Getting a startup off the ground is hard work. The team needs to juggle developing an MVP, validating customers, pivoting, finding investors, growing the team, and gaining traction. It can be an overwhelming experience, especially for those trying to balance profit with people and planet.
For-profit startups with a social or environmental mission need to demonstrate performance, accountability, and transparency in achieving a positive impact. Developing the framework to actually achieve these goals can be a challenge.
Rather than reinvent the wheel, startups can look to established guidelines for inspiration. One of the better developed guidelines can be found in the B Impact Assessment for certified B Corporations (B-Corps). The assessment was developed by B Lab, a non-profit organization that aims to help companies benefit the community and turn a profit. The B Impact Assessment measures a company’s performance in areas such as environment, governance, operations, community, and accountability.
This page highlights B Impact Assessment guidelines that can help a startup achieve the greatest positive impact. Creating the right mission statement, developing relationships with local suppliers, monitoring the impact of business operations, and creating an inclusive and diverse workforce are just a few of the ways that a startup can plant the seeds for a better future.
1) Mission & Engagement
It is important for a startup to establish a clear corporate mission. The mission statement communicates the core values and culture of the startup to investors, customers and potential hires. The corporate mission statement should have a commitment to specific positive social & environmental goals. These goals should have a direct influence on decision-making when considering the success and profitability of the startup. The founding team should establish how the goals are prioritized in relation to profitability and measures of success.
The mission statement should also state how compensation of the founding team and employees is tied to achieving specific social and environmental goals. This ensures that the entire organization is aligned with the mission statement and the proper culture is fostered.
The idea behind transparency is to publicly share the mission and communicate how the startup is performing. The team should sit down and identify quantifiable targets that reflect the core social and environmental mission of the business that can be tracked and measured.
The team should establish a process to generate an annual report highlighting the mission statement and social/environmental targets set and met throughout the year, which would be published in conjunction with annual financial reports. As part of the process, the team should identify a third party to validate the report.
3) Suppliers & Distributors
Developing relationships with suppliers and distributors is a key component of scaling any startup. However, selecting suppliers and distributors that align with the mission of the startup is especially important for positive impact ventures. A startup should develop a formal written Supplier Code of Conduct that specifically holds the suppliers accountable to social and environmental performance. In conjunction with a screening process, the Supplier Code of Conduct ensures that suppliers and distributors enforce safe working conditions and environmentally responsible manufacturing processes.
The Supplier Code of Conduct empowers the startup to develop relationships with suppliers that meet certain standards and practices such as environmental management (ISO 14001), energy management (ISO 50001) and social responsibility (ISO 26000). Distributors can be considered based on methods of shipping (air is more carbon-intensive than rail) and packaging (use of efficient packaging techniques and recyclable materials).
4) Local Involvement
When possible, a startup should develop supplier and distributor relationships within the local business ecosystem. B-Corp guidelines recommend more than 60% of a company’s expenses (excluding labor) be spent with independent suppliers local to the company’s headquarters or production facilities. In addition, the guidelines suggest that the majority of the businesses banking services be provided by either an independent bank, cooperative bank, credit union, or a local bank committed to serving the community.
5) Office & Facilities
Not every startup produces a physical product that requires manufacturing facilities or direct material inputs and outputs. However, most ventures need an office or basic meeting place for their daily operations. The startup team should develop an environmental policy statement documenting the organizations commitment to the environment. A process should be created to assess the environmental impact of business activities, state targets to be achieved, document progress, and identify a third party to audit and evaluate the achievements.
The environmental policy should also establish a company-wide recovery and recycling program for paper, cardboard, plastic, glass, metal, and composting. Even if a startup operates from a garage or dorm a policy can still be developed and enforced ensuring “office” supplies are reused or recycled.
For startups with formal offices and facilities the B-Corp guidelines suggest 80% or more of the facilities (by area) are certified to meet requirements of accredited green building programs. If the facilities are leased, the business should work with the landlord to implement energy efficiency improvements, water efficiency improvements, and waste reduction programs.
6) Inputs & Outputs
A startup may have minimal inputs and outputs as the founding team struggles to develop an MVP and the business operates from a basement. But as the company gains traction and starts to grow, the impact of those inputs and outputs will begin to grow as well. A startup team should identify the inputs and outputs of the business as it begins to scale.
For material inputs the startup should aim to have more than 75% of the product contain recycled, renewable, or other environmentally preferred materials. The business should also aim for more than 75% of energy needs produced from low-impact renewable sources.
In evaluating the impact of inputs to the business operations the team should set specific reduction targets for water and energy usage, and develop a process to monitor and report on those metrics. Setting and achieving reduction targets will help the startup save money while also reducing exposure to rising energy and water prices.
The outputs of a business operation also need to be considered and evaluated. The startup team should establish a process to monitor greenhouse gas (GHG) emissions, as well as hazardous and non-hazardous waste disposal, while setting specific reduction targets for annual reporting. Reducing GHG emissions allows a startup to save energy and reduce operating costs. The reuse, recycling, and composting of production materials reduces disposal fees and leads to cost savings that can help a startup gain a price advantage and differentiate from competitors.
7) Diversity & Inclusion
Startups are in a favorable position to foster diverse and inclusive teams from day one. As startups gain traction they have the opportunity to offer employment to a diverse population of talented and skilled workers. B-Corp guidelines suggest that women, underrepresented populations, and minorities represent more than 50% of company ownership, more than 30% of supplier ownership, more than 50% of Board of Directors, and more than 50% of the executive leadership team. A diverse workforce allows a startup to create a more inclusive culture and provide opportunities for talent to develop within the organization.
8) Compensation & Wages
The early days of a startup likely won’t see large payouts as the company struggles to gain traction. However, it is important to create the framework for a pay structure that can scale with the organization and insures equality and fairness. B-Corp guidelines recommend that the highest compensated individual is paid 1-5x the lowest paid full-time worker (inclusive of bonus) and that workers are paid a living wage or above. Compensation should also be tied to achieving the specific social and environmental goals of the organization outlined in the mission statement.
9) Training & Education
Any founding startup team is small. However as the business begins to gain traction and scale that team will grow. As it grows it will need to attract and retain skilled labour – training and educational opportunities for potential hires might be the key to landing the needed talent. The guidelines recommend at least 75% of full-time and part-time workers receive annual skills-based training to advance core job responsibilities, as well as training that goes beyond regular job responsibilities (e.g. public speaking).
10) Civic Engagement
B-Corp guidelines suggest more than 5% of equivalent revenue be donated to charity during the fiscal year. A startup will likely invest all revenue back into the business during the early days to fund customer acquisition and to scale operations. However it’s a good idea for the team to identify charities that align with the corporate mission and that would benefit once the startup is able to donate part of its revenue.
Though the initial stage of a startup may be stressful, it is the best time to plant the seeds for a positive impact business. Taking inspiration from the B Impact Assessment guidelines and embedding the principles within the DNA of a startup can foster the right culture and values while attracting the right talent and investors.
Full disclosure: I am not affiliated with B Lab and I am not involved with certifying B-Corps. The information on this page is based on my own personal experience integrating B Impact Assessment metrics into the structure of the startup I co-founded. All explanations are based on my interpretation of the guiding principles that achieve the greatest positive impact. For more information on certification and the guiding principles please visit www.bcorporation.net.