How B Lab does business better
On this special episode of The CMO Show, Marks sits down with Andrew Davies, CEO of B Lab Australia and New Zealand to discuss the organisation behind the B Corp certification, the difference between transparency and accountability, and why they won't stop until all business is a force for good.
“To earn credits in the B Corp world, it's not enough to get to the end of the year and have the CEO decide to write a bit of a cheque, it actually has to be baked into the business model.”
For Andrew Davies, CEO of B Lab Australia and New Zealand, the biggest single lever that any business can pull to create positive impact is literally the way it runs its business. Every decision made every day have a significant impact on B Corp certification.
B Lab, the organisation behind the B Corp certification, is a response to ‘what does different look like?’ - it’s a framework for creating change. Practically, it’s a trust mark that certifies high performing businesses that hold positive principles. For Andrew, it comes down to trust and accountability.
“We're recognising that if we operate businesses with no real accountability, we end up in a pretty bad place, and therefore we need to do it differently,” Andrew says. “It's not enough just to solve a problem in the first way that we've chosen to solve it. How could we better solve the problem, or what other problems are we inadvertently creating?”
Andrew believes there’s a real shift happening across business, describing a generation of entrepreneurs emerging who see the for-profit business as a great way to raise capital quickly to better solve the problem that they want to solve, and hopefully make great returns along the way.
“One of the phrases that we've used in the past ourselves is this idea of balancing purpose and profit,” Andrew says. “And I personally don't like that, because I think we're increasingly seeing evidence that a well designed for purpose business model can be very profitable, and I hope they are.”
Impact is something that has become increasingly mainstream and more than a ‘nice to have’. Andrew says, “Impact, in terms of actual consequences of your actions, is something that every individual business needs to think about. What is the impact that we want to have, and how might we measure that?”
So how do we articulate ourselves towards impact? Find out on this special bumper episode of The CMO Show.
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Credits
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The CMO Show production team
Producers – Candice Witton
Audio Engineers – Ed Cheng & Daniel Marr
Got an idea for an upcoming episode or want to be a guest on The CMO Show? We’d love to hear from you: cmoshow@filteredmedia.com.au
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[Transcript]
Participants:
Host: Mark Jones
Guest: Andrew Davies
What does different look like?
In a world where the lines between profit and purpose are increasingly blurred, the idea of a corporation and a for-profit business can be seen as just a mechanism to go solve a problem.
And where historically this area might have been left to the not-for-profit or the charity sector, or even left to government we are seeing is starting to shift with the Impact Business Model.
And the response to that is big brands saying, "Well, heck, how do we play in this space? How do we articulate ourselves towards impact?"
Hello friends, Mark Jones here.
Welcome to The CMO Show. It's great to have you join us.
We have a very special episode for you today. It’s a bit of a bumper episode as I’m joined by Andrew Davies, CEO of B Lab Australia and New Zealand.
You’ve probably heard of B Corporation, well B Lab is the organisation that sits behind it. Essentially B Lab are the experts and stakeholders who evaluate businesses that apply for B Corp Certification.
Andrew has a remarkably diverse background, spanning a wide range of different industries giving him a unique perspective into businesses that are trying to create a positive impact in the world.
We have a lot to cover and we explore impact measurement, brand authenticity, the difference between transparency and accountability, and impact storytelling.
I hope you enjoy.
Mark Jones:
Welcome to the show, Andrew.
Andrew Davies:
Thanks Mark. It's really great to be here.
Mark Jones:
Look, I've got to say it's a pleasure to have you. We, of course are a B Corp ourselves, big fans of the movement, so I'm thrilled. I'm thrilled to have you with us. And in fact, we have just done an interview with Who Gives A Crap, which is another fellow B Corp. If you haven't heard that one, go and check it out. So, look, we're on a roll here. Tell me a bit about yourself and how you came to be in the role as CEO?
Andrew Davies:
It's a bit of a long and strange story, Mark, and I'll spare you the long version. But, look, I have got a background in business. I started off as a corporate lawyer way back when, worked through a couple of firms and ended up in a listed automotive business, which owned a few different businesses itself and was really a good early experience in my career of some of the challenges of being in a listed environment with all the short term expectations of a market chasing returns and a business that had probably set overly high expectations on growth. So, from the inside I saw some of the pressures that that brings, but I also learned an awful lot about how a big business works. But then I took a bit of a different step.
Andrew Davies:
My father-in-law became quite ill, so I stepped in to help my wife with a family business, and that turned into a 10 year journey of working with my wife, starting a couple of businesses, then working with a different business partner. And I sort of found myself having worked through winding up a family business and having carriage of a multi-generational perspective was a big shift from the listed short term perspective. And then starting my own businesses as well, brought a new lens on what being accountable is all about.
Andrew Davies:
So, it's a bit of a funny journey, but I was fortunate to land in this role in 2019, and it's been honestly the best work of my life. It's an amazing organisation and a really interesting space at the moment.
Mark Jones:
Well, look, I think there's a book in that by the sound of it. We’ll park that for you to write that, and we won't do that now. But I think one of the things I'm taking out of that very brief recap of your history is the diversity of experiences. And I imagine that's a nice perspective to bring into the work you're doing? Clearly there are thousands and thousands of B Corps around the world. The diversity there must be just mind boggling. What's your perspective on being the CEO, looking at such an array of businesses? I guess what's it like from your side of the fence, looking out at all these organisations trying to change the world?
