Welcome back again to my Sustainable Business 101 series.
Today we’re getting a bit more granular.
We’re going to talk about the practices that make a sustainable business, well, actually sustainable.
To do so, we’re going to lean on an excellent tool for “measuring” the impact of a business, the B Impact Assessment.
The B Impact Assessment is a tool, created by the nonprofit organization B Lab, that allows businesses to put a “number” (or an “Impact Score”, as they call it) behind their social and environmental impact.
Using the tool, businesses assess their current impact, see how they compare to other similar businesses, and ultimately, build a plan around improving the score they received.
If a business is so interested, once they’ve met the minimum required Impact Score (80), they can submit for certification to officially become a member of the Certified B Corporation community.
So, jumping back in here…What are the practices of a sustainable business?
There are two levels here. At a high-level, sustainable businesses:
- Measure their “impact”
- Assess where their greatest opportunity for improvement is
B Corps and other businesses use that B Impact Assessment to continuously go through the above 4-part exercise.
At the next level, there are the specific policies and day-to-day practices that a sustainable business takes on.
Again, using the B Impact Assessment as a guide, they’ve identified four overarching Impact Areas: Governance, Community, Environment, and Customers.
Let’s define each and look at specific examples of practices and policies that fall underneath each.
The Governance Impact Area assesses a company’s mission, ethics, transparency, and internal/external accountability.
Assessment questions in this Impact Area include:
- Does the company publicly share information about its social and/or environmental performance on an annual basis?”
Companies like Oliver Russell, Patagonia, All Good Products, and Dr. Bronner’s produce annual “Impact Reports,” sharing their improvements/shortcomings on various social and environmental business practices.
- “Separate from a mission statement, what has your company done to legally ensure that its social or environmental performance is a part of its decision-making over time, regardless of company ownership?”
If available in their state, province, etc., companies will adopt a benefit corporation legal status. This ensures that a company’s social and environmental mission is preserved, regardless of the changes in ownership.
If not incorporated as a benefit corporation, a company is at risk of legal threat from investors if their pursuit of some public good comes at the expense of financial performance.
Read more on this with our post What is a B Corp, or my friend Russ Stoddard’s post How Do You Tell a B Corp from a Benefit Corporation?
- “What information does the company make publicly available and transparent?”
This question again focuses on transparency as it relates to social and environmental performance, but as well, financial performance—or who/what entities possess ownership in a company.
Companies might choose to use an Open Book Management style where employees can all visibly see the financial performance of the company, incomes, and expenses, salaries, etc.
This level of transparency and accountability is what ensures businesses that strive to be sustainable (like Certified B Corporations) are in fact walking the walk.
The Community Impact Area assesses a business’s social and economic impact on the community (or communities) in which it operates.
Assessment questions in this Impact Area include:
- “How does your company take part in civic engagement?”
The possible answers are things like: financial (or in-kind) donations, community use of company facilities, advocacy for social or environmental progress, pro bono work, and more.
- “What was the percentage of per capita worker time donated as volunteer, community service, or pro bono time in the reporting period?”
The question asked companies to report what percentage of total work time was allocated towards community service or pro bono time on a scale of 0% – 5%+.
- “What characteristics apply to the financial institution that provides the majority of your company’s banking services?”
There are plenty of ways in which a company can make an impact with seemingly standard business operations. This question, on who a business banks with, is an example of that.
The B Impact Assessment awards points for companies using banks that are Certified CDFI (Community Development Financial Institutions), credit unions or cooperative banks, members of the Global Alliance for Banking on Values, or as well, Certified B Corporation banks.
Three examples of Certified B Corp banks
- “What are your company’s policies regarding independent contractors that do not work for the company greater than 20 hours per week for longer than a 6 month period?”
Speaking to labor points, the Assessment questions how a company manages their relationships with part-time contractors. Are they paid a living wage? Can contractors submit feedback to the company?
These points ensure that contractors are treated fairly and respectfully.
The Environmental Impact Area assesses how a company manages their environmental impacts, as well as energy and resource uses.
Assessment questions in this area include:
- “Are your company’s products/services or processes structured to restore or preserve the environment[?]…”
One of the first questions asked in this section is whether or not the core of what the business does or sells is something that was constructed to “restore or preserve the environment.”
Let’s take a specific example.
Pela manufactured the world’s first compostable phone case. Pela made these cases out of an innovative “Flaxstic material” that’s designed to compost in under 6 months from its end of life.
This, as an alternative to the conventional plastic phone cases that won’t degrade or compost, ever…
Pela manufactured their cases in this creative way as an alternative to the typical practices of the phone case market. This is what makes Pela’s model an “Environmental Business Model.”
- “How does your company manage its greenhouse gas emissions for at least Scope 1 and 2?”
This question asks: what’s the company’s carbon footprint? And, what are they doing about it?
To achieve the highest score here, companies need to be monitoring and recording their emissions, setting targets to reduce those emissions, and ultimately, achieving “carbon neutrality,” where the company is offsetting as much carbon output as they are producing.
You might even begin to see the Climate Neutral label on products out in the world.
Similar questions are asked about a company’s water usage or energy usage. Are they recording it? Do they have plans and objectives to mitigate and reduce usage? Are their facilities/offices run off renewable, more sustainable energy sources?
Finally, the Customers Impact Area evaluates what sort of relationship that the company keeps with its direct customers.
Assessment questions in this area include:
- “Do any of your company’s products/services address a social or economic problem for your customers and/or their beneficiaries?”
Similar to the Environmental Impact area, this section questions whether there’s a direct social impact at the core of what the business offers to the market.
These can be services that offer clean water and electricity to those who haven’t had access, or services that improve financial outcomes for low-income individuals, or even products/services that have an educational component, such as independent media (like Grow Ensemble!).
There are additional questions as to how a company manages and monitors the outcomes of their customers. Does the company measure customer satisfaction? Do they share that publicly? Do they monitor the impacts that their products have on customers?
Sustainable Business Practices – What’s it Matter?
Mind you, I’m just briefly summarizing all that’s included in the B Lab’s B Impact Assessment.
It’s quite extensive and can take companies extended periods of time to even gather the information necessary to adequately answer the questions.
Walking through a few of the examples of these sustainable business practices is in effort to show you the amount of rigor through which these types of businesses assess themselves, look to mitigate and remove any negative impacts, and of course, pursue a verifiably positive impact with their products and the operation of their business.
Of course, these businesses aren’t doing this because they have to. It’s because they’ve committed to (measurably) using their businesses as a force for good.
From the policies and business models to the overarching methodology and focus to the continual improvement, we can see major differentiators between those who are truly sustainable businesses, and those who are not.
The B Lab’s B Impact Assessment might not be the only means to measure and assess what makes for sustainable business practices, however, I do believe it’s the best one that is currently available.
With a clearer understanding of what practices and standards a “sustainable business” adheres to on a day-to-day basis, we’ll talk next about where the greatest opportunity is for businesses to be more sustainable as well as, how, from a consumer perspective, businesses can be pushed to make these changes much faster.
➡️ P.S. — 7 out of the 10 businesses featured in our Ensemble 10 Collection: Examples of Sustainable Business in Action are Certified B Corporations.
Find out more about who they are and why they set themselves apart in their commitments to use their businesses as a force for good. Check out the collection here.
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I’m Cory Ames. I’m a writer, podcaster, social entrepreneur, and the Founder of Grow Ensemble.
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