organic

Food Companies Should Obtain Legal Protection to Look Beyond Profit

Re-posted from Al Jazeera

organicIn a marketplace full of greenwashing, I often scoff at the various certification programs that allow for-profit businesses to promote themselves as being sustainable or otherwise socially responsible.

 

But a closer look at a certification dubbed B Corp suggests real promise. Companies with B Corp certification are for-profit ones that meet certain public benefit standards. The private certification is offered by a nonprofit called B Lab, which uses a point system to assess companies in the areas of governance, workers, community and the environment. Businesses that gain the certification can place the B Corp logo on its marketing materials — like the Fair Trade label for coffee.

 

These B Corporations (which undergo the aforementioned private certification process) are not to be confused with benefit corporations (a legal status for for-profit companies allowed in certain states). But the rising popularity of B Corporations and the growing number of states — in just a few years, 27 — that have passed laws allowing benefit status, are related.

 

Forbes.com explained the advantages of the legal designation, saying, “Incorporating as a benefit corporation legally protects an entrepreneur’s social goals by mandating considerations other than just profit.” In other words, including social responsibility in a company’s legal status allows flexibility for companies that care about more than just the bottom line.

 

The same philosophy — of prioritizing positive social and environmental practices — guides certified B Corporations. And last month they got a big boost with the promise of $4 million in investment money from the venture-capital firm Collaborative Fund and CircleUp, a funding platform for nontech startups. CircleUp previously raised more than $10 million in investment funds for B Corporations, including $2.38 million for Peeled Snacks, an all-organic dried fruit company.

 

This shift toward social responsibility is especially important for food companies. As I’ve argued for years, even if a food corporation might want to sell healthier foods or stop marketing to children, it can’t because it is bound by the legal requirement of prioritizing shareholders, which means maximizing profit. And profit too often means selling poor-quality foods, paying workers low wages or harming the environment.

 

Getting Big Food on board

 

Several food companies have decided to incorporate as legally recognized benefit corporations, including one recently bought out by Big Food. Plum Organics, which makes food products for children, was purchased by Campbell Soup Co. last year, making it the first B Corporation to be a wholly owned subsidiary of a publicly traded company. While Plum Organic has been a certified B Corp since 2008, the company took legal steps to become a benefit corporation in Delaware last year after the state passed legislation recognizing that status.

 

Plum CEO Neil Grimmer explained for Co.Exist the importance of the legal change, saying, “When these ideas become inscribed in your corporate bylaws, it becomes the compass of the company. Now more than ever that’s part of our charter.” The company is also helping Campbell get recommended as a good investment.

 

According to Grimmer, Campbell embraced the idea of Plum’s becoming a benefit corporation. That a leading food company not only tolerates but also embraces the benefit model signals potential for more positive change. With Big Food increasingly buying out organic companies — General Mills, for instance, is about to buy organic food company Annie’s — the benefit corporation could help prevent the potential diluting of values.

 

While Plum Organic’s mission is focused mainly on ingredients, other benefit corporations emphasize the importance of its workers. Given that food workers are often paid slave wages and otherwise exploited, could the benefit corporation be a path to improving working conditions? One company that thinks so is Greyston Bakery, which in 2012 became New York’s first benefit corporation.

 

Greyston, which also has B Corp certification, prides itself on its open hiring system, in which anyone who wants a job can get one, regardless of experience and despite any history of “homelessness, incarceration, substance abuse, welfare dependence, domestic violence or illiteracy.” All the company’s profits go to the Greyston Foundation, which operates several self-sufficiency programs in the company’s community of Yonkers, New York. But the bakery’s biggest claim to fame may be that it’s a supplier (30,000 pounds of brownies daily) for Ben and Jerry’s, another certified B Corp. Greyston scored an impressive 133 out of 200 on B Lab’s assessment. In a sign that B Lab’s questionnaire encourages improvement, Greyston increased its score by 35 percent between its 2011 and 2013 audits. In addition to creating good jobs, the bakery has installed solar panels and purchases sustainable cocoa and sugar.

 

Other food companies that have attained B Corp certification include the Better Bean Co., Revolution Foods, Numi Organic Tea, Nutiva, Guayaki and Happy Family (another baby food company). B Lab has certified 1,000 businesses in 33 countries. So far, most certified B Corporations are small. But with the growth of the organic and natural food industry surpassing conventional food’s, it could only be a matter of time before existing B Corps grow and big corporations start to realize the economic value of joining the movement.

 

Increasing the scope

 

Benefit corporations are held accountable mainly in the same way as traditional corporations — through their shareholders. But they also have additional reporting requirements.

 

“Benefit corporations have a higher level of transparency than any other business form because they must produce an annual benefit report made available to the public,” B Lab’s policy director, Erik Trojian told me.

 

B Corp certification, which must be renewed every two years, raises the accountability bar even more by providing a third-party assessment. (Companies must score at least 80 out of 200 possible points to get certified. Trojian said the typical corporation in the United States would score 35 to 40.)

 

But there is still a ways to go. B Lab’s assessment tool doesn’t cover certain important societal issues. I was disappointed to learn, for example, that it doesn’t assess companies’ marketing practices. As I’ve written, companies shouldn’t market to children because a child cannot understand how marketing works, making the practice exploitive. A food company designated as a benefit corporation could refuse to do so; the decision would certainly qualify as a material positive impact on society — one of the criteria for being a benefit corporation. Other important issues could include animal welfare, disclosure of ingredients (such as those hidden by euphemisms like “natural flavors”) and even lobbying that undermines democracy.

 

It remains to be seen if benefit corporation laws and private certifications such as B Corp will have broader positive effects on the food system. The growing interest in and support of big companies such as Campbell is a positive sign. Moreover, removing an important legal barrier to caring about more than just profit is a great first step.

 

Michele Simon is a public health lawyer, president of Eat Drink Politics, and author of “Appetite for Profit: How the Food Industry Undermines Our Health and How to Fight Back.”