Measuring Impact in the Boardroom: B Corps setting the standard for measuring SRI.

• Author: Raymond, Doug
• Position: LEGAL BRIEF

Over the past decade, there has been a significant change in the way companies, investors and consumers think about the broader role business plays in society.

The proposition is gaining acceptance that businesses should provide a benefit to more than their customers, employees and owners. The social-impact investing movement has focused attention on a broader role for corporate social responsibility, moving beyond merely avoiding pollution, child labor and other bad behavior.

The "B Corp" movement --recognized as a driving force in the arena of social-impact businesses--has set the standard for making and measuring impact in a public and verifiable way. It's a fairly new organizational form for for-profit businesses dedicated to the environment and social issues.

The eyeglasses retailer Warby Parker, for example, is a B Corporation. The company works with other organizations to provide one pair of eyeglasses as a donation for each pair sold, which is an important part of the company's marketplace positioning.

We're seeing more B Corps, in part, because of a push for socially conscious investing.

With a reported $8.72 trillion of "socially responsible investing" (SRI) in 2016 in the U.S. (an increase of 33% from 2014), the markets increasingly reflect that many investors are putting their money where their conscience is. This trend is expected to continue as wealth shifts to younger generations that desire to work for, buy from and invest in businesses more closely aligned with their concerns about the environment, sustainability and social justice.

Companies that are riding these trends have found that it can increase their access to customers, talent, capital and even profits. Consumers have increasingly shown a preference for brands that support a social cause, with a recent Brookings Institution report finding that millennials responded overwhelmingly (89%) with increased trust and loyalty, as well as an increased likelihood to buy from these companies.

In addition, companies with a broader purpose have an advantage in hiring and retaining the key millennial demographic that is expected to grow to 75% of the workforce by 2025.

This trend has significant implications in the boardroom.

While it is, of course, important for the board to make sure that employees comply with applicable laws, embrace best practices and otherwise operate responsibly, for many this is no longer enough. But if these steps are no longer sufficient, what is? There...