While
some of the nation is buried under snow or parched with drought, I’m
standing on a beach near Santa Barbara, Calif., in a summer shift,
looking for Garrett Kababik, a millennial who is part businessman and
part eco-evangelist. I find him in a commercial trailer that doubles as
headquarters for his company, Channel Islands Outfitters. Kababik is
bearded, tanned and fit, the sort of outdoorsman who cares so much about
the environment that he and his partners have taken the risky step of
registering their firm as a B Corporation.
What’s a B Corporation (or “B Corp”), you ask? It’s a new type of business that aims to benefit the community
turn
a profit. These entities have a much broader mission than traditional
companies and as such are rebooting the idea of business success. But
they’re only one aspect of what I consider to be a trend among intrepid
millennials — a new economic movement I’ll call Indie Capitalism.
To
understand the origins of this development, let’s quickly review the
first 13, luckless years of this millennium. That’s when the average
middle-class worker suffered three man-made crises. First, there was the
, a fever predicated on the twin ideas of silicon genius and an ever-rising stock market. Next there was the
, which thus far has cost the country about $3 trillion. Then came the
,
empowered by reckless lenders, irresponsible regulators and gullible
homebuyers. In quick, head-spinning succession, we witnessed a $700
billion taxpayer-funded bank bailout and mounting home foreclosures.
But wait: How come the lower and middle classes saw their fortunes crash when corporate profits were soaring to record highs?
“The
[financial] crash played a significant role in raising awareness about
our broken system,” says Katie Kerr, a spokeswoman for
,
which spearheaded the B Corp wave. “You can’t have a successful life if
your co-workers can’t subsist on their wages or if your community is
dying.”
Many people believe that’s precisely what’s happening now in America. Since 2007, our economy has lost
an estimated $12 trillion; and about
120 million of
our friends and neighbors have fallen deeper into (or toward)
poverty. It seemed that our institutions — both public and private — had
either abandoned their traditional role of safeguarding us, or at the
very least had atrophied into paralysis. Even now, bankruptcies,
foreclosures and unemployment, while
lower than three years ago,
are still too high for our own good. “Something has got to change,”
said Justin Kennedy, a 30-something electrician in Santa Barbara. “We
can’t continue down this path.” But who will lead us to a better place?
Millennials like Kababik are embracing B Corps as a solution. Since around 2006, the number of
certified B Corps has
boomed from zero to nearly 1,000 firms, spread across 60 industries in
32 countries. Here in the United States, California is leading the B
Corp charge. It has more certified entities than any other state in the
union: 199 compared to 87 in Delaware and 62 in New York. “The growth
has been exponential,” says B Lab spokesperson Kerr.
B Corps’
cousin, Benefit Corporations, have gained legal recognition in more than
20 states since 2010, with 18 more states about to pass similar laws.
While B Corps are certified by an independent third party as being
socially and/or environmentally responsible, Benefit Corporations are
socially minded firms that are state chartered — but without much
oversight.
Still, what the corporation was to baby boomers the B Corp is to millennials:
the place
to work. During the 1980s and 1990s, many boomers toiled for the corner
suite, the second home or the Rolex watch. Today, millennial workers’
aims are more practical yet at the same time more altruistic; they list
meaning and mission among their work objectives.
Driving
this trend is this generation’s relationship with business. It’s hard
to generalize about any group and this one consists of 90 million
Americans who were born roughly between 1980 and 2000. They’ve been
described by some sociologists as shallow,
narcissistic and even
lazy. A
radically different portrait shows that they volunteer for causes,
value civil service and, based on the last two national elections, turn
out in
record high numbers to
vote. In general, this group doesn’t have a lot of money and what cash
they do have they’re reluctant to spend. They aren’t buying many new
cars and homes. Sure, their sky-high
credit-card debt has dropped,
but they can’t secure more credit and, even if they could, they don’t
like the buy-now-pay-later plan of mindless consumerism. This might stem
from the fact that
45 percent of all unemployed people are between 18 and 34 years old, and that 36 percent of people that age are still living in Mom and Dad’s spare bedroom.
“Things
are getting more difficult,” 24-year-old college graduate Zack King
told me. “The system hasn’t delivered on the promises it made, so we’re
looking for other ways of doing things.”
Certainly they want
decent-paying jobs. But they also want jobs that give their lives
meaning. What I’ve found is that many millennials are not narcissists or
slackers. Rather, they’re trying to turn their disillusionment into a
new vision by exploring places where entrepreneurship intersects with
social enterprise. They’re incorporating their need for financial
stability with a yearning for a better, more meaningful life — and not
just for them but for
everyone.
