Applying to become a B Corp

Last week, MY Wealth Planners filed its first assessment and request for review to become a certified B Corporation. Unlike an S Corporation or C Corporation, B Corporation status is not a business structure or tax election. Rather, “B Corp” is a voluntary designation to make not just profit the purpose of the company, but to address governance, workers, community impact, environmental impact, and customers as equally important elements of the company’s purpose. This includes the adoption of a purpose clause: “The purpose of the company shall include creating a material positive impact on society and the environment, taken as a whole, from the business and operations of the company.”

Now let’s be clear about a couple of things before we dive into discussing this. Filing an assessment and requesting review does not mean that MY Wealth Planners is a B Corp. It will likely take months before the review process is completed, and even then, we may be required to perform certain adjustments or change certain policies in our business before being accepted as a B Corp. Further, let’s be honest: restructuring your business with an acknowledgment of the aforementioned social and environmental considerations is, to be frank, some squishy Boulder hippie stuff. Yet, I think we can all agree that it probably doesn’t hurt for a company to consider something other than profits in its operations. In our vision that MY Wealth Planners is to become a financial planning equivalent to a teaching hospital, it makes sense to give greater emphasis to the impact the firm makes on its workers and community.

So, today we’re going to discuss the broad strokes of the B Corp certification assessment and some of the details in the application process that really stood out to us.

Becoming a B Corp

To qualify to be a B Corp, there are eleven steps required of a “small enterprise” like MY Wealth Planners, meaning a company with less than $5 million in revenue and less than 50 employees.

1. Register for the B Impact Assessment
2. Gather data and collect documentation
3. Take the B Impact Assessment
4. Establish a company profile and start the disclosure questionnaire
5. Submit the B Impact Assessment for review
6. Join the evaluation queue
7. Evaluation
8. Join the verification queue
9. Verification
10. Post-verification
11. Certification

Some of that can seem a bit redundant (join the queue, then do the thing), but recognize that B Corp certification is an intensive process that requires both significant disclosure by the applying company, but also significant review and auditing by the B Corp certification team. In effect, it’s not enough to say “we do good in the world,” but you actually have to show that you are doing so, and making a continuous effort to improve the impacts you make on both social and environmental issues. To give you some idea of the time involved, just the evaluation queue is expected to take five months before moving onto the evaluation stage.

B Corp Governance

The first set of questions asked in the B Corp assessment has to do with the mission of the company, with a specific emphasis on its orientation toward making a positive impact. In this regard, it asks the company’s management to talk about the company’s mission, and how both social or environmental issues are addressed not only by the mission, but in how staff and leaders are taught to consider such issues in training and their performance. One area that stood out to us as a present omission from best practices was the use of an advisory board. While I’ve personally had what I call a “board of directors” in the sense of a group of friends and colleagues who gather occasionally to prod at the business and drink whiskey, this is not quite what the B Corp certification has in mind. A stakeholder advisory board is meant to encompass feedback from not just the owners of the company, but those with a stake in its performance, including people such as clients, vendors, and non-owner staff.

Another area that comes up in governance is that of transparency. Taking a cue from the world of non-profits, B Corp certification encourages sharing information with the public such as ownership, financial performance, impact reports, and the members of the board. In this regard, today it’s fairly plainly stated that I, Dan Yerger, own MY Wealth Planners. But other items such as sharing financial performance publicly or generating impact reports on social and environmental issues are something that we simply haven’t done to date. Yet, in the world of non-profits and mission driven organizations, such activites are common. The members of the board, staff compensation, and financials of non-profits are public record, and such organizations build their entire purpose around the impact they make, and thus, impact reports are far more common. As a for-profit-enterprise, playing cards closer to the chest is commonplace, so adopting practices such as sharing practice financials and impact reports will be something we have to grow into.

B Corp Workers

An area MY Wealth Planners really thrived in for the assessment was the worker’s assessment. This area includes reporting of wage data, use of contractors, the nature of wages and benefits, workplace and safety, career and professional development, and worker engagement. Some particular standout questions spring to mind in discussing this area.

First is the living wage. The assessment doesn’t define a living wage in explicit terms, because this is highly relative to the geography of the company and its employees. In Boulder County, Colorado, MIT calculates this as $26.36 per hour for a single adult without children. This is 82.8% higher than the minimum wage in Colorado currently, though Boulder County’s recent increase of the minimum wage to $15.69 per hour in unincorporated areas is aimed at rapidly growing to reach closer to a living wage level. We’re fortunate at MY Wealth Planners to be in a position to pay no less than a living wage for even the lowest-paid employee, but understandably, the economics of business don’t support this in all cases. However, as I’ve written about before many times, the relationship between an employer and its employees is that of a voluntary arrangement, and employers who are unable to pay livable wages to their team members need to seriously consider their business models.

Another area of the B Corp worker’s assessment is in benefits, such as health insurance and retirement plan benefits. Offering a match greater than the 401(k) safe harbor (3% or 4% depending on your approach) is viewed positively by the B Corp certification, and this is one that I fully agree with and that we provide at MY Wealth Planners. In a similar light, the quality of health insurance provided to employees comes into question, and herein the B Corp is rather nit-picky. How much co-insurance is paid for by the health insurance plan, how much does the company pay in individual premiums, how much does it pay for family members, what are the out-of-pocket maximums, what are the co-pays, does the insurance pay for drugs and with reasonable co-pays, etc.

