Michael: Hello, and welcome to the HaBO Village Podcast. I'm Michael Redman.
Kathryn: And I'm Kathryn Redman.
Michael: And this is a podcast that works with small business, medium-sized business, any of you leaders who are in business, helping you develop companies that are full of joy and full of profit. We want you to develop a great culture while at the same time developing a great bottom line, and we try and bring all the tips, tricks, little conversations about what that looks like to encourage you and equip you and just to refresh you, as you're listening to a podcast. We thank you for joining us, and today we have a guest with us. It's going to be a really good interview. Kathryn?
Kathryn: Yeah. We're super excited to introduce Carolina Miranda, and Carolina is just going to spend some time educating us on something that many of us don't know a lot about today. She's the founder and CEO of Cultivating Capital, which is a certified California green business and B Corp, which is going to be the conversation we're having today, since 2012. She specializes in helping companies align their business with their values by implementing best practices for social and environmental responsibility. Just to give you a little bit of insight, there's a lot to Carolina, but she's a sustainability ... I can say that word. Sustainability coach.
Michael: Yeah, I'm sure you can.
Kathryn: It's a hard word.
Michael: It's not sustainable.
Kathryn: Apparently, my saying it. She's led organizations through the development of sustainability action plans, leading training sessions and providing coaching and mentoring services. She's worked with people like, I don't know, Pixar, Bayer, that's the aspirin company, right? City of Emeryville, City of Berkeley, Caltrans, and the California Department of Transportation. So she's worked with a handful of well-known organizations and has an MBA in sustainable enterprise. So Carolina, welcome to the podcast.
Michael: Yeah, welcome to the podcast. It's good to have you.
Carolina: Well, thank you. It's good to be here.
Kathryn: Yeah. So Carolina literally certified her first B Corp in 2009, and I am only just learning that such a thing as a B Corp exists over the last few months. So that's [crosstalk 00:02:00].
Michael: Let's jump in. What is a-
Kathryn: Yeah, what is a B Corp?
Michael: For everybody who's listening, they're like, "Okay, wait a minute. This is the first two minutes. Should I even pay attention and should I turn it off?" What's a B Corp?
Carolina: So a B Corp is a company that is voluntarily meeting independent verified standards for social and environmental performance. So it's a third party certification, and the companies that seek B Corp certification are basically committing to consider all stakeholders and how they operate. So traditionally, we've thought of shareholders and the purpose of the company is to maximize profits for shareholders, and B Corps are saying, "You know what? Let's think about this a little differently. What if we consider not just people who own shares in the company, but everyone who has a stake in the company? Why don't we put that front and center?"
Carolina: And when you do that, it really expands your perspective on how the company is operating and how it should be operating because then you've got to consider your employees, your customers, your suppliers, members of the community, the environment. There's just all of these other groups that are touched by how a company operates, and B Corps are saying, "You know what? If we're going to impact them, let's try to impact them in a positive way."
Michael: So it's an independent certification. What's the motivation a lot of people have in wanting to go ahead and get certified?
Carolina: So B Corp certification is still relatively new. The first B Corps were certified in 2007. So we're only in our second decade right now, and there's just over 4,000 B Corp certified as of right now, when we're recording this in July 2021. So it's still very much a small number of businesses, and what that says to me is that these are early adopters. These are the companies that are basically at the forefront of saying, "We need to do things differently from the way we've been doing them," and so what really motivates them, in my experience, is that desire to see the private sector operate differently than how it's been operating and to actually be part of making that change come about. It's definitely something that, especially at this early stage, very much attracts values-driven entrepreneurs and founders and business owners.
Michael: Yeah. Well, one of the things that I always find interesting about certifications is that, especially in a new industry when you look at them and study how they grow, you've always got individuals in the beginning who were doing it on their own. They don't need a certification because they're just doing a good job. One of the books I read this last year was about the Guinness Brewing Company in Ireland. I mean, we're talking two, 300 years ago, they were making decisions that benefited all of their employees, that benefited the customers, that benefited, at the time, the majority of stockholder, it was a privately held company until the 20th century. But they were doing all kinds of stuff that were independent, and there was no concept of certification. But then you have this movement where people start to say, "Well, I'm one of those, too," but there's no way of going, "Are you really doing it? What are the standards? How do we actually say this?" I'm a nice guy. Somebody else is a nice guy. How are we defining nice?