Andrew Davies:
Look, I mean it's an enormous privileged market. It's at a great space to work. And the businesses that we have in this community are honestly, they're inspiring, they're energising, they bring a lot of hope for change and a lot of energy to our central mission, which is about creating change in our economic system. And we might come back to that one, I'm sure. But for me it is very challenging, and that experience of having worked in different size and shaped businesses definitely helps.
Andrew Davies:
It's not something I had planned as a career, but it's helped enormously in terms of just having empathy for people in different situations and different cycles of their business itself. So, businesses typically grow and they start off often quite small, and you're in that kind of hustler mindset and B Lab itself has gone through that. We've grown quite significantly since I've been in this role in this region, and we're growing globally as well. So, I think having that empathy for different forms of business has proved really helpful.
Andrew Davies:
But mostly I just still pinch myself and wonder how I ended up here, because B Corps are really building a bridge to the next economy. They're businesses that are showing what's possible to create a more sustainable economic system. And it's just fantastic to work with them.
Mark Jones:
I've got to say, that does sound really inspiring. So, for the benefit of people who don't know, so you've got the B Lab, which is the organisation itself, both here and overseas in America, and I imagine globally. And then there's the B Corp itself, which is the certification. Can you just very briefly give us a picture of what you do?
Andrew Davies:
Yes. And I suspect your audience is saying, "Geez, that's a pretty confusing brand proposition." And it's at times not particularly helpful, but look, B Corporation is the central brand that we are known for, but the organisation that sits behind it, yes, is called B Lab. And we have different B Lab organisations in different parts of the world, and we operate as a global network. So, we do have our own structure here where we're structured as a not-for-profit in Australia and Aotearoa in New Zealand, and different B Lab organisations in different parts of the world are structured in different ways.
Andrew Davies:
But B Corporation as a brand we're best known for, and it's a trust mark, and we offer it by certifying businesses to confirm that they meet our standards. So, B Lab itself also engages in a few other things. We offer programmes, we work with consultants, we often work with governments around policy issues, and the best way to think about what we're trying to do is we are trying to change the economic system by working within it. And I don't think it's too controversial to say that our economic system has been a pretty significant driver of a lot of harm, but also is really falling very short of its potential to create significant positive impact.
Andrew Davies:
And our work at B Lab really rests in driving change. So, we think about that on three levels. We focus most obviously on behavioural change, so what businesses do, and we set standards and we have tools that businesses can use to literally change the way they operate, so their business behaviour. And the highest performers might want to go on and get certified, which is an exercise in us verifying their performance and giving them that trust mark. But we also participate in spaces around cultural change. And, most obviously, that's just a conversation about the role of business.
Andrew Davies:
And I think many of your previous episodes really speak to this. We are going through a very significant change in expectations on business, what we think the very structure of business should be about. And then thirdly, we operate in spaces around structural change. So, we try and translate the work of businesses and the way they behave and the conversation around the role of business into actual reform of the structures that underpin business. So, that's the companies that we operate, the director's duties that we have to abide by, and the regulatory regimes that governments impose on business, that's another significant lever of change.
Mark Jones:
So, one of the challenges with speaking with you, there's about a hundred different ways we could go in our conversation and you've just touched on structural change, economies, certification. And also, I'm keen to talk about how we understand the storytelling aspect of what you do. In other words, how do you market the certification itself? How do you invite more people into your story? So, there's lots of different ways.
Mark Jones:
Can you just help locate B Lab and the global B Corp movement within this other broader set of influences and really movements around ESG, there's the social impact movement, there's lots of causes out there that are effectively trying to achieve similar goals such as yours. How do you see that within the ecosystem, and how do you make sure that people understand why you're different?
Andrew Davies:
Well, I think it's a challenging proposition, but it shouldn't be. The reason I think it's challenging is that we are in a very busy space at the moment in terms of these broader conversations around impact and the role of business. But you can probably start off going back not that far, only about 50 years ago, when Milton Friedman wrote an essay in the New York Times in the US talking about the social purpose of businesses to make returns for shareholders.
Andrew Davies:
And he gets a little rough end of the stick, Milton, because of course he didn't define this himself, but it was a pretty significant piece of thinking, and it was part of a few others at the time. But it really has become the dominant paradigm in the modern corporation that the role of business is to provide returns to shareholders, and it's become effectively the fig leaf, if you like, that business leaders wheel out when they've essentially done something pretty dreadful, or they've caused a problem.
Andrew Davies:
And it's like, "Well, we're providing returns to shareholders and it's up to regulators to tell us what not to do." But the reality is so much harm has really been caused under that pretty low level of accountability, that spirit of only being accountable to the bare minimum of what you're told you can't do. And I think as we start to experience those consequences, there's been some real conversations around how that idea is not sustainable, nor is it particularly necessary in the sense that there's very few Western legal systems that actually require that of business leaders.
Andrew Davies:
It's a very complex area of law, but at the same time, it's quite a simple set of principles. Your main responsibility is to act in the best interest of the company. And what we are seeing now is a pretty significant rewiring of what the best interest of a business is. And the best way to look at that is to recognise that what might be in your interest in the short term is increasingly not in your interest in the long term, and business leaders are grappling with that. I think that you can see that through the growing awareness of a climate crisis. And then obviously most recently, in the last two years, we've seen a huge shift on some of the orthodoxies that have become normal business practice have completely changed in the wake of a global pandemic.
Andrew Davies:
And that's issues like long versus short supply chain. So, it is a busy space, but I think you can really ladder it up to a pretty simple concept, which is we're recognising that if we operate businesses with no real accountability, we end up in a pretty bad place, and therefore we need to do it differently. And B Lab is a response to that idea of, well, what does different look like? How do we do business differently, and how can we demonstrate to others that different ways of doing business can actually be successful?