It then goes onto career development, with an eye toward “how are you helping your employees grow?” This digs into the amount of training provided to new hires, documented review and development plans, and opportunities to develop outside of the company from professional networking and formal education programs such as tuition reimbursement or certifications offered by third parties. The section then closes out with a review of supplemental details, such as employee handbook information, supplemental benefits, and information of the quality of life and work for employees currently working and from those who’ve made the decision to leave the company.

B Corp Community

This section of the assessment gets into what some might view as more political issues. Take it with a grain of salt and remember to be curious, not judgmental. The first section is explicitly titled: “Diversity, equity, & inclusion.” In fairness, this was probably the title long before the term DEI became politically loaded over the past few years as part of a political reactionary backlash to perceived “reverse discrimination.” In the case of the B Corp assessment, it wants to understand the mixture of owners, employees, and the ratios between owners and employees with respect to protected categories such as race, gender identity, wages paid to leadership versus rank and file employees and even goes into asking about suppliers and vendors for the company and their ownership and employment practices. For MY Wealth Planners, we gained points here because of my status as a Veteran but also in that today, the firm is 50-50 male and female, albeit that ratio is easy to accomplish on a team of two.

The assessment then moves on to consider the localized community economic impact. Think “shop local” types of questions, such as how many company roles are filled locally versus being outsourced, how many owners are accredited investors versus “everyday folk”, and how much spending is done in the local economy versus with national vendors. This then moves onto a section on civic engagement and giving, including volunteer service and charity. Given that MY Wealth Planners commits itself to spending over 100 hours per employee on volunteer efforts, and has donated several percent of its revenue annually to charity for the past several years, these were areas we easily succeeded in. However, it was valuable to be reminded that concepts such as “shop local” or local civic engagement were meaningful beyond the simple physical presence of a business in the community.

The last section was a bit out of the norm for MY Wealth Planners, with a specific emphasis on suppliers, supply chain, and their staffing and environmental impacts. Simply put, because MY Wealth Planners is a local service provider, we don’t really have any overseas linkages with vendors or labor. However, the next section got us to think harder about the environmental question.

B Corp Environment

The next section is where you get to find out whether you’d be a hero or a villain on an episode of Captain Planet. The section starts off with a basic question about facilities and the nature of your workplace, with an extension into the quality of the buildings, energy efficiency, and how you deal with the literal environmental impact of your business. As a company whose environmental impact is effectively just the use of electricity, these are fairly straightforward questions. However, the questions get more interesting as it dives into the percentage of renewable energy used by your business (easily reported and satisfied by the terrific work of the Platt River Power Authority and its commitment to reaching full renewable status in the coming years), but also even in consideration of greenhouse gas impact caused by commuting to work in personal vehicles versus public transit or non-impacting options such as walking or cycling.

The section then extends into questions about water use, conservation, and impacts on the land. Admittedly, this was a bit of a stumper for MY Wealth Planners. As a company whose material water use is making coffee and using the restroom, we didn’t have much to say here, and as a company that rents its offices rather than owning them, utilization of land is not really a top of mind issue for us. However, there were some pointed questions about recycling programs, waste management, and ensuring that any byproduct of our operations was not directly harmful to the environment. On that front, we can easily check the box.

B Corp Customers

The final section of the B Corp assessment (other than legal disclosures) is “customers.” Simply put, who are you serving and how are you helping them live beneficial and better lives? This section represents a cross section of all the other sections. How are you offering services or products that your clients need? How does your service impact their lives? Does your product help or harm the environment and community they live in? This also came back around to the element of stakeholder advocacy. “Do your customers have a say in what you do for them?” This was an area that has led us to consider strongly working on an advisory board to bring more client engagement into the conversation.

This section also got into our business very specifically as an investment management firm and financial planning firm. Specifically, there were a number of very pointed questions as to how we manage client’s money and take into account the ESG impacts of our investment philosophies. Simply put, we’ve commented on ESG many times in the past, including our belief that while it’s fundamentally good to have beliefs and values that can be reflected in your investment, it’s ultimately a personal choice. We help clients fulfill their investment beliefs and values in the portfolios we structure for them, whether those beliefs be utterly neutral or incredibly specific.

Another area this addressed was our advocacy on behalf of investors via proxy voting. Because we don’t do this today, the B Corp assessment seemed to take this as a negative. However, this is a tricky area in our view. While shareholder and stakeholder advocacy can be valuable activities, voting one way or another for various companies’ boards or policies can lead us into an area we’re simply not well-equipped to handle, as well as considering that not all clients may uniformly agree on the best approach to take. In this regard, we’ve always directed shareholder voting and proxy voting back to our clients so they can represent their beliefs directly as they see fit. But, this may be an area we take a deeper interest in going forward.

B Corp Overall

To become a certified B Corp, you have to score 80 out of 200 possible points. Today, we scored a total 118.1, with 5.7 points from governance, 38.9 points from workers, 27.2 points from community, 8.8 points from environment, and 37.3 points from customers. Naturally, this suggests we have work to do, but it’s actually quite typical for companies to fail to meet the 80 point threshold when they initially assess and apply for certification. We are yet to be reviewed and audited, so it’s quite likely that we may have been generous in some of our self-assessment and that our final score will be lower. Still, going through the process of critically evaluating a business I’ve built over the past decade has been an interesting and enlightening one, and one that we hope will help us continue to make positive changes for our business and more importantly, our clients and the stakeholders of our community. As for you as our community and clients, one element of money is that it is a means of expressing our values. We shop at businesses we like, we boycott those that we don’t, and so on. In this regard, we hope that pursuing and attaining the B Corp certification in the future will let you know that we more clearly reflect those with values of positive community impact.