Kathryn: Yeah, how do we codify and standardize what it is we're talking about?
Michael: So when the certifications, and you started doing this, your first one was in 2009, was that part of the thinking in the certification process of, "How do we set standards to this thing that we're calling a B Corp and sustainability and so on and so forth?"
Carolina: Yes. So one of the things that B Lab, which is the nonprofit that administers a certification, one of the things that they started working on very early on was actually putting together a clear set of standards around social and environmental performance. And if we think about the context back then, I actually find that it was something that was very much needed, and it's part of the reason why I actually became so much a supporter of this movement because back then, if you think about it, people were just starting to talk about businesses being green, right? That was the new big thing. All of a sudden, every business out there was being green and that actually very quickly led to the term "greenwashing" entering the vernacular, right?
Carolina: Because then you had all of these companies saying, "Oh, we're green." But if you actually looked at their practices, it was all talk and no substance, right? And so now what we're actually seeing is purpose-washing. Every company is purpose driven, but who is really following that up with their actions? Yes. And so it's really something that is being witnessed out there. But I think that the point that you raised is a good one, which is, I don't believe, even as somebody who is committed to this certification completely, I don't believe that a company needs to have a certification to actually demonstrate that they're actually doing good work.
Carolina: There are companies that were basically operating as B Corps before the certification existed. There's companies now that are doing a lot of good in terms of their social and environmental work, but for whatever reason, they may not be B Corps. What I think the value of the certification is, is one, I tend to think of it as your college diploma, right? It's not that piece of paper that you get at the end that actually has value. What has value is the years of work and effort and learning and determination that went into actually getting that degree.
Carolina: So getting a certification like B Corp, it is absolutely fabulous to get that certification at the end. But what I find is a true value comes from the learning process that a company goes through when they are uncovering these areas that maybe they hadn't considered before. Maybe there are practices out there that they didn't know that they could actually bring into their company, and they start going through that process and actually changing the way that they operate.
Carolina: So the other day, just to give you an example, I was on a call with the VP of Human Resources for a client that I'm working with, and she said that they were already a company that was focused on employee development and treating their employees well, but just going through this process, she has already been able to make so many improvements to how the company is treating their employees, that she says, "I'm glad that we're doing this for our employees." Now this is a consumer facing brand. There's going to be other benefits to them, but from her perspective, she recognized that it was really going to benefit the employees because they went through this.
Carolina: The last thing I'll say in terms of the value of the certification, and we touched upon this already, a lot of companies also will get certified because they want to bring about this broader change in our society. B Corps unite around one goal, which is to have an economic system that is inclusive, equitable, and regenerative. That's what we're all working towards, regardless of what country we're in.
Michael: Say those three again for me.
Carolina: Inclusive, equitable and regenerative.
Michael: Okay. Can you give me a quick definition on those three real fast?
Carolina: Yeah. So inclusive is making sure that everybody is participating, that nobody is being excluded. Equitable is that everybody is participating in a fair way, that you don't have some groups that are being left behind while others are moving forward. And then regenerative, meaning that we are not just extracting and depleting natural resources, but that we are actually helping them to continue to generate themselves so that they'll be here for generations to come.
Michael: That's good. Thanks.
Carolina: Sure. Just to wrap up the thought that I was sharing is a lot of companies will get B Corp certification because they do want to support this movement and help it to gain awareness and traction and momentum and to bring other people into it as well.
Kathryn: So one of the questions I was thinking of while you were talking is how do most corporations that come to you or that come to B Lab or whatever, how do they find out about this? What are the decisions that cause them to come to a place where they're like, "We need to do something different. Let's investigate this"? I mean, how does that even happen?
