt containers, drink pouches and energy bar wrappers. I go through a lot of energy bars, so I’m pleased to have a place to send the wrappers. For each container, $0.02- $0.05 is donated to the charity of the collectors choice. I’m still working through the details, especially what will be done with all the material collected, but I love the idea.
Jay Parkhill December 8th, 2007
New Cycle Capital is a new venture firm with a mandate to make money while investing in the “green economy” and underserved domestic markets. This is an area I find fascinating because it is such an intricate dance; some of my earlier thoughts on it are here.
Companies focused on a single, economic bottom line really have one big thing to think about- making money. Companies that adopt a triple bottom line approach or some variation on it are juggling almost by definition to find a profitable business that supports the non-economic goals.
I think most companies can’t really put that off very well, which is why they settle for making money in one arena and using it to do good in others. Investment funds run much the same way. The Omidyar Network, for example, cites a commitment to “creating opportunity for individuals to improve the quality of their lives”, but a quick look at its Portfolio page shows a split between for-profit and non-profit investments.
Pacific Community Ventures is a $60M family of funds trying to do things differently. Part of their mandate is that portfolio companies employ a portion of their workforces in low/moderate income communities. They invested in Timbuk2, whose bags are made by just such people in San Francisco.
The fact that PCV is not a household name may suggest that this area is a hard-to-serve niche. I’ll be watching New Cycle Capital as another entrant in the field, and hoping to see more funds taking similar approaches.