Are B Corps Making a Difference in Inner Cities?

By Lena Ferguson, ICIC

Now over 1,000 businesses strong, the B Corp movement is gaining momentum as a way for companies to certify their commitment to social, environmental and business goals. Companies must meet both performance and legal requirements with rigorous social, environmental, accountability and transparency standards to achieve certification, and are then reassessed every two years. Since, according to our research, at least 60 percent of B Corps are located in urban markets, at ICIC we wondered what type of impact B Corps might be making in their inner cities.

Answering this question requires more in-depth research, but we found that the B Corp performance assessment can be an important tool in helping drive companies to make a difference in inner city communities. Many of the factors the assessment measures relate directly to inner city development, including the percentage of facilities in low-income areas, local purchasing, percentage of employees from low-income areas and belonging to underrepresented populations, community service policies, and the development of products and services to serve those in need.

B Labs, the nonprofit that oversees and assesses B Corps, reports that, compared to other sustainable businesses, B Corps are 68 percent more likely to donate at least ten percent of their profits to charity, 28 percent more likely to have over 30 percent management from previously excluded populations, 18 percent more likely to use suppliers from low-income communities, and 2.5 times more likely to give employees paid time off for community volunteering. Furthermore, 22 percent of B Corps sell a majority of products or services that directly address a social issue. For example, Moving Forward Education in Emeryville, California provides tutoring and mentoring services for underserved students of color in California, and MaineWorks in Falmouth, Maine is a temporary staffing company in industrial construction that provides opportunities for disadvantaged workers facing barriers to employment.

B Corps also serve as important business role models, helping to show other entrepreneurs that interest in social and environmental outcomes can also help improve company profits. As Katie Kerr, Director of Communications at B Labs, says, B Corps are “not only sustaining their positive impact while constantly working to improve it. They’re also setting the gold standard and setting an example for others so that it’s a more welcoming business environment for everyone, as well as inspiration for young entrepreneurs as they come up.” In essence, she says, B Corps prove that “it’s possible to do well and do good and it doesn’t mean that you’re not a strong business.”

Thanks to data provided by B Labs, we were able to analyze the number of B Corps with headquarters in the inner city. Our analysis shows that at least 19 percent of U.S.-based B Corps are headquartered in inner cities, which is disproportionately high. In comparison, nine percent of all businesses nationwide call inner cities home. This network of inner city B Corps is poised to make long-term change in urban communities.

Why does B Corp certification appeal to inner city businesses? We’ve found that the certification seems not to be a reason for them to create social responsibility, but rather a reaffirmation of the good work they already are doing.

For Azavea, a geospatial software and analysis company located in Philadelphia and named to ICIC’s Inner City 100 list of the fastest-growing inner city businesses in 2011 and 2013, becoming a B Corporation made sense as the company sought to further define its socially-minded brand amid a name change. Robert Cheetham, Azavea’s President and CEO, says that Azavea “had always been a company that did geospatial software development, but we had also always been a company that had done work with a civic or social impact, and we had never talked about that.” So, when the company rebranded, Cheetham says they “wanted to rearticulate who we were but do so in a way that really emphasized the civic and social impact component of what we were doing, and we felt like adopting the B Corporation certification would be a good way to do that because it would be shorthand for a mission-driven company.” Cheetham feels that Azavea’s B Corp status has helped recruit employees that reflect that ethos and make their mission-driven work stronger. “I would say now 95 percent of the people we interview cite it as one of the primary reasons they apply to us…And I would say we do a lot better job now of attracting people who are motivated by working for a mission-driven organization or are focused on values-driven meaningful work,” Cheetham explains.

Cheetham says that the B Corp assessment and the reevaluation process has caused him to think about things Azavea could do to increase its impact and has sparked the institution of new policies at the company. He says, “We didn’t have to change anything in the company to become a B Corporation, but we have changed things in how the company operates because we’re a B Corporation, and the fact that we are talking about the fact that we’re a B Corporation on a regular basis has a positive reinforcement effect in terms of looking for opportunities that able us to express that in positive ways.”

Similarly, at inner city Boston-based Next Street, a mission-driven merchant bank named to B Corp’s 2014 Best for Communities list, Rishi Shukla, Managing Associate, maintains that “with or without a B Corp status, we would still be focused on the same thing.” For Next Street, becoming a B Corp was “something to signify what Next Street was doing” and “stood for what we wanted to be represented by.” Shukla believes Next Street’s inner city location and B Corp status are intertwined. He says, “our belief is that serving this specific type of community as a for-profit is the most sustainable way of doing it, and so creating a sustainable business model in an inner city is good not just for economic development, but for the firm. So if we do well, the community does well and vice versa.”

Come meet a number of fast-growing inner city B Corps and other companies making significant impact in their inner cities at the 2014 Inner City 100 Symposium and Awards on October 15-16 in Boston. The day-and-a-half agenda is fully packed with networking receptions, seminars from leading CEOs and thought-provoking case studies from Harvard Business School professors.  Click here to learn more.