Carolina: Yeah. I mean, I would say it can happen in many different ways. I think at first it was a lot of word of mouth and people knowing somebody who was at a B Corp or whose company had gotten certified as a B Corp. I think that what's happening now is that as more companies get certified, especially known brands, if you've got Patagonia, you've got Ben & Jerry's, you have Eileen Fisher, you have Danone, as those consumer facing brands get certified, then there is growing consumer awareness. And so some people are coming at it from that perspective of, "What? We're seeing our competitors in this space get this certification, and so maybe it's something that we should look into."
Carolina: I think it was last summer or last fall, Vogue ran an article about this. I put this in air quotes here, "This little known certification called B Corp certification in the apparel industry." Now air quotes because some of us, obviously, knew about it, but what was significant about it is that to the broader community, it is very much a little known certification, but when you have Vogue putting that out and saying, "Hey, here are companies in the apparel industry that are getting certified," of course, that's going to start getting people's attention, and then one of the things that is going back to that earlier question that we were talking about, about the value of the certification, is we know that many consumers are looking to be more intentional with their purchases, right?
Carolina: Most people, given the choice, would rather have something that's not made in a sweat shop or something that is organic, right? And so the thing about B Corp certification is that it is certifying the entire company, and so it's a very meaningful stamp of approval saying, "This company has met this independent set of standards. It's gone through a third party vetting process." It's not as though they're just self proclaiming about what they're doing, and they are having to really make improvements throughout the company to do this. So it does convey a very strong message, especially as more people become aware of it.
Michael: Is it possible to have a sweat shop in another country and get B Corp certified?
Carolina: That's a good question. The way that the certification is set up, you earn points based on positive practices that a company is engaged in. A company can be doing really well in one area, and then maybe not scoring as highly in another area. So maybe they're doing really well in the worker section, for example, but not as well in the environment section, or vice versa.
Carolina: What this means is that because this is a company level certification, B Lab is not going out there and inspecting all of the factories that suppliers might be using. What they do is they actually rely on third-party certification. So if a company is doing audits of their suppliers, then that can actually be provided to B Lab as documentation for how they are evaluating their suppliers. So I would not go so far as to say that 100% of certified B Corps are absolutely not using sweatshops because the truth is there's too much obscurity in supply chains, as the systems stand right now, for anybody to really have a handle on that.
Carolina: And that's one of the reasons why you do have a lot of these big name companies, say like a Nike type of company, that do run into problems in their supply chains. It's not that they're not trying to do it, but it's that their suppliers work with other suppliers who work with other suppliers who get [inaudible 00:15:31] tier 2, 3, 4, and it just gets very, very murky. That's something I think that in time we're going to start seeing more transparency in supply chains. But as they stand right now, it's not a perfect system.
Carolina: But the reason why I use that as an example is when I work with clients, I can see what they actually are doing to actually try to make sure that they have as much control as they can over their supplier practices, and it's better than companies that are just ignoring what happens in the supply chain altogether.
Michael: Is it becoming economically feasible for a company to go, "Not only do I care about, let's say, the ethics of the issue, but when it comes to ... I want to do this because we think it's going to open up an opportunity to work with other companies," because maybe in an RFP or some kind of contract, they're going to say, "We need to work with somebody who's B Corp certified." Are you seeing places where there's an economic drive for companies to do this also?
Carolina: Yes. And I'm actually seeing that more now, but it's not something that really existed a few years ago. But now I've talked to ... Who'd I talk to recently? One, I think, was a marketing company. Another was an engineering firm where they're like, "Yeah, we're responding to these RFPs, and they're asking us about our social and environmental performance." And in some cases, specifically, the question is, "Is a company a certified B Corp?" So because it is a certification for a company overall, not just one of their products or not just, say, a great place to work award ... Which is great. I don't want to knock that, but that's looking at one very specific [crosstalk 00:17:23]
Michael: It's like one leg of the whole stool type of thing.
Carolina: Exactly, exactly. So a lot of people are using it as a quick way of vetting, like, "Okay, at least this company is on the right track."
Kathryn: Yeah. So just for our listeners, obviously when we talk about entity structuring and things like that, we're usually talking about things that will bring a tax benefit or things that will affect how taxes fall through, whether you're an LLC or an S Corp or a C Corp. So talk to me really quickly, just for our audience, about B Corp as it relates to entity structuring and/or tax value-
Michael: And/or doesn't.