Mark Jones:
And without getting political, it is political because it also taps into schools of philosophy and thought around how to best govern and run not just organisations, but countries and societies as a whole, right? And so that's, I think, why for some people it's quite disruptive and affronting, as you're pointing to. So, I think maybe we can just take that debate offline a bit more, but I think it's interesting to understand that this is not just a good thing to do, it is the thing to do, if you believe that social change will only be affected by organisations that do a good thing. In fact, I think you've got this great line on your website, "We won't stop until all business is a force for good." I love that line. That's effectively a summary of your intent, right?
Andrew Davies:
Yeah, it is. And it captures a pretty important part of our philosophy, which is that we really look to recognise businesses that are designed for positive impact. The early kind of thinking, especially people are pretty familiar with the space of ethical investing. And in the early days it was a lot to do with what we won't invest in. So, we won't invest in harm causing industries. And I think in the early days of corporate social responsibility in businesses, there was a growing awareness that there were certain things we just shouldn't do. And then there was also an awareness of, "Hey, we're making some profits here, maybe we should allocate some of those towards something good. So, maybe support a charity or do something on the side."
Andrew Davies:
But the biggest single lever that any business can pull to create positive impact is literally the way it runs its business. So, every single decision that it makes on every day has a significant impact. And if it changes the way it makes something, or the way it distributes something, or the way it employs people, businesses can have far more impact than they can donating a bit of money on the side, which don't get me wrong, is a wonderful thing to do. But really thinking deeply about how can you make your business have positive impact on your stakeholders, is that, I think, new paradigm that you are talking about when you say it's becoming the central thing.
Mark Jones:
Yeah. I mean this has gone from being a nice thing to have, to being mainstream, for want of a better phrase. I wonder, let's say a listener is thinking about B Corp. Now they're not a B Corp and they're interested in becoming one, one of the questions that I've actually come across in my own experiences, leaders will say, "That's great, but what do we get out of it? Yes, we want to do a good thing, but what can we expect in the short to medium term in terms of benefits to our community, to our staff, and then to the bottom line? Are we signing ourselves up to wash our profits away? Or can we expect our profits to get bigger?" What's generally the sort of experience and the value that's derived from being a B Corp?
Andrew Davies:
It's such an interesting conversation to have, because the reality is, of course, like many things that you can do with your business value is very much what you want to obtain from it and what you choose to obtain from it. I think that breaking it down in a few different ways, the B Corporation logo is a trust mark. So, in the same way that you might want to put a Fairtrade logo on your coffee, you are telling your customers that this coffee's been grown and purchased in a certain way that the Fairtrade organisation has determined to be fair and reasonable.
Andrew Davies:
And B Corp is a trust mark, but it looks holistically at the whole of your business. So, our assessment looks across your entire value chain, including your local community impact, the way you employ people, your business model itself, your governance structures as well as, of course, your environmental footprint. But I think it really diminishes the conversation to say, therefore the value is it adds value to your brand by stamping the B on your packaging or on your website.
Andrew Davies:
Because the reality is that's just the starting proposition, and the clearer value is about creating change. So, we talk a lot about B Corp being a continuous improvement journey, which is one of those sort of fairly buzzy things. But the idea is that it's a framework for creating change. So, it will ask questions of your business across that holistic framework, that you probably haven't thought about. Most businesses tend to be pretty good on some of those questions, some of those areas of our assessment, because they've focused on that. And it might be that they've really tackled their environmental footprint, but they probably haven't thought about their governance model or their employment practises for some time, and that's okay.
Andrew Davies:
So, it's that framework that enables you to think about what can I change now? And then what can I be thinking about changing in the next few years as well? And by achieving certification, you're holding yourself accountable to that. So, the central value proposition is around accountability, and it comes from a value that businesses who become certified hold pretty dearly, which is that they want to be accountable. They want to step up and say, "Hey, I think I'm pretty good in this area, but I want to be accountable to an external standard, and I want to be accountable to a framework that will make me better in the future."
Andrew Davies:
Now, of course there's lots of data in Australia particularly, we get lots of feedback that the there's lots of value in terms of engaging your employees, building customer loyalty. But I really think it starts from that central proposition that people come to us saying, "I understand I might get some other value down the track, but I want to be accountable, and I want to be accountable to a very credible set of standards." So, that's really where it starts.
Mark Jones:
Yeah. So, on the basis that you want to affect change or enable change, this is also a driver of change, if you like. It's that accountability piece. So, there's a lot going on there. I wonder what's the role of impact measurement in all of this? So, as a trust mark, in order to get that trust mark, clearly there's a certification process that you've developed as a framework for measuring the impact that you are, as an organisation, having on the world and your people. Can you step us through that? And obviously there's the key components of what you're measuring. And I'd just like to unpack that a little bit, because I think this is where the rubber hits the road.
Andrew Davies:
And look, impact is also a bit of a tricky buzzword these days, isn't it? The way the framework works, you can think of it as an architecture. So, you earn points based on how well you are designed to match a set of standards. And I think it's a really important distinction that we put a number on that. So, you have to achieve a certain benchmark in order to apply to be certified. And it's quite a high, the number is 80, that's a bit meaningless, but the reality is most businesses land somewhere in the 50 to 60 point range. And they have to work pretty hard to get to the 80, which is what we want, because when I say work hard, they have to change what they do to improve their performance. But that number itself is just a representation of how well are you aligned with our standards?
