By Dirk Sampselle
Since B Lab created its B Corporation certification four years ago, responsible businesses have rushed to earn the coveted “B Corp” seal of approval. Today, over 1,000 businesses have begun using B Lab’s impact assessment tool, and over 600 have become fully B Corporation certified.
But many ventures seeking B Corporation status – and even some that have already received the coveted certification – fail to capitalize on using the certification as a resource to enhance profitability and improve their impact and business models.
Because many of the enterprises seeking B Corporation certification are doing so because it reflects their values, too many are content to earn a “passing” score of 80, and move along. But savvy, vanguard firms integrate the B Corporation analysis into their strategic plan for the venture, and query:
How can we leverage opportunities to improve our impact assessment outcomes while creating profit-generating business model innovations, value chain efficiencies, and enhanced stakeholder relationships?
At B Revolution Consulting, we help clients design strategies to address that key question. Here are some broad-stroke tips for finding sources of enhanced impact and profitability within your existing or soon-to-be B Corporation.
Optimizing Your Value Chain
A value chain is the combination of primary and support activities a business uses to carry out its business model. Well-established research on competitive strategy tells us that the stronger each value chain activity is – and the more closely it is tied to the other activities within the value chain – the more profitable and efficient the firm will become.
For example, if marketing and sales do not integrate or communicate effectively with the service team, sales pitches may not align with what is provided in reality in the service department, or the service department may not be able to receive important information from the sales team about common concerns of typical buyers. By facilitating communication, the service team can better prepare for common concerns, and the sales team can tailor its pitches to service team realities; together, they create happier customers and enhanced revenue.
Undertaking the B Corporation impact assessment to not only achieve the threshold score, but to also analyze and optimize current operations (or plan for future ones), allows owners to discover and create hidden pockets of enhanced profitability called shared value.
The B Corporation certification adds a unique shared value layer to value chain analysis by providing key insights into the environmental and social impacts of a business’s key operations and analyzes over 140 attributes of the business’s value chain, including:
- Social Business Model
- Environmental Business Model
- Harm Disclosures
By better understanding how to improve performance within each of those areas – and to improve the links between those areas – businesses can not only enhance their profitability, but also improve their social and environmental impacts by making processes more collaborative and more efficient. These are the “Inside-out” sources of shared value.
But the B Corporation certification should also be used as a means of creating “outside-in” shared value through business model innovation.
Generating Business Model Innovation
Far too many entrepreneurs seek to become B Corporation certified without considering the manifold ways in which the assessment can guide them towards an innovative and truly disruptive social enterprise business model.
Social and environmental impacts should not be merely layered on top of a preexisting business model, or even integrated within the operations required by that business model: a social and environmental impact strategy ought be interwoven into the core of the business model, and centered as a key part of the value the venture provides to its customers and stakeholders.
Failing to integrate a bona fide impact strategy into the core business model results in disjointed, strategically unaligned responsibility initiatives which are more likely to tear the value chain apart than tie it closer together.
Porter provides another useful heuristic in defining these “outside in” opportunities:
At B Revolution Consulting, we integrate a thoroughgoing analysis of stakeholder constituencies into our business model interrogation, asking key questions about the core value the venture seeks to provide to each constituency before defining key linkages between the value provided to each constituency, and the profitability of the firm. We then measure the value provided to the constituencies against a baseline as well as in comparison to same value to each constituency provided by current and foreseeable competitors.
We also use a technique called Multi Attribute Decision Analysis to define constituencies as precisely as possible before weighting their place in strategic decision-making; we also use this tool to create adaptive decision-making processes based on a number of factors, including things like economic conditions, competitor marketing initiatives, and changes in the demographics of the target markets and stakeholder groups.
Ensuring that the business model is impact-integrated, context-specific, and directed towards creating an inimitable competitive advantage is critical to creating a sustainable venture.
Developing Stronger Stakeholder Relationships & Activating your Brand
Ceres conducted a study on companies’ ability to build substantive stakeholder dialogue with the hypothesis that companies would engage stakeholders in a manner that was ongoing, in-depth, timely, and involved all appropriate parts of the business; and that the companies would disclose how they were incorporating stakeholder input into corporate strategy and business decision-making.
Only eight of 600 surveyed actually created focused engagement activity and substantive stakeholder dialogue and engagement.
This is problematic not only because it implies that stakeholders were not actually meaningfully incorporated into corporate decision-making processes, but because that failure also represents failed opportunities to receive invaluable input about contextual circumstances – adjacent market opportunities, local trends, and the movements of key players in the business’s overarching value chain.
The purpose of sustainability, from a strategic standpoint at least, is not to merely analyze activities, measure results, and report them in a transparent manner: rather, it is to activate the company’s brand, engage stakeholders, build stronger relationships, strengthen the value chain, and promote an efficacious culture.
It is to place principles at the forefront, as a perpetual source of strategic guidance.
The result of this business practice is to build trust, increase loyalty, and enhance relationships with key stakeholders. The improved business intelligence and loyalty gained through these relationships is invaluable as the value-centered B Corporation seeks to create inimitable products, services, and processes tailored to each of its key constituents.
This is the third post in an ongoing series about B corporations. See more at CSRwire.com.