Kathryn: Or doesn't, which ... Yeah.
Carolina: So when we talk about B Corps as we've been talking about them, we are talking about the third-party certification. Third-party certification in and of itself generally doesn't have any tax benefits. I believe that there have been some cases where on a local basis, there have been efforts to say, "Okay, in this city or in this county, the certification can get some type of benefit," but there's certainly nothing that is very widespread.
Carolina: Now in terms of the legal entity, there is also a legal entity called a benefit corporation, which exists in about, I want to say, maybe 33, 34 states, and then also in a couple of countries like in Italy, there's benefit corporation legislation. And benefit corporation is different from C Corps or S Corps in that it is legally embedding into the company's governing documents that it will consider all stakeholders and that it will serve a broader purpose with an eye toward social and environmental performance. And so it is a separate legal entity, but again, in and of itself, there aren't any tax breaks that I'm aware of.
Carolina: Now where it often comes up is people that I talk to will say, "Well, we're already a C Corp. If we convert to an S Corp, how is that going to affect our taxes? Is it going to raise our taxes, anything?" I'm not an accountant, but the accountants, including B Corp accountants that I've spoken to, have explained to me that because benefit corporation is not yet recognized at the federal level, as I mentioned, it's only available in 30 or so states, then when companies file their federal taxes, they can still opt to be taxed as either C Corps or S Corps. So it really has no bearing one way or another on their taxes.
Michael: So to be clear, we've got normal federal corporate structuring of companies. We've got this thing that's floating around in 30 plus states that's called the benefit corporation. What we've been talking about up till now is a third-party certification that's the B Corp. A lot of confusing corporation language there. What does B stand for with the nonprofit B Corp?
Carolina: So the B Corp certification started first, and then there was a recognition that if companies were going to put social and environmental performance on par with financial profitability, then they needed to be protected from shareholders who might sue them because they're not maximizing profits. So it was really coming out of the B Corp certification movement that there was a recognition that there needed to be a legal entity that was aligned, and so that's when work began at a state-by-state level to create that entity. But you're right. It is confusing, especially for people who are hearing about this for the first time.
Michael: Well, any new industry, there's always a play for "How do we define things in the change and the migration?" And sometimes it takes 20, 30, 40 years for an industry to shift like that and get really clear.
Kathryn: Yeah. So B stands for benefit, no matter whether we're talking about the certification or the legal structuring, when it comes to states or countries that have that. That's helpful just to plug those in.
Michael: Has California recognized the benefit corporation yet?
Carolina: Yes. California was one of the first states to actually recognize. I want to say it went into effect early 2012. Patagonia is one of the first companies that-
Michael: Oh, interesting.
Carolina: ... signed up as a benefit corporation. Yeah. And they're also a certified B Corp.
Kathryn: That's good to know.
Michael: So in the midst of all of this, what we see is, I'm going to say it this way, desire for a personal value of caring about all the stakeholders and the environment, creating a sustainability in the business. What does that look like? And figuring out a way to put some benchmarks to this and some measurements to this so that we can also, as a community, hold each other accountable if this is a value to us and everything else. And as time goes on, it's clear that the legislation is starting to move at a slow pace, just like legislation usually does, to also take all of this in. That in itself may be interesting to some of the people because I know that there's some folks that are listening to the podcast that actually they're already doing pieces and parts of this.
Michael: But one of the things that stood out to me in thinking about it was the idea of really that idea that there's benchmarks. When you were talking about the woman in, I think it was HR who said, "We're already starting to do stuff. We're doing more for our employees and everything else," when you have this conversation even at the C level, and everybody's saying, "We want to do more for our employees," there's a lot of opinion. I mean, we've been behind those closed doors and in those conversations where there's a lot of opinions about what does that mean and how much do we do? And quite frankly, we've had conversations at Half a Bubble Out where we close the door and we go, "Okay, how do we improve things for our employees? Okay, well, here's a great idea, blah, blah, blah."