Andrew Davies:
What I think is really important for any business to think about as well is that impact in terms of actual consequences of your actions is something that every individual business needs to think about. What is the impact that we want to have, and how might we measure that? And that goes even beyond the B Corp set of standard, that goes into really thinking about what is the purpose of our business? How have we articulated that? And then how might we measure that? And that can be quite challenging concepts like the wellbeing of certain communities.
Andrew Davies:
And you have to come up with different ways to measure that. The B Corp assessment overall gives you a sense of how you are performing to our standards. But if you've got a specific outcome that you want your business to achieve, there is so much interesting work in this space at the moment to help businesses figure out what is the impact I want to have, and how can I do that, and how can I measure it? So, there's a lot of growth in this space at the moment, but I think that the difference with the B Corp framework is that it gives you the architecture to build on, but you still need to have a sense of what impact you want to achieve.
Mark Jones:
Yeah. And, look, I really like the way that you express that in terms of your alignment to a set of standards or an approach that you've got to understanding that, and then obviously this doesn't stop. You've started the metaphorical ball rolling down the impact hill. I don't know where that came from, but you have to stay with it. So, one of the things that we talk about, because we're an impact advisory, we work with organisations to understand the measurement component.
Mark Jones:
One of the biggest things, just to address that comment about the impact being buzzy, I think unfortunately I do see this conversation becoming a little bit like the greenwashing of old, which is that, yes, we've got a purpose, but look at the impact we're making. But there are a lot of claims being made that are not properly substantiated, or perhaps slightly misleading. I think sometimes not with harsh intent, or deliberate intent, but really just not understanding what they're saying. And so what I mean by that is that we've got inputs in our organisation and resources and time, we've got the outputs, which are our programmes and stuff that we do in the world.
Mark Jones:
And then we start measuring what are the outcomes, short to medium term? And this is sort of where the B Corp plays, right? You're looking at what are we doing and how are we seeing that in the short term? And then the impact comes in the long term, it's this long term sustained positive changes, is our impact definition. And that's where you've decided these are the indicators we're going to measure. This is actually what we're going to hold ourself accountable to. There's lots of different ways of looking at that whole universe, but I was really interested to understand how you saw that, because really you are providing some of the inputs and the framework and the standards for helping organisations do that.
Mark Jones:
It's really like a really key component of having that broader awareness that we actually do change the world through the decisions we make. We can make poor sourcing decisions, for example, we can make good sourcing decisions and so on. And so what's your perception of the broad awareness around impact, and if you like, the proper definition? Because I think that's one of the things at the heart of this conversation. We want to know that we are making the right positive impact, because you can go in the wrong direction, can't you?
Andrew Davies:
It's a really central challenge that I think business leaders are facing, many marketers are absolutely facing. And to a certain extent, one antidote to greenwashing is to say, "Well, we're going to hold ourselves accountable to a third party set of standards." And I think that's a really valuable path. Of course I would say that, wouldn't I? But I think that is one really valuable way to build credibility in a conversation, is to say we want to hold ourselves accountable to what we think is right. And whether you choose the B Corporation model, there are others, whether you choose to get other trust marks like a Fairtrade certification for your raw materials, they're all different ways to say we don't just want to make claims, we want to be accountable.
Andrew Davies:
So, those third party frameworks, that's where they become really important. I think there's a nuanced distinction to be made between reporting, which is about transparency, which is a wonderful thing to do, but that doesn't necessarily take you far enough. So, being transparent about what you do is great, but being accountable for what you claim to do is a little bit different to that. So, that third party accreditation is a really good antidote to greenwashing, but there's another one too. I think that we talk a lot about authenticity, especially when it comes to brands, and it's such an important conversation.
Andrew Davies:
And one of the best antidotes to greenwashing, I think in a marketing sense, is that if you find yourself making a very, very long stretched claim and you think, "Oh, this is danger territory," it's probably because you are effectively trying to boast about something. I think some of the most powerful claims or conversations that companies have are not about what they think they're great at, but what they think they're not good enough at yet. So, when a company talks about where it wants to be better, your risk of steering into greenwashing territory is incredibly low, because you are already talking about what you are not necessarily good enough at in your own eyes.
Andrew Davies:
But the second thing that happens then is that people will instinctively want to help you be better. You've just said to the world, "This is where we need to improve. How can we improve?" And I think this is what I find really fascinating about so many B Corps is that they obtain B Corp certification out of a spirit of wanting to be accountable. It builds authenticity through this credible third party set of standards, which allows them to then shift into this space of having the confidence to talk about what they're not good at, because they know they're good at some things.
Andrew Davies:
And it's a really interesting shift when companies become B Corp certified, they suddenly have this sense of confidence of, "Hey, I feel more comfortable now speaking about maybe the areas I need to be better at." And when you do that, you are very much out of the greenwashing space and you are into the space of creating real change, and people come on that journey with you. This is where true loyalty is built, I think, with employees and customers. It's not when you are bragging from the rooftops at the particular programmes that are awesome. It's when you're saying, "Hey, I'm trying to be better over here. Can anyone help me?"
Mark Jones:
I love that.
Andrew Davies:
I think that greenwashing is, we also run the risk at the moment, I think, of throwing the accusation out a little quickly. It's interesting to see that regulators are moving in this space in Australia, the ACCC, and in Aotearoa, the Commerce Commission is getting more interested in starting to really challenge claims, which I think is a great thing. But as consumers, or customers, or business partners, you've also got to think about intent if a company is genuinely trying to do something better. I do think we run the risk of throwing those accusations out a little too quickly.
