Sometimes it’s better not to know the obstacles that exist when creating something new.
That was certainly true for Andrew Kassoy, who, along with Jay Coen Gilbert and Bart Houlahan, two friends and roommates from Stanford University, wanted to encourage companies to focus on their employees and the environment. In 2006, they left their jobs and created B Lab, which certifies companies that operate for social good, in addition to trying to make money. Think Fair Trade for food or LEED certification for environmentally sustainable buildings.
Certified companies — referred to as B Corps — are businesses with verified social and environmental performances, including factors such as sustainability, income inequality and the impact on local communities. They are, essentially, companies that use business as a force of good, rather than focusing solely on profit maximization. Companies like Patagonia, Eileen Fisher and Danone North America have all been certified; overall, there are more than 3,000 certified B Corps in 71 countries, Kassoy said.
Kassoy and his friends had not anticipated that the success of their efforts would also hinge on persuading individual state legislatures, as well as foreign countries, to amend their corporate laws. But through legwork, persistence and the help of some dedicated outside lawyers, the three slowly effected legal change in 37 states, including in Delaware, where more than two-thirds of the Fortune 500 and 80% of public companies are incorporated, according to state statistics.
Kassoy’s work presaged a theme that in the last year has been adopted by business leaders like Laurence D. Fink of BlackRock Inc., as well as the chief executives of the Business Roundtable, who are urging corporate accountability in areas like the treatment of employees and the impact on the environment, in addition to shareholder returns.
Kassoy — who emphasized that B Lab was created by, and is still run by, all three men equally — discussed how the organization continues to work to transform global capital markets.
The following conversation has been edited and condensed.
Q: What would you like people to know about your work?
A: We started B Lab because we thought there had to be a better way of running the economy. Capitalism, historically, is about enterprise and the capital needed to grow that enterprise. What we’re trying to do is create an economy where capital and enterprise meet not just to benefit a few shareholders, but to benefit society as a whole. Our goal is to have every company create value for all stakeholders — like corporate workers and community members — not just shareholders.
Q: What did you want to be when you were young?
A: By the time I was in fourth or fifth grade, I wanted to be an elected official or a policymaker. My grandfather Ruby, whom I was close to, read The New York Times every day from front to back and engaged me in conversation about policy and social justice from an early age. I assumed the best way to make a difference was to run for office.
Q: Who or what inspired you to go into your field?
A: A series of relationships and mentors have helped guide me, including my parents and my grandparents. I spent time in college working on the Pine Ridge Reservation in South Dakota and the elder Basil Brave Heart was a spiritual and moral center.
But it was former Congressman David Skaggs who really set me on my path. After I interned in his office, I asked if I could return to work for him after college. He said, “Maybe, but I think not yet.” Instead, he told me to do something out in the world — to see what our economy is all about. Although I had no experience in capital markets at the time, his words set me on that path and away from public policy. And I saw that I could effect change without being a politician.
Q: Where do you find sources of creativity?
A: This is not a creative field — it’s not tech, art or music, but I do think that it requires a lot of creativity to invent what an economy ought to look like. But I’m not a mad genius imagining things and willing them to be true.
Instead, I find that creativity comes through relationships and community, and through conversation to find the right design.
Q: What obstacles do you need to overcome?
A: We face an enormous challenge in that the economic system, over the last 400 years, was built on extraction, without limits. People have been treated as just another economic input, rather than as humans.
Jay and Bart had the experience of building a business that cared about their employees, while I was on Wall Street in private equity in the belly of the beast. I loved the work, but I saw the industry transformed to focus on how quickly you could leverage something up and sell it with very little interest on the underlying business or the humans involved. As the three of us talked about the problems we saw, we thought that there had to be a better way of running capitalism to benefit society and not just a few shareholders.
Q: How do you define success?
A: As I rose up in private equity, the financial rewards never felt like success. And in the end that made it hard to stay in the field.
Instead, in my work at B Lab, success is any sign of progress toward an inclusive and regenerative economy that is both meaningful and long-lasting. And 13 years into our work, there are real signs of success: New laws that enable businesses to operate as if people and the planet mattered as much as profit, and moves by groups like the Business Roundtable in August. But we still need to tell corporate leaders that they need to walk the walk for change.
In my personal life, success is defined mostly by whether I have relationships that are bringing me — and other people — joy.
Q: What challenges do you face?
A: We still need to address shareholder primacy as a mindset and a legal impediment. And we are asking governments what else they can do and trying to form a broader coalition of organizations to address this. And we are working with multinational companies to encourage more to become B Corps — they have big bullhorns and are really important to our work.
And we are also mindful that while we are trying to build a more inclusive economy, that to do so means we need a more inclusive community in business. It’s a shift that will take some time, but it’s one in which we need to play a role.
Q: How does technology interact with your profession?
A: Technology is having an enormous impact on business. Whether it’s automation, outsourcing or the growth of the gig economy, or issues like privacy and the ownership of data, technology is dramatically changing the nature of work. And these are issues to think about if business is to have a positive impact on our economy.
At B Lab, we’re dealing with the impact of technology in our standards, which we revise every three years. Recently, we’ve changed our definitions as they related to the people who support a company. We used to call them employees, but now we refer to them as workers because large percentages aren’t actually employed by the company. By just asking about employees, we’re missing a large percentage of the workforce, including contractors and those working in the supply chain. We need to make sure to ask about those who may be on the margins — the vulnerable workers in the economy.