Michael: Well, it turns out that that would be better for the employees, but it actually incurs a greater liability in the state of California for us as a company. And because California is one of the states-
Michael: California is California.
Kathryn: California is California.
Michael: They've got great opportunities, so here's this great idea that we can't enact here because it would just be too dangerous for us as a company. It's like, okay, well, there's a place where treating people fairly and the laws and everything has to match up, and we're in this process, but at least this starts to say, "Here are some benchmarks going around the country." It's international, too. Correct?
Carolina: That's correct. Yeah. So out of those 4,000 plus B Corps that I mentioned, more than half of them are outside of the US. So there's B Corps on every continent except for Antarctica.
Michael: Oh, wow.
Carolina: So it is a global movement.
Michael: Yeah, not, that's fantastic. So then we sit there and go, "Okay, at least we can have something that says an agreement that's a little bit broader than just the four, five, six people in the room at a specific company. What are some ideas that we can do? What are things that aren't going to put us in jeopardy as a company? What are things that are going to actually improve the quality of life for everybody involved?" And I found that that whole idea of the legal aspect, why become a B Corp in some states, the benefit corporation, legally, and that protection issue because if somebody does swing around and say, "You're not maximizing my profits. You're spending too much money trying to shut down our sweat shops, and our sweat shops are making more profit," the idea that legally somebody could sue against that and potentially win in court, those are some really interesting dynamics that I really like. I like how it's giving protection to individuals who actually care.
Carolina: Yeah. I mean, you touch upon a couple of very interesting points there. One, in terms of the legal protection, there was actually a case last year or the year before. I want to say it was in DC, where basically it was a B Corp, benefit corporation, that had this mission where a lot of the funds were going to be provided to a nonprofit. New leadership came in, and basically they were like, "Yeah, we don't need to be doing all of this," and they tried to actually take that part of the company, just dismantle that part of the company.
Michael: Oh, interesting.
Carolina: And it actually did go to court and got settled out of court. It was handled by a B Corp attorney, and it was the first time that that had been tested. Now I'm not an attorney, but what I was told by the attorneys who were looking at this, is saying that there was a case that they settled because if there hadn't been a case, it would've just been dismissed. So it's still something that's very much new, and time will tell, as more tests against it come up, how it's going to change or evolve. But the other thing that you mentioned in terms of the legal issues that individual companies and different parts of the country, or other countries might run into, I think that that's very real. I'm in California as well, and obviously, we have laws here in California that a lot of places don't have. And so there's a lot that business owners need to navigate here that they don't necessarily need to navigate in other places, regardless of whether people are in favor of that or against that.
Carolina: I think that the point that I wanted to make is that even with B Corp certification, even with best practices, it doesn't mean that one practice is going to be perfect for all companies, right? So maybe looking at professional development opportunities, maybe for one company, it does make sense to say, "You know what? We'll reimburse you for our Master's degree," right? There's companies that do that. Maybe for another company, it's saying, "You know what? We can't do that, but we will allocate maybe 1,000 dollars a year for everybody to attend a conference or something." So it's going to look different for different companies, and certainly if there is anything that could potentially cause legal issues, then my standard disclaimer is check with your attorney.
Kathryn: Yeah. So is there a basic size or type of organization that really makes sense to go, "Hey, I really need to investigate this. I really need to dig in. Maybe I'm not Patagonia or Nike, but this would be worth really looking into"? Is there a size or a timeline for a company where that starts to make sense?
Michael: That's ideal or ... Yeah.
Carolina: So any for-profit company can become a B Corp. So that goes from sole proprietors. A lot of times people don't realize that if they're a sole proprietor, they can get certified, up to multinationals, so as long as it's a for-profit company. Now that said, the earliest companies that have been certified do tend to be small service-based companies. A lot of marketing firms, consultants, coaches, whatnot, and so that's just the groups that were first, perhaps that the certification first appeal to. So I would say definitely small service-based companies can look into a certification to see if it's something that's going to make sense for them.