Mark Jones:
Not stopping to ask enough questions. So many reflections on what you just said. The annual report is where I see this most egregiously, particularly calling annual reports an impact report, or even just separately publishing an impact report and really only talking about what we've done. And the things that we've done would be this many meals delivered, or this many people cared for, this much money given away, which really are outputs. And you might say that maybe these people's lives are changed in a certain way, and you can start hinting at outcomes and so on, but really not being able to show what change in your language that you are actually affecting.
Mark Jones:
And then of course you are pointing out this report card concept, which is to say this is the difference we are making, and this is where we are not yet realising our vision for change, these are the gaps, and publishing it in a more transparent way. I don't see that very often. And I think it's probably a much healthier way to look at this big conversation. There's probably other ways of expressing this too, but is that something you're seeing particularly in the B Corp community? You're seeing more people being transparent about where they're not coming up as well as they'd like to?
Andrew Davies:
Absolutely. And I think we're seeing it across wider businesses. I mean we're at a time when there's never been a greater expectation on business leaders to take a position. And you were talking with Mia Bacarro from Ben & Jerry's recently, and I listened to that conversation. It was fascinating. And some brands like Ben & Jerry's are well known for taking particular positions and really leveraging their brand power to have a conversation. And even those brands, or maybe particularly those brands, are then often challenged, what about this? Or what's your position on that?
Andrew Davies:
And I think there was a time not that long ago, where business could comfortably say, "That's not our business," but that's getting harder and harder for brands to stay out of the fray, or to try and stay in the space that they've decided they have some credibility to speak to. And, again, what gives you a superpower there to really participate is having the confidence to know that what you do well, you do well, the space that you want to play in you've got credibility in, which comes from consistency and authenticity over a period of time.
Andrew Davies:
And having them the confidence to say, "Well, I don't know the answer to that question, but it's a really fundamentally important question and I'd love to hear from people that do know more." And, again, it's just so long the orthodoxy of business leaders was that you couldn't admit you didn't know something, or that you didn't have a position, but I think that's becoming a really important part of this as well. So, hugely important to show that impact reporting. But even if you create the world's greatest impact report and you really very carefully track the impact that you have as a business in terms of the negative aspects, the impact that you have in terms of the positive aspects of what you want to do, you're still going to get pulled into a conversation that you might not have thought you had any role in.
Andrew Davies:
And that's the pressure facing business leaders and brand managers at the moment, is where are those safe spaces? And I think it's a really difficult time, but when you see brands respond the right way, you know it when you see it. So, Who Gives A Crap during the early days of the pandemic in Australia when we had those ridiculous toilet paper shortages, which seem so funny now, but they were pretty serious business at the time. Who Gives A Crap took that as an opportunity to lead with two real messages. One, they had this lovely message of, "Guys, our supply chains are fine across the industry. This will bounce back. It's not a structural problem. It's a bit of a short term thing. So, first of all, we'll all be all right. You'll be able to wipe your bum."
Andrew Davies:
But then secondly, they used it as an opportunity to talk about their mission and to point out that if you did buy their toilet paper, it has an immediate impact in terms of their mission for solving some of the world's sanitation problems. And they did it so beautifully as an opportunity to kind of bring their conversation to the front when they had the microphone. They were given the microphone, they had this moment. That was a beautiful time for them to talk about what they wanted to talk about. And they can do it with credibility, because they've done the work, they've done the impact reporting, they know what their impact is.
Andrew Davies:
So, I think that there's a foundational piece as well for businesses who do that work. It might not translate immediately, but if you've done the work in that annual report and you've held yourself accountable, it pays a dividend later as well.
Mark Jones:
There's a lot of confidence that comes with that approach, right? You can step into those moments knowing you've got a good, healthy perspective.
I note that there's this thing called the impact business model. And as a former technology journalist more than a decade ago, I also know that that stands for IBM, the company, right? The tech company. But Who Gives A Crap, I think is an IBM, right? So, it's a structural approach to giving 50% of your profits back. Can you contextualise that for us? Why is that important? Are you seeing more companies heading that direction, given what we've just been speaking about in terms of the orthodoxy and picking up on that word you've used a few times? It seems like is IBM the, if you like, structural approach to changing the orthodoxy of how we think about capitalism and business?
Andrew Davies:
Yes. And I think we're seeing so many interesting examples of this. And I think, again, it's to generalise a little bit, but we're also seeing a generation of entrepreneurs coming through who really see the for profit business as a great way to raise capital quickly in order to better solve the problem that they want to solve, and hopefully make great returns along the way. One of the phrases that we've used in the past ourselves is this idea of balancing purpose and profit. And I personally don't like that, because I think we're increasingly seeing evidence that a well designed for purpose business model can be very profitable, and I hope they are.
Andrew Davies:
Because, again, it gets into the Simon Sinek territory here, but profit's not a dirty word, it's the fuel that drives a business and it creates scale. So, to come back to your point, an IBM in our world is something that we recognise in our standards, and it's a way to earn points, where a business has actually been designed to have impact. And not to pick on lawyers, but if you're a regular law firm and your business is providing advice to other businesses, let's say, that's absolutely fine. To earn credits in the assessment you'd have to have some really strong operational practices.
