The Rise of Conscious Capitalism: Why Doing Good is Good Business

A new generation of entrepreneurs is practicing a business model that places just as much importance on doing social good as on making money.
Ghostwriter: The Open Organization, Red Hat
April 08, 2014

Dan Klock didn’t take a straight path to becoming an entrepreneur. In fact, he started his career on Wall Street, working for global investment banks like Rothschild and Credit Suisse, before joining Bear Naked, the all-natural granola company his wife, Kelly (née Flatley), co-founded. But when Kellogg bought Bear Naked in 2007, the Klocks saw a new opportunity.

 

 Bridgetown Natural Foods, Dan Klock

 

“We struggled to find the right manufacturing partners as we grew Bear Naked,” Dan Klock says. “We knew that other growing food companies out there needed help from a trusted manufacturing partner.”

Klock used that insight in 2010 to open up Bridgetown Natural Foods, a contract manufacturer of natural and organic foods based in an 110,000-square-foot facility in Portland, Oregon, as a way to help emerging granola and snack bar companies scale up and bring their own brands to market. The company currently churns out up to 2 million snack bars and more than 50,000 pounds of baked snack products a day.

 

 Bridgetown Natural Foods, Dan Klock

 

Just as importantly, Klock wanted to create the kind of business that would operate sustainably, create meaningful jobs for its 260 employees and give back to its community—all while making a profit. For example, Bridgetown uses environmentally responsible, non-GMO ingredients and then sells any unused food material to local hog farmers, which decreases waste and generates additional revenue for the company.

Further demonstrating what has become known to some as a “triple-bottom-line philosophy,” Bridgetown has launched an ambitious employee wellness and nutrition program, which employees are paid to attend, and also partnered with volunteer organizations to support local farms in its community.

“Our success is about more than the bottom line,” says Klock, who serves as CEO of the business. “Our profits are the fuel that allow us to do great things. We strive to be an example for sustainable modern food production, demonstrating that manufacturing can thrive with an environmentally and socially responsible business model.”  

A New Take on Capitalism

Klock is an example of a new generation of entrepreneurs who are driven to create value not only for their companies, but also for their workers and communities. Even as our system of capitalism finds itself under attack (as evidenced by the popularity of books like Capital in the Twenty-First Century, by French economist Thomas Piketty), a growing number of companies have embraced the notion of measuring results through a triple bottom line, which combines the traditional bottom line of profit with additional outputs related to environmental and social returns the business may generate.

Put another way, this generation of entrepreneurs is discovering that making a profit doesn’t have to come at the expense of making positive contributions to society.

“Businesses have always been a way for humans to come together so they can perpetuate their survival and flourish as a community,” says Jeff Klein, author of It's Just Good Business: The Emergence of Conscious Capitalism & the Practice of Working for Good. “People typically start businesses—whether it’s a mom-and-pop grocery or a high-tech company—because they’re motivated by an idea and a passion to create something they want to share with others. Human beings are motivated more by meaning and purpose than by money.”

What’s exciting is that while big companies like Whole Foods may draw most of the attention, helped in part by the popularity of founder John Mackey’s own book, Conscious Capitalism, we’re seeing a surge in the number of smaller growing businesses that are also pursuing business models that take more than just profit into account. An example of that trend is the explosion in the number of companies seeking certification to become what’s known as a “B Corp” or Benefits Corporation

 

Whole Foods

 

It’s a program administered by B Lab, a nonprofit based in Wayne, Pennsylvania, that helps companies brand themselves in a way that promotes “a better way to do business that focuses on creating sustainable success for communities, workers and the environment,” says Katie Kerr, a spokesperson for B Lab. “We believe there is no one right way to run a good business. But you do have to look at all the stakeholders it impacts, including consumers, workers and the environment.”

Kerr says that interest in gaining B Corp certification has surged in recent years and now includes some 990 companies across 60 industries in 32 countries.

Businesses can either assess themselves for free online and benchmark where they stand against similar organizations (as some 15,000 companies have done), or pay a fee starting at $500 (and goes up depending on the size and industry of the company) to be officially certified, which involves assessing a company on 150 different questions in categories including governance, workers, community and environment. Companies can also consider incorporating as a Benefit Corporation, a legal entity that requires business owners to consider employees, community and the environment when making decisions, rather than being beholden solely to profits—something that is now legal in some 22 states, including Delaware.

While some big names like Ben & Jerry's, Patagonia, Etsy, Warby Parker and New Belgium Brewing have become certified B Corps, Keer says that more than 87 percent of their member organizations have 50 employees or less, which implies that it might be small businesses, not big ones, that are changing the conversation when it comes to the future of how we do business. “If you want to be a growing company and still maintain your mission,” Kerr says, “this is one way you as a founder can preserve your legacy.” 

“Becoming a B Corp is about acknowledging that you are obligated not just to your shareholders but to people and the planet as well,” says Craig Wichner, managing director of Farmland LP, a San Francisco-based real estate company that purchases conventional farmland and converts it to certified organic land by actively managing it with a sophisticated farming rotation of livestock and crops for optimal soil health. “We need to take people, planet and profits when it comes to accounting for our businesses. Making money is easy. Making money while making the world a better place—now that’s worth getting out of bed in the morning for.”

An Emerging Competitive Edge 

What’s becoming clear is that doing business differently is not just a nice-to-have feature for companies anymore; it’s actually becoming a competitive edge. In a market where consumers are increasingly interested in buying from companies that operate ethically and socially responsibly—one study found that some 30 percent of consumers planned to beef up their purchases of products and services offered by such companies—a B Corp certification can be a way to stand out and attract consumers who share similar values.