* * *
Garrett
Kababik of Channel Islands Outfitters is a 33-year-old New Englander,
the sort of CEO who wears shorts and flip-flops to work. His corner
office is a grassy triangle above the beach. It’s midwinter, and amid
the sounds of murmuring waves, we talked as his two enormous dogs
slobbered all over me and my notebook.
“I’ve always appreciated
the outdoors,” Kababik began. He arrived in Santa Barbara a decade ago
and landed a job at a paddle and kayak company. He took people on wild
adventures to the spectacular Channel Islands, a rugged archipelago 25
miles off the coast here. Kayaking through sea caves and scampering
across rocks, he gave customers once-in-a-lifetime experiences that
often transformed their lives. Over the years, he got to know his
company’s operations; he once asked for equity in the firm but was
turned down. Even so, the business kept growing. “In 2008, we had a
really good season,” he said — so good that the firm went into debt
buying a lot of pricey equipment.
That September, the financial crisis hit.
“When
the banks failed, our cash dried up,” said Kababik. Businesses across
the land began laying off employees in order to save money and/or to
please shareholders. A similar thing was unspooling at Kababik’s shop,
only worse. While the government was handing private banks an
unprecedented bailout, the ocean tour-guide business hit its nadir,
burdening Kababik’s company and other small businesses. It struck him as
unfair and corrupt. “I saw what was happening and had to leave,”
Kababik recalled.
For six months, he hiked the Appalachian Trail
and thought about how multinationals wreak havoc on people. “There’s no
humanity behind these corporations,” he thought. The typical
corporation, he surmised, is a “money-grubbing beast” owned by “rich
people” who aren’t involved in the daily operations of their companies.
Yet, the number of yachts and mansions they own keeps climbing. “There’s
so much greed and excess on display.” It boggled his mind.
Back
in Santa Barbara, Kababik reconnected with friends Fraser Kersey and
Johnny Dresser. In 2010, it turned out that the owner of the kayak tour
company they had worked for wanted to sell his firm. So the three men
brainstormed to see if they could not only buy it but manage it, too.
Kersey had earned a business management degree from Cal State Long
Beach, Dresser had served in the U.S. Navy for eight years and Kababik
had a recreation management degree from the University of New Hampshire.
All three had read about “ethical” businesses, “impact investment” and
other forms of socially responsible ventures. “We decided that we were
going to have a triple bottom line, focusing on people, planet and
profits.”
The term “triple bottom line” was coined in 1994 by a
British consultant, John Elkington. It means that the value of a company
includes not just its financial health but its social and environmental
merit, too. “If we couldn’t (run the company) that way, then we didn’t
want to do it at all.” But banks weren’t about to lend money to these
do-gooders. Fortunately, the three friends were able to buy the company
with owner financing. Yet, they weren’t certain how to manage their
company in a socially conscious way — without losing money.
Some
3,000 miles away, a new corporate structure was taking shape. B Lab, a
nonprofit based in Wayne, Pa., had seen a huge demand for companies that
had “social responsibility” woven into their DNA. Lots of companies
claim they’re responsible. (See
Exxon and
“greenwashing.”) But if a company asks them to, B Lab will actually
measure those claims. Owners pay a fee (based on revenues) to go through
the certification process, which includes questions such as: How well
does your company treat its employees? How do you care for your
community? If a firm passes B Lab’s rigorous standards, it becomes a
certified B Corp.
That label indicates an “ethical business,”
which appeals to a growing number of consumers. Polls show that many
millennials will go out of their way to support firms that truly do
“make the world a better place.” And that niche is slated to become a
lucrative one. It turns out that, despite the current dire straits of
millennials, they’re forecasted to start spending
$200 billion a year by 2017. Many companies would like to capture some of that money.
But doing well as a so-called
S Corporation is
tricky. By law, the sole purpose of the traditional American business
is to maximize shareholder profits. Yet, here was Channel Islands
Outfitters, trying to save the whales. The small business couldn’t
afford to be sued by its six shareholders for putting the planet before
profits. “It was a real dilemma,” said Kababik.
By 2011, however,
several states began passing laws that established a new legal entity —
the Benefit Corporation. These chartered companies must create a
“positive impact on society and the environment.” By registering their
firms as such, owners have a broader fiduciary duty than just making
money, and that mandate protects from certain shareholder lawsuits.
California’s
Benefit Corporation law went into effect in January 2012. Kababik and
his partners were eager to switch over and sought advice. “But everyone
we talked to said we’d be crazy to do it.”