Andrew Davies:
But if your business has been specifically designed to provide legal advice to disadvantaged groups, maybe people who are working in indigenous enterprise, or even the not-for-profit sector, then you might earn some more credits, because you're actually designing a business to help solve a problem. In Who Gives A Crap's case, one of their impact business models is they've got a locked in profit donation mechanism. And, again, to earn credits in the B Corp world, it's not enough to get to the end of the year and have the CEO decide to write a bit of a cheque.
Andrew Davies:
It actually has to be baked into the business model as Who Gives A Crap has done. It's very much built into their legal structures, this approach to donating money. So impact business models we're seeing it as well very much in the recycling and reusing space where businesses are designed to capture an externality of an industry and turns it into a new product. So, that's, again, another example. Or businesses that are changing the way we approach manufacturing and existing product to reduce toxins or use more organic.
Andrew Davies:
So, there's lots of different examples, but I think the bigger picture here is that there are people who see the idea of a corporation and a for profit business as just a mechanism to go solve a problem. And I think that's, again, an area that historically we might have left to the not-for-profit or the charity sector, or even left to government. And it's really interesting to see they, I think, start to shift. And the response to that is big brands saying, "Well, heck, how do we play in this space? How do we articulate ourselves towards impact?"
Andrew Davies:
And at times that can look a little clunky, but the big picture, again, is we're seeing a shift that will help us, I think, meet some of the challenges we need to meet as a society.
Mark Jones:
I'm just picturing some lawyers and people who are responsible for risk, really twitching all over the place when it comes to assessing how you might adopt an approach like this, when obviously the risks are pretty quickly evident if you are at the very beginning of the journey. How do you approach that conversation?
Andrew Davies:
I'll try and keep this as the CMO show, not the get into the Chief Legal Officer territory.
Mark Jones:
I'm leaning on your legal background here, I think.
Andrew Davies:
Yeah. Well, look, I think, again, it's really interesting to go a little bit further back in history and recognise that the first corporations were created with very specific mandates. So, they were given a job to do, their investors were given limited liability. And what that meant was that you could invest money, you might get a return, or you might not get a return, but no one could come back to you as an investor and claim that you were personally liable for the consequences of the business. And that's really the underpinning of every modern business that we run. But back in the day that was some of the early examples were the East India Company in the UK, whose job was to go pillage around the world on ships on behalf of the Crown. And it made spectacular returns for its investors.
Andrew Davies:
And then the railroads in the US as well were given a specific job of really building railroads to help build America. And the bargain was they were allowed to sell land and raise funds, but their job was limited to building railroads. And so I think I am coming back to your central question here, which is the modern corporation is untied to any mandate, any purpose. It's allowed to really do what it wants. And I think the trick to this is to say, "Well, hang on. If you want to manage risk and think about what are the responsibilities of particularly the directors in management of a modern business, we need to give that business a clearer sense of purpose and we need the shareholders to sign up to that and endorse this purpose."
Andrew Davies:
And it can be quite specific, or it can be still quite general, but that's the DNA of a company. That's what that bargain is between the shareholders and the directors and the management, determines what the management can do in running the business. And at times when you're a founder, you might be all three of those people, or if you're running a small business. But as you grow a business, those distinctions become important. And, again, without going down this rabbit hole too much further, there's a central part of becoming a B Corp that means you have to bake into your company constitution a commitment to operate for an overall public benefit and to consider stakeholders in your decision making.
Andrew Davies:
Now, what that looks like in practice is what most B Corps are already doing. They're thinking about who do I impact? How can I engage with them? How can I give my employees a say in what goes on? So, it's very contemporary business practice, but it's thinking about how can we reconnect that into the structural underpinnings of a modern company?
Mark Jones:
Well, to start pushing us more towards the marketing side of the universe, which you kindly pointed out, I think the reason why I ask about the whole risk piece and the structure of this, we can't tell the story of an organisation without really understanding its DNA, as you point to that core essence, the regulation. We need to have a really nuanced understanding, otherwise we can't position, we can't differentiate, we can't act in ways that are consistent with that core purpose.
Mark Jones:
And so what has been your experience watching organisations grow and evolve? How are you seeing them, I would call this impact storytelling, which is they are recognising that the choices they've made are making a difference in the areas they've chosen to play. So, what's your experience been like? And I think to be practical, what are some good tips and some best advice you can give to organisations who are in that place of being able to really shout it from the rooftops?
Andrew Davies:
Well, I think step number one, if you want to shout anything, make sure you're credible and accountable. Again, we get into dangerous territory as marketers when we don't have that accountability in place. I could probably answer this thinking about what's happening within the B Corp community, and the B Corp community's been around globally for 15 years, and in Australia since 2012. And it really has started off with quite small privately held businesses that tended to be pretty high impact. And good examples of businesses people resonate with is Australian Ethical Super, one of the innovators in ethical investment for people's superannuation.
Andrew Davies:
Keep Cup. Keep Cup's founder, Abigail Forsyth, is an incredibly passionate person who's got a very clear mission to reduce waste from disposable coffee cups. And that's a good example, because what you've seen is her businesses has grown successfully as a global business. She's kept questioning, well, what about the products that she's creating, how can they be better? And she's moved into different materials of production. And I think that's an example of a business that has grown being true to its mission, that forces us to keep asking itself questions about, could we be better ourselves?
Andrew Davies:
It's not enough just to solve a problem in the first way that we've chosen to solve it. How could we better solve the problem, or what other problems are we inadvertently creating? So, that idea of growing, but having as your true north this idea of a mission or a purpose, again, this is not new thinking, right? Purpose has been around for a long time, mission statements and vision statements. There's beautiful ways to create these. And again, Simon Sinek does a great job and The Infinite Game talks about the just cause. Tim Duggan wrote a great book called Cult Status. He's a Sydneysider that talks a lot about an impact statement versus a mission statement.