Case in point: Mary Kearns is an entrepreneur who launched her bath and body product company Herban Lifestyle in 2008 with the mission of providing people with attractive, earth-friendly and non-toxic products.

 

Mary Kearns is an entrepreneur who launched her bath and body product company, Herban Lifestyle, in 2008, with the mission of providing people with attractive, earth-friendly, non-toxic products.

 

Kearns, who has two employees, is in the process of being certified as a B Corp because she feels it’s an extension of why she started her business and where it’s going. Besides paying careful attention to using certified organic and fair trade ingredients and recycled or recyclable packaging with her products, she has always donated a portion of her gross annuals sales to nonprofits.

“I built these values into the DNA of my company not only because I feel that it is the right thing to do,” Kearns says, “but because I saw that this is the direction that business needs to move in if we are to build up our economy in a sustainable way. It’s a trend that consumers are driving.” 

Kearns says a key element in earning trust with her customers is that she lists her ingredients not just on her labels but also on her website as a way for consumers to know exactly what they're buying. “Some might say that this puts me at a competitive disadvantage because anyone can replicate my formulas,” she says. “But the care with which I source the individual ingredients cannot easily be replicated, and my brand story remains uniquely mine.”

Another example of a growing business that sees embracing environmental sustainability as a competitive advantage is Brooklyn-based EcoLogic Solutions. It manufactures and sells institutional-grade, non-toxic, non-polluting and non-hazardous cleaning products and technology.

Anselm Doering, who has been supporting the environment since his childhood, started EcoLogic when he realized that places from office buildings and restaurants to train stations were using hazardous chemicals in their cleaning products, even though he knew there were safe and cost-effective alternatives readily available. “Everyone loves the idea of having clean energy, food, water and air,” says Doering, whose company has 28 employees and sells a range of 100 different products to big-name customers like Whole Foods, Amtrak and Mario Batali’s family of restaurants. “So we began asking them if they wanted safe cleaning products as well.”

 

Anselm Doering, who has a long history of supporting the environment that dates back to his childhood, started EcoLogic when he realized that everyone from office buildings and restaurants to train stations were using hazardous chemicals in their cleaning products – even though he knew there were safe and cost-effective alternatives readily available.

 

But Doering has even more ambitious plans to disrupt the multibillion-dollar cleaning products industry: His company has begun selling Electro-Chemical Activation (ECA) systems that allow organizations to make their own cleaners and disinfectants using only tap water, salt and small doses of electricity. The machines, which are about the size of a medicine cabinet, are about 100 times more effective than bleach in killing bacteria, viruses and harmful spores, yet are also safe and nontoxic to humans.

“I have board members asking why we would sell a technology that cannibalizes our existing business,” says Doering, who notes that using the ECA machines also eliminates all the waste associated with packaging and transporting traditional cleaning products. “But we do it because we want our customers to trust us more and to help them use fewer chemicals. This creates loyalty and more recurring revenue for us, which then becomes the new anchor for our business. We’re creating a whole new paradigm.”

Building Sustainable Employment 

While there’s no question that running a “green” business is a key part of embracing the notion of conscious capitalism, there’s also the human element to consider—especially when it comes to helping improve the lives of those who work for the business. 

Consider then, the impact that Rubicon Bakery in Richmond, California, has not just on its employees, but on its community as well. The bakery, which was originally started as a job-training program by a nonprofit organization called Rubicon Programs, actively seeks to hire ex-prisoners and folks recovering from substance abuse.

“We have people join us who have made bad decisions in their lives who have now made a choice to lead deliberate and purposeful lives,” says owner Andrew Stoloff. Stoloff bought the bakery in 2009, and has since helped grow the B Corp certified business from 14 employees to a staff of about 100 not through charity, but by teaching his workers how to run an efficient business that uses all-natural, premium ingredients in its cakes and other baked products.

 

Rubicon Bakery

 

“By giving people a new lease on life, you get huge rewards,” says Stoloff, who worked on Wall Street and as a restaurateur before turning to the bakery business. “These are people who no one else would give an opportunity to. But we have some of the hardest working and most loyal people in the business who prove themselves on a daily basis.”

Indeed, in an industry that averages nearly 100 percent annual turnover rates, Rubicon sees just 10 percent of its workers leave each year.

 

Rubicon Bakery

 

Part of that recipe may be that Stoloff not only pays a living wage to his workers; he has also established an interest-free loan program for employees to help them avoid paying exorbitant rates at check-cashing facilities, as well as an open-door policy where he helps guide his employees to financial counselors who can help them manage their personal finances. 

“These are people who were never taught these skills either in school or from their parents,” he says. “But we help them when we can, and we are rewarded for that.”

A Standard of the Future

Dan Klock’s company, Bridgetown Natural Foods, was certified in March 2014 as a B Corp. He says the company made the decision to do that as a way to benchmark itself against companies that share similar values when it comes to building a truly financially, socially and environmentally sustainable business. “Our view is that no matter what industry you are in,” Klock says, “you are competing for customers and talent. That’s a people game. And you will only get the best people if they believe there is a purpose. Ours is to build stronger families as we build the business.”

When you combine the best people with a long-term vision that embraces balance, growth and a reinvestment in the community, Klock says, then you truly have a recipe for a successful, sustainable and, yes, profitable business.

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 Photos: Bridgetown Natural Foods, Getty Images, Herban Lifestyle, EcoLogic Solutions, Rubicon Bakery