Beth Lambert, CEO of Herbalist & Alchemist in Washington Township, decided to have her company certified as a benefit corporation by B Lab. The state passed legislation last year to offer legal recognition for her company's efforts to help the environment and society, but the program is still young.Beth Lambert’s business won’t print a catalog until someone orders one, employs a lot of women and makes sure all its workers have health benefits.
Each one of these facts has helped Herbalist & Alchemist, Lambert’s natural extract manufacturing company in Warren County, maintain its status as a "certified B corporation."
The "B" stands for social benefit. B Lab, the Berwyn, Pa.-based nonprofit that grants the title to qualifying businesses around the country, has enrolled more than 500 firms that want to validate their simultaneous pursuit of profits and the greater good. New Jersey passed a law to legally recognize benefit corporations last year, but Lambert said she’s content to use B Lab’s standards for now.
"For many years we’ve been looking for a third party that confirms that we are trying to run a socially meaningful and sustainable business," she said. "I think everyone is trying to say they’re doing something like that. There are a lot of words out there and it’s hard sometimes for consumers, and potentially investors, to sort it all out."
Her company underwent its first B Lab audit over the summer and could be randomly selected for one every two years. The assessment included an exhaustive questionnaire and required Lambert to make Herbalist & Alchemist’s financial records available during an on-site visit.
"I had a team of five people working for several days in advance, because we had to actually sit down and figure out how to compile all the info. We had it, we just don’t keep it in a form that they wanted to see," she said. "In the end we had a stack all indexed with sticky notes and several inches high."
It hasn’t revolutionized the way she runs the business or won over dozens of new customers, but Lambert said she thinks being a benefit corporation is worthwhile.
The extract manufacturer deals primarily with people who grow their ingredients and the natural medicine practitioners who buy them. Suppliers and buyers alike have expressed their appreciation for the company’s social responsibility, Lambert said, and she expects that it would help the firm impress investors if there were ever a need to raise outside capital.
Four companies in New Jersey currently participate in the B Lab program and voluntarily undergo assessments to preserve a happy and healthy marriage between their profits and their mission. The nonprofit claims its member companies earn $2.9 billion in revenue, represent 60 industries and save $2 million annually by making socially and environmentally responsible business decisions.
While no multinational conglomerates have gotten on the benefit corporation bandwagon yet, Seventh Generation, a Vermont-based natural household products manufacturer, is one of B Lab’s largest members and a founding company. The firm sell its cleaners and personal care items in major retailers like Stop & Shop, Target, Wal-mart and ShopRite.
New Jersey one of seven states to grant benefit corporations some legal recognition and create its own methods for gauging how effectively they help the community. The recently enacted law also protects businesses from investor lawsuits when environmentally sustainable or socially responsible decisions don’t maximize profits.
Companies interested in registering with the state as benefit corporations don’t have to join B Lab’s program, but they do have to follow some rules.
A company must appoint a benefit director and submit annual reports that assess how effectively the business has supported its mission. The legislation didn’t collect one vote against it during its one-year journey to the governor’s desk, but it’s still hard to quantify its impact.
"It doesn’t look like there are a lot," said treasury department spokesman Andy Pratt. "We expect it to be a very small number of people of filing reports this year."
Several businesses include language in their articles of incorporation that make them sound like potential benefit corporations, Pratt said, but the state won’t know for sure until it receives reports in April.
That doesn’t mean there isn’t a growing number of people who want to use their entrepreneurial powers for good.
"Sometimes it takes a while for people to understand the benefits. With an entity like this, it clearly gives the shareholders and board more ability to look at factors other than shareholder value," said Sen. Thomas Kean Jr. (R-Union).
"That change brings tangible benefits to the corporation because it allows for people to potentially advance a cause about which they care or bring factors that are hard to quantify only in dollars or cents into the corporate decision making process," he said.
Kean was among 19 legislators to sponsor the bill (S-2170) when it was introduced in 2010.
Whether they choose to work through B Lab or the state, social entrepreneurs need to establish legitimacy, said Jeffrey Robinson, assistant director of the Rutgers Business School’s Center for Urban Entrepreneurship & Economic Development. He teaches a social entrepreneurship course and has organized an institute that nurtures burgeoning nonprofit-business hybrids.
There’s been growing demand from investors and philanthropic organizations, he said, for ways to detect when a business owner’s goals are nothing more than optimistic lip service.
"What we’re trying to do in New Jersey is focus them on these legitimate benefit companies," Robinson said. "The purpose of these companies is to make a profit, but to also have a positive benefit on society instead of making the profit-making the primary priority. Investors put money in, but they realize that the profits of this company are secondary to the social benefit."
Stacy Jones: 973-392-7969 or stacy_jones@starledger.com.