Carolina: What you're seeing now, though, is as we were talking about earlier, there is growth in other industries. So the apparel industry is one area where there's a lot of growth among B Corps, a lot of B Corps getting certified in that space. So that's another area that I would say if you have any listeners that are in that space, it's worth worthwhile for them to consider it. But at the end of the day, there's 150 different industries represented in among B Corps, 75 different countries. It really is for anybody. The only caveat that you do need to be in operation for one year. So if you just started a brand new company, you can start building according to B Corp standards, but you would have to be in operation for a year before you can get certified.
Carolina: And one last thing, I'll just mention the there's an online tool that's used for the certification that helps you assess all of your company's practices, and that's a free tool. So any of your listeners could actually just go to Bimpactassessment.net, create an account, no financial obligation, no obligation to continue. It's basically just a free tool that will help them to explore some of these practices and then actually get some of the benchmarking that's built into the tool. So they can actually get that for free.
Kathryn: So that was Bimpactassessment.net.
Carolina: Dot net.
Kathryn: Okay. We'll put that in the show notes for sure. That's a really good tip because I think one of the questions, if I was a listener, would be, "What are the benchmarks? What does this look like? What kinds of questions are being asked? If I'm a marketing company, do I need to be giving to the environment, and what does that look like?" Whatever. You're like, "What are those pieces and moving parts?" So that's super helpful.
Michael: Yeah, no, I think this is good. This has been a really good entry-level discussion with some details on what is this stuff? I remember us starting to hear about benefit Corps probably, I don't know, seven or eight years ago. And it was just this literally our foundation, our local Northern California foundation we were doing work with, and they were like, "We've heard about this thing. We're not sure what it is. It sounded like it might be a good deal for many of us, or maybe even some of their clients." And then it was confusing to try and even find out. And this was six, seven years ago, maybe even eight years ago. Time flies when you're just busy.
Kathryn: Having time, living the dream?
Michael: So when it comes to that, if you're listening today and you found this interesting, one of the things you can do, go to the show notes page at halfabubbleout.com. Under our blog, you'll find the link for the free assessment. Also, Carolina, how can people get ahold of you and contact you if they want to?
Carolina: Yeah. The best way to do so is through my website, which is cultivatingcapital.com. There's a contact page on there, so they're welcome to just send me a message through there. We also have a lot of information. There's actually a B Corp guide on the website that will provide more information about the impact assessment, the certification process, and we run a B Corp one-on-one webinar on a monthly basis, and that's just a free webinar. We dig a little bit more into the impact assessment and the types of questions that you can expect to see as well as some of the activity that's taking place within the community because at the end of the day, the community that you join is, I would say, probably the biggest benefit of the certification.
Kathryn: That's cool. I think that at the beginning, I failed to mention, so in case you wonder what Carolina's main role in this is, she's actually a B Corp consultant. So her primary job, her day job, her thing she does on a daily basis is helps companies define and create what it looks like to move towards becoming a B Corp and getting that certification. And so she walks alongside those folks, helps people get certified, re-certified, maintain their certification, all those kinds of things. So if you're interested in looking for help specifically about converting your company to a B Corp, Carolina would be a great person for you to connect with.
Michael: Yeah. Thank you so much for coming on today. We appreciate it. It's fun to see you again and to have more to our conversation. I'm glad things are going well for you, and we just appreciate it. Thanks for making the time.
Carolina: Yeah. Thank you so much for inviting me. I really appreciate it. And thanks for helping to spread the word about B Corps.
Kathryn: Absolutely. Super fun.
Michael: Well, if you're listening today, I think you'll realize, if you're a regular listener to the podcast, that B Corp aligns really, really well with passion and provision. We care about values. We care about the fact that we're creating an amazing culture with a great bottom line and actually contributing to the community, the immediate community we are in and the larger community that we're a part of, which in today's world seems to continue to spread, really, literally around the world with the relationships we are all building.
Michael: So if you need anything else, want to find out any more information, please go to our website, halfabubbleout.com. Share this podcast with any of your friends that you think would be interested in them, and hit that subscribe button. I'm Michael Redman.
Kathryn: And I'm Kathryn Redman.
Michael: And this is the HaBO Village Podcast. Thanks for coming today. Bye-bye.