Kevin Chin, an Entrepreneurs' Organization (EO) member in London, United Kingdom and Brisbane, Australia, is the author of HyperTurnaround! and founder and CEO of Arowana, a certified B Corporation which invests in, operates and grows small to medium-sized enterprises. We asked Kevin about the process of becoming a B Corporation. Here's what he shared:
How did you learn about becoming a B Corporation?
I first learned about B Corporations--the B stands for beneficial--in September 2016 when, during a conference, my preferred session was full, so I walked into a session about B Corps. I knew nothing about them beforehand. I walked out convinced that B Corps would become a gold standard certification, that the ethos of B Corps aligned with our core values, and it was where I wanted to take my company.
Certified B Corporations are for-profit companies that meet the highest standards of verified social and environmental performance, governance, transparency and legal accountability. The ultimate goal is to balance profit and purpose, using business as a force for good.
To become certified, a rigorous due diligence assessment is conducted by the B Lab organization, a non-profit certification body. In order to achieve and preserve certification, companies must attain a minimum score for environmental, social and governance performance.
What's the difference between a B Corp and a company that commits to responsible corporate citizenship?
Most companies do set out to be responsible corporate citizens. The vast majority also have a primary purpose of maximizing shareholder returns. With the increasing myopia of shareholders, this creates pressure on corporate leaders to make a profit at any cost--sometimes manifesting in behavior that is not conducive to sustainability and long-term success.
A case in point is Boeing, whose 737 Max aircraft was rushed into service over concerns about competition from Airbus adversely impacting annual profits. This led to the deaths of 346 passengers.
A key difference with B Corps is that they are required to codify in their company constitution that their ultimate purpose is to operate their business as a force for good and for the benefit of all stakeholders--not just shareholders.
Another key difference with B Corps is that they legally commit to an annual assessment of environmental, social and governance performance. Failure to uphold standards could result in an embarrassing loss of accreditation. By contrast, companies that commit to being responsible corporate citizens are generally not held accountable by an assessment mechanism.
In that case, why did you voluntarily put your company through the hassle of becoming a B Corp?
As our company approached its 10th anniversary, I wanted to effect a major cultural transformation to align with our core purpose of building sustainable companies. This core purpose necessitates a long-term horizon. However, at the time, our culture was overly focused on short-term remuneration, where people essentially lived for the annual bonus day. This was a legacy of the company's private equity firm background where an annual bonus mindset defines culture.
As the Boeing example illustrates, such misalignment can be dangerous and is not conducive to building companies over the long term. I realized the fundamental incompatibility between what we were already becoming--an organization that invests in, owns, fixes and scales up companies--versus our private equity roots of flipping companies for profit.
So, my stumbling across B Corps was serendipitous. I felt that becoming a B Corp would be the perfect catalyst to drive cultural change.
In addition, I liked the fact that B Corp assessment would provide a robust, independent review of our systems, processes and governance architecture. Furthermore, it provides a methodology and scorecard to assess these elements on an ongoing basis.
What were some unanticipated issues you confronted?
B Corp accreditation was much harder and took far longer than anticipated! This was partly because we have multiple businesses across four continents, but also because the assessment process is rigorous. It took 15 months; we were accredited in May 2018.
It was also a more powerful catalyst than I anticipated for driving cultural transformation. For example, a forensic review of our governance architecture, including the quality of and compliance with company policies, led to a handful of senior employees being exited. We experienced significant cultural turbulence, complete with toxic behavior designed to disrupt and try to destroy the organization.
What would you share with leaders contemplating B Corp accreditation?
- Be prepared for total cultural upheaval, especially if your company culture focuses on short-term shareholder returns, or in other words, making money above all else.
- To change the culture, you have to change the people--often those in senior positions. This requires steadfast commitment, as you will experience push-back from those who are not aligned with your organization's purpose.
- The end result is worth it: We're part of a community of 2,933 companies in 64 countries leading a global movement to do business for good--and that's no longer a subjective statement. Each year, our B Impact Assessment evaluates how our business model and operations impact our employees, customers, community and the environment--from our supply chain to employee benefits to charitable pursuits. We've made the choice to be held accountable for making a positive impact--and I'd do it all over again.