In a faraway land, there lived a wise king who wanted to defend his country from powerful outside forces. To protect his kingdom and provide prosperity for his people, he created a code of values called Gross National Happiness. The king built his country’s infrastructure upon the Four Pillars of Gross National Happiness: good governance, sustainable socio-economic development, cultural preservation and environmental conservation.
Although it sounds like a fairy tale, King Wangchuk of Bhutan created the framework for Gross National Happiness back in the 1970s and his country has thrived under these guidelines. Can this idealistic and innovative approach ever work in the immensely larger and more diverse American economy, where profit is king?
Since the invention of the modern corporation in the late 1800s, most companies have operated under the single bottom line of making profit. The American economy has been on a wild roller coaster ride over the last few decades, culminating in the Great Recession of 2008. The tumultuous cycle of bubbles and bursts has caused high rates of unemployment, increasing economic inequality, rampant development and widespread environmental degradation.
Like the Four Pillars of Gross National Happiness, innovative companies across the United States, including Hawai‘i, have created a similar business model to counter these destructive trends and the volatility of traditional single bottom line capitalism. Their new, socially responsible framework is based on what they call the triple bottom line of “people, planet and profit.” Known as social entrepreneurs, these leaders in sustainable business believe they can use business to help solve social, environmental and economic problems. By doing the right thing, they believe their companies will also do well in the long run with benefits extending to customers, employees and shareholders, as well as the community and the environment.
In fact, an entirely new type of corporation has arisen. There are now more than 910 Certified Benefit Corporations, also called B Corps, in 29 countries and 60 different industries, including well-established brands like Patagonia and Ben & Jerry’s. There’s also a focused crew of social entrepreneurs in Hawai‘i who are a part of this movement and they all have one unifying goal: to redefine success in business.
While only in her twenties, Dawn Lippert became the founder and senior manager of Hawaii’s Energy Excelerator, a unique nonprofit with the goal to help solve the state’s energy challenges. Lippert and her team created an incubator to provide funding, strategic planning, partnerships and a supportive community for innovative startups that promote clean, renewable energy. “We say it takes a village to raise a startup,” Lippert remarks with a smile.
Originally from Seattle, Washington, Lippert went to Yale, where she received a master’s degree from the School of Forestry and Environmental Studies. While still a grad student, she worked on a Big Island energy project with Maurice Kaya, the state’s former energy director. Kaya was so impressed with Lippert’s work that he asked her to move out to Hawai‘i and help create the Energy Excelerator.
Funded mainly by the Department of Defense, the Excelerator is looking for renewable energy and high-tech companies to help the military reduce its dependence on foreign oil, which they see as a threat to national security. By supporting social entrepreneurs, they hope to launch startups that will create innovative solutions for other companies and homeowners. To find these innovative companies and entrepreneurs, the Energy Excelerator holds an annual business plan competition for both small and larger companies seeking guidance and funding.
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“I think social entrepreneurship is the ultimate path to sustainability because you end up with self-perpetuating, self-sustaining organizations that are measuring their impact not only by the amount of money they are making, but also by how much good they are doing,” Lippert says. Many of these entrepreneurs believe Hawai‘i is the perfect testing ground for renewable energy technology and energy efficiency because the state has the nation’s highest dependency on fossil fuels. Each year, the state ships out about $7 billion for the oil brought in on tankers. “It’s a huge hole in the economy,” Lippert laments.
Pono Home, founded by Scott Cooney, is one of 15 companies to win the Energy Excelerator’s business plan competition. A business owner and lecturer at the University of Hawai‘i at Ma-noa, Cooney is a serial social entrepreneur who has created four companies over the last ten years. “Everything I’ve done since I started my first company in 2004 has been geared toward the triple bottom line.”
A green home consulting service, Pono Home is trying to make sustainability as easy as possible for local residents. Cooney and his crew have worked in over 30 homes, helping owners and renters cut their utility and water costs