Andrew Davies:
And I won't go into those, but they're really good ways to create an impact statement. The trick is to then say, how do I build a business that is true to that. And then how do I get beyond the superpower that a founder has? Founders can do what they want. They probably own most of the business and they have this aura about them. But as you transition to a bigger business, you need governance structures, you need mechanisms in the business to hold you to account, and you need to find your way through the grey. So, much of ethical decision making is about recognising that there's no right or wrong answer. I'm in a grey space. Who do I need to talk to help find my way through this?
Andrew Davies:
And that's the other boring area of business that people don't engage enough with, that's governance. So, to me it's about businesses building great governance models are the businesses of the future, and breaking the rules.
Andrew Davies:
So, another great example is Outland Denim, which is a business that has really been designed to probably do two things. But what they're best known for is actually employ seamstresses directly in Southeast Asia to make sure that they're improving the livelihoods of the people who make their products. And that's not the right way to run a fashion business according to the last 20 years, you're supposed to just outsource and have a long supply chain.
Andrew Davies:
They've effectively in-sourced and done things very differently. But I think that's an example of they're really guided by their mission, they want to improve livelihoods. And they're also quite obsessive about the environmental impact of denim, but that's another aspect of the impact that they're choosing to have. And, again, they've really just followed the mission as opposed to followed the old ideas of the right way to run a business.
Mark Jones:
So, from a storytelling point of view, you tell the upstream story, this is where it comes from, and this is how we work with people directly as employees in that example, and then not just the downstream. Because I think much of the conversation does tend to be focused on, look at what we're doing downstream, look at the communities, the lives we're changing. And we forget that this whole sourcing thing, as we touched on earlier, really does matter.
Andrew Davies:
Yeah. And again, we've seen that pretty clearly in the last two years. So much of 2020 was conversations around what we couldn't get anymore because of a global crunch on supply chains. All it took was one ship to do a bad U-turn and the Suez Canal and then we had even more supply chain interruptions. We've really, I think, had a moment in the last few years of understanding that we are way more interconnected than we like to think we are. We run a truly global economy, which is simultaneously terrifying at times when you see those disruptions, but I think there's a positive in it because it's made us realise that the vaccine status of people in different countries does matter not just at a human level, but in terms of the way we live our lives. We're interconnected in really significant ways.
Mark Jones:
Not only that, I think we have really in the last few years seen a change in... we talk about this consciousness of consumers and we're not taking things for granted anymore. We don't take it for granted that things will always just turn up, because when you supermarkets, again, just are empty at different points, it's really hard to avoid this idea that everything's just on tap all the time. I think for marketers and storytellers, part of that is not using that in a manipulative way, but in a way to reflect the reality. This is one of the things, if there's one thing CMOs really should bring to a leadership team and to a board is to actually say, "We are in touch, we understand the heartbeat of our customers. We know how they're thinking and feeling."
Mark Jones:
I think that's one of the biggest challenges for any organisation, is to stay connected. You mentioned The Infinite Game concept from Simon Sinek. This is this idea that the point of the game is to stay in the game. And the only way you stay in the game i.e. business or for social sector to be providing services for the community, for example, the only way to stay in the game is to stay with the people, to understand their heartbeat, the way they think and they feel and respond accordingly. And it's become quite manifestly apparent that you can't maintain an artificial distance anymore. Those days are gone.
Mark Jones:
And I think we're really at the early stages of understanding just how significant a change, I'm going to use your orthodoxy word, is now in conceptualising what it takes to bring a brand to market and to sustain that brand. It's actually a completely different way of thinking about the customer connection. Am I going in the right direction here?
Andrew Davies:
I couldn't agree more. I'm not a marketer, so I don't have to try and be wise about how exactly you do that, because I think it's brutally challenging. But you are seeing, I think, like 95% of good business is copying someone else, right? Every now and then you come up with a little good idea and good on you. And we're seeing the exemplars in this space, we're seeing businesses like Who Gives A Crap who have built a beautiful brand story with absolute credibility and consistently. But again, they're the first to admit they make mistakes, they get some social posts wrong, certain things don't resonate, or they're still challenged to talk about things they aren't comfortable talking about.
Andrew Davies:
Vanessa was on your podcast recently and talked about exactly that, that they make mistakes. I've got to be careful not to pay too much homage to Sinek here, but there's a beautiful framing in that book, that opening framing, which is imagine you're on a road, there's a fork in the road. One sign says the road to victory in the other side says road to fulfilment. In business, which road do you take? And most people would say, road to a fulfilment. That's what I want to be on. But then most people in their business lives find themselves on that road to victory. They're trying to beat the competitor. They're just trying to be better than someone else. And that's okay.
Andrew Davies:
I think that's so much of the influence on us as people in business sends us in that direction. What's important is to recognise every now and then, "Hey, I'm on this road to victory. I need to get back on the road to fulfilment. I do need to think not just about beating a competitor, but building the game. I need to do more to contribute to a healthy economy and an economic system that is sustainable in the long term. Because that is actually what's going to help me stay in the game."
Andrew Davies:
So, I think that it's also okay to recognise it is hard work, especially in the marketing space. You will make missteps, but that's the duty to the game, right? Is to keep reflecting on what you could do better.
