Tuesday, September 11, 2007

Fix it, don't complain about it

You've heard this old refrain before, "Don't complain about a problem, do something about it," probably from your mother. The most exciting example that I've seen lately of people acting on this advice is the creation of the B Corporation.

What is a B Corporation? It is a new designation for commercial enterprises that actively seek to produce social and environmental benefits along with profits. While not yet part of corporate law, the B Corporation founders aim to first build a movement of companies that meet certain standards, and then change the law to recognize these entities.

Why is it so important? Everyone who has ever worked in, volunteered for, or donated a nonprofit organization knows how hard it is for these entities to raise the money they need to do their work. By creating a new type of corporate designation, organizations that focus on social, environmental goods will gain access to new kinds of capital. Once there are a few successes, the capital markets will shift accordingly. New types of financial products, new access to capital for public benefit organizations, and, eventually, perhaps, a new norm for fiduciary responsibility.

No, we're not there yet. But the B Corp is a big step forward. Mix it up with changes in accounting practices, new efforts to account for intangible assets, new metrics for business that include a Social Return on Investment, and new investment indices being created and the world could look quite different in a decade or so. It is entirely possible that the standard definitions we now hold as written in stone - nonprofit, commercial enterprise, capital markets, investments, and return - will all have widely accepted new meaning in 2020.

This is a good thing. We also need to ensure that as public citizens we all act on our responsibilities for providing public benefits. That we - as communities and societies - realize how shifts in one sector influence shifts in others. And that we remember some basic truths:
  • As citizens in democracies, we hold responsibility for ourselves and others;
  • There are some human rights and needs that need protection, advocacy, and support especially when they are least popular or unsupported by either majority opinion, autocratic leadership, or free markets;
  • Changing markets and market forces is a part of solving social problems, but not the answer in and of itself, other sectors (public and independent) must also play new roles, and, finally,
  • The problems of our society are not the result of action in any single sector, be it business, public sector, or the independent sector. No single sector created any of the challenges we face, no single sector will solve them.
I had a conversation not long ago with a colleague, Jill Blair, who challenged my argument that philanthropy is an industry. "Its not an industry," Jill argues, "its a value." I don't disagree - I believe there are sets of values that reveal themselves philanthropically, and which are then served by the vendors, regulators, advisers, professionals, advocates, and critics that make up the industry. Where Jill and I are looking for agreement is on where to find the leverage points for change - in the values that underlie the whole? In the industry that serves the values? In (re)connecting the two?

Our discussion is relevant to the possibilities of the B Corp and other changes mentioned above. Surely, if they disconnect themselves from the underlying values, corporate structure or regulations about fiduciary responsibility will be window dressing, not real change. At the same time, the changes represented by the B Corp, etc. are themselves expressions of values operating in the form of firms, laws, corporate code, and board responsibilities. This is the greatness of what is going on - there are efforts out there, such as B Corp, that are challenging the industry at the level of its essential code - They are essentially saying that the existing rules don't match the values we bring to work and public good.

So, why do I think the B Corp is a big deal? Its value based. Its structural. It inherently challenges our rigid definitions of public, private, and independent. Its systemic in its thinking, grassroots in its organization, movement-centric in its ideology, and accessible to enterprises of all sizes, shapes, and purpose.

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