Dennis Clark, a tax
manager at Bartlett Pringle and Wolf, said there is no tangible upside
to registering as a Benefit Corporation under state law, or to getting
certified as a B Corp. “It just ties your hands.” Plus, there’s no tax
benefit. “We don’t have a single client who falls under that law,” said
Clark. Some experts say that a better way to get corporations to behave
responsibly is to elect a government that enforces existing laws. Others
believe that the modern corporate animal — with its executive suite,
shareholder class but no other stakeholder — is too entrenched to ever
change. As Clark told me, “You’re not going to find baby boomers who
subscribe to this and who are willing to pay $5 more to support a
Benefit Corporation.”
Ah, but baby boomers were among the first to
jump on the millennial bandwagon. The cherubic sexagenarians known as
Ben & Jerry registered their ice cream company as a Benefit Corp.
early on. In 2012, the 75-year-old Yvon Chouinard registered his iconic
firm, Patagonia, of Ventura, Calif., as a Benefit Corp.
and a
certified B Corp. As Chouinard explained at the time, “the existing
paradigm isn’t working anymore.” Many B Corps accomplish things that a
Fortune 500 firm would never dream of doing. Greyston Bakery in Yonkers,
N.Y., for example, offers a job to anyone willing to work, be they
poor, homeless, previously addicted or formerly incarcerated.
When
Kababik heard about these B conversions, “we were inspired to do the
same.” In July 2013, CIO became a Benefit Corporation. But California
law doesn’t guarantee that a firm actually walks its talk. So, Kababik
and his partners went further by enduring B Lab’s rigorous certification
process. CIO claimed that it used recycled materials. Fine, said B
Lab:
Send your firm’s policy statement along with receipts that prove you buy recycled materials. It claimed it was a sustainable business.
Prove that you deposit with a local bank. “It took a lot of time to gather all the paperwork,” said Kababik.
But
finally, CIO became not just a registered Benefit Corp. but a certified
B Corp, too. Its mission? “(T)o save the oceans and natural places by
fostering an understanding of them through education, adventures, and
outdoor experiences.” It vows to treat employees well, and keep
customers happy. In order to keep its B status, CIO must submit to
surprise audits and apply for recertification every two years. Kababik
is proud of the label: “We’ve tried to create a business system that
meshes with our personal philosophy.” (Of course, the company’s record
isn’t perfect. Kababik and his crew still haul equipment on Highway 101
in a diesel-fueled truck; fast food stops are not unheard of.)
But
running a business is expensive: State and federal taxes gobble between
15 and 20 percent of revenues; federal, state and local regulations are
costly; and workers’ comp insurance and other coverage is expensive,
too. “We try and keep the money here in town, but it’s hard,” he said:
Some of its insurers are located in another state. CIO pays employees
decent wages, starting at $12 an hour, which is no mean feat since 50
people work during the peak tour season. Even better is that its
full-time workers receive health coverage. Plus, the B Corp insignia
adds another layer of costs. For example, CIO gives employees 20 hours a
year of paid leave to volunteer for causes related to CIO’s mission.
And it trains teachers of developmentally disabled students so that
these kids can paddle in the water, too.
Yet, the B badge does
have its advantages. For one thing, it forces the owners to make sure
they’re achieving what they set out to do. “It’s a great exercise.” And
being part of a “conscious” business community expands CIO’s
opportunities. “It gives us greater access to capital since socially
responsible investors and ‘impact investment’ groups want to invest in
firms like ours,” said Kababik. It also links CIO with other certified B
Corp firms. “It’s great to work with people who share our core values,”
he explained. And it fosters employee loyalty since people know they
are working for something bigger than money.
That “something” is
keeping the oceans off Central California clean. People here still talk
about the winter of 1969, exactly 45 years ago, when a Union Oil
platform blew. For eight days, the rig oozed 100,000 barrels of a dark
oleaginous substance that killed thousands of fish and fowl, and tarred
100 miles of coastline and hundreds of square miles of water. The
tragedy drew national attention and spawned the Environmental Protection
Agency, the Clean Water Act and the modern-day environmental movement.
Yet, today, when Kababik and his crew paddle out to sea, they bump into
seals and cormorants that have been tangled up in plastic bags and
poisoned by man’s garbage. “Santa Barbara used to be an environmental
leader,” said Kababik. “But it was one of the last counties in
California to ban plastic bags.”
Now with climate change and
mounting pollution, Kababik and his employees believe that their
environmental mission has become even more urgent. For them, the B Corps
stamp is like the Good Housekeeping Seal for the Indie Capitalism set.
“We hope our customers see the value in our company and [are] willing to pay for it,” said Kababik.
The
question is: Will millennials put their money where their mouth is? And
will that make any difference in the way we do business?
Andrew Garfield and Jesse Eisenberg in "The Social Network" 
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