Mark Jones:
We've covered a lot of ground. I could probably keep this conversation going for a lot longer with all the questions I've not yet asked. But I think to start to wrap it up for the moment, let's just say a listener is like, "Okay, I'd like to take the next step." What do you do? Presumably obviously go to the website, but what's the best approach from an organisation leadership team perspective? If you want to be that... what do you say? Like the advocate for change, or somebody who's really going to lead the charge, be the champion of the B Corp. What's your best advice?
Andrew Davies:
It's a holistic assessment. So, yes, head to the website and we're at bcorporation.com.au and find our way to what we call our B impact assessment, which is the global platform, free for any business to use. And I'd encourage you to just log on and run through the assessment. You need to be knowledgeable across the business. So, sometimes getting a little internal team together is a great idea to just get a sense of, hey, how are we performing now? We don't have to try and be a certified B corporation. We can just do the assessment. And what you'll find is that it's not a Wikipedia of every sustainability policy that you just download and plug and play.
Andrew Davies:
It asks you the questions that you probably haven't asked before. And so the opportunity is to then build an internal group of people who are also interested in this space and ideally who work across different parts of the business and use that as a way to then get the engagement of your executive, your shareholders ideally, it is a fundamental rethink of the purpose of your business. So, it does need buy in from senior management and ultimately shareholders as well. But just start simple. Run through the assessment, get a sense of, hey, what are we doing well? What haven't we thought about as a business?
Andrew Davies:
And from there I think if you ask someone in the business, maybe from the marketing team who has done that initial step, a really powerful way to build a case for anything is not necessarily just to argue the point, but ask questions, ask questions of your CMO or your CEO. What is the impact we're trying to create here? What are our views on certain topics that we're going to get asked about? Keep asking questions, because sometimes it's in the asking that we really start to highlight what's missing and what's the work that we need to do. It's really hard to build a cause to do something like become a certified B corporation, unless you've got the buy-in of people who are really committed, because it's a long journey, it's a challenging process, it's a very high bar of performance, and it's a very difficult assessment process, but that is kind of the point.
Andrew Davies:
And where you started earlier, talking about value, a lot of the value is obtained because it's a struggle. It forces you to change the business. So, you need to make sure you've got people who are willing to go through that change.
Mark Jones:
How long from beginning to certification? You mentioned it's a long time.
Andrew Davies:
Well, increasingly we're getting approached by very large complex businesses, including globally, and they can take many, many years to achieve it. The time is the bigger creature of how much change do you need to engineer into the business, and changing a business that has lots of people sitting behind computers is easier than changing a business that makes certain objects at a manufacturing plant. So, to a certain extent, it's a very hard question to answer. But if you sat down and you really approached it in a way that structures, here's the work we need to do in the assessment, and then here's the work we need to do in the business. You could go from where you are now to becoming a B Corp in 12 months. It's achievable, but there are pretty substantial long periods of work that are really dictated by you and your business more than they are by the process itself.
Mark Jones:
And you've got your own good problem, which is so many applications, right? I understand that there's a delay in terms of getting it actually read.
Andrew Davies:
Yeah. Look, it took us 15 years to get to 4,000 certified B Corps globally, and in the last 18 months we've had about 6,000 applications. So, we call them submissions. So, that's people who've done the assessment, they're over 80 points and they press submit for us to do the verification process, which is very people intensive. And yes, at the moment, there's some pretty big backlogs. I really encourage people to still sign up and give it a go. We've undertaken some pretty significant expansion globally in our resources, and we're starting to see those wait times come down.
Andrew Davies:
But I think as well it's that initial assessment process that you do on your own, that you really start to see the value and create some change in the business. So, don't hold back worrying about those wait periods, they are coming down. We've had businesses in the last couple of years wait six to 12 months just to get looked at, but that's really starting to shift now. And it's been really challenging, as you say, it's the classic nice problem to have, right? But it's still a bloody problem.
Mark Jones:
Yeah. Well, I think that's the other part of your job we've not talked about, but good luck with that.
Andrew Davies:
Yes. Thank you.
Mark Jones:
Well, Andrew, it has been such a pleasure to have you on the show. Thank you for being my guest and sharing your experiences. Some really great insights there. I've learned a lot, and I know the listener has as well. So, thank you so much.
Andrew Davies:
Pleasure to be here, Mark, and all power to your listeners. I think those working particularly in the marketing spaces are really often at the front of this evolving conversation and it's evolving quickly. So, it's great to have had the opportunity to talk to you.
Mark Jones:
Awesome.
Mark Jones:
So that was Andrew Davis. Thanks for sticking with us(!)
I think one of the main takeaways was this shift that B Lab are leading where it's no longer enough to get to the end of the year and have the CEO decide to write a cheque. That they are really looking at dismantling the traditional business model, and these purpose activities actually have to be baked into the business model.
And Andrew mentioned a couple of past guests we’ve had on the show who are great examples of this. Make sure you check out our episodes with Mia Baccaro from Ben & Jerry’s and Vanessa Morrish from Who Gives a Crap.
I think another thing that is important for us as marketers to keep in mind as we navigate new landscapes is the nuance of ethical decision making: It’s about recognising that there's no right or wrong answer. I'm in a grey space. Who do I need to talk to help find my way through this? And as Andrew acknowledged, marketers are really at the front of this evolving conversation. It’s about being comfortable with the uncomfortable.
That’s it from me today, don’t forget to subscribe to The CMO Show on your favourite podcast app, so you never miss an episode.
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That’s all from me this time, thank you for joining us on The CMO Show. As always, it’s been great to have you with us.
Until next time.