May 06, 2016
03.12.2012 - 04:40PM
Socially Responsible Investing
Even though I didn’t know it at the time, looking back I see that I got into what is now called Impact Investing in order to solve the Ben & Jerry’s problem.
For B Corporations – or B Corps – and for the movement being enshrined into law in several states around the country, that means making it legal to have language in a company’s operating agreement that enable it to push back against investors and shareholders who think that the duty of a company is to maximize shareholder return, without thinking about its impact on the environment, society, it’s local community, or any other interested parties beyond those who can make money if the company succeeds.
The B Corps movement is an attempt to create an alternative to rapacious capitalism (the kind of capitalism that provoked the Occupy Wall Street movement) and to enable the success of good businesses (ones that solve social and environmental problems). This is doing business in a new way that takes into account people and planet and profit. (The businesses we own in our Good Capital portfolio are B Corps.)
When a B Corp succeeds, employees and executives know they will not be forced to sell too early, or to a bad buyer who offers the most money. They know that if they are running a good business – good for the economy, the people, and the planet – they will not be forced to sell out.
I applaud this progress and I am part of it, but it’s not the part of the Ben & Jerry’s problem that I have dedicated the last half dozen years of my life to solve, and that I intend to work on for the next decade or so.
At Good Capital we want to invest in and help build companies where the mission can survive the exit: the sale to a normal corporation. I want the mission to be baked in so deeply to everything from the supply chain, to customer expectation, that the mission is front and center for the people operating the business; not just an external effort to mitigate harm or use some of the profits to do some good, as with traditional corporate social responsibility.
In the three enterprises of Good Capital – our Impact Investment Fund – the mission drives the profit margin, and we make more money because people value that we’re doing good in the world.
For Alter Eco – a growing fair trade company in the GoodCap portfolio that’s selling chocolate bars, quinoa, and rice in grocery stores from Wegmans to Safeway to Whole Foods – this has meant the company’s trade spend (the promotional money it pays to get products put on the grocery shelves) has gone down 150 percent in the last two years as distributors and retailers realize the depth of the story around the food.
Alter Eco is increasingly attractive to the growing number of consumers who want to be assured their food is really good: that the cacao farmers are restoring the trees in the areas in which they farm, that the groundwater is not polluted, and that the carbon footprint of shipping internationally is offset.
Because people like Alter Eco more the more closely they look at it, it is growing toward profitability at increasingly lower cost. Whole Foods is going to make Alter Eco its focus company to explain the deep story of food in the month of May. Alter Eco will be displayed at the end of the aisles (called endcaps) in all the Whole Foods stores throughout the country. Alter Eco is ready for the momentum that is likely to ensue, and we at GoodCap are doing our part to put the spotlight on them.
One of our jobs as investors is to get people to understand all the value the companies in our portfolio create. As their momentum grows, Good Capital can help tell their story in all the venues in which we work – from the SOCAP conferences to co-working hubs throughout the world – because they are one of those companies that, the more you look at them, the better they look.
Creating demand for food that is more than organic, that has social values built into its supply chain, is one way you solve the Ben & Jerry’s problem. You brand the mission.
In other stories to come I will write about how Better World Books created a supply chain that provides them extraordinary mission insurance as they grow. Mission insurance linked to your supply chain is a way you can insure that the mission will survive if the visionary founder (the customary mission-holder) leaves, and help the enterprise grow to reach its potential. Supply chain linked mission insurance enables faster growth, can create viral channels (where people invested in your mission give you things they trust you to reuse on their behalf) and make money doing it.
For me, that means finding a way for the social mission to survive the eventuality of a sale to a large corporation with the responsibility to show that the acquisition will pay off in financial terms.
A social enterprise with a supply chain linked mission can grow and be sold at the right time with the mission intact, and baked into the business – from the raw product through to the end user demand, including contributions, donations, from the businesses fans, and co-world-builders. If we execute the plan as we envision it at Better World Books, we can accelerate the movement into a deeper form of conscious consumption… but more about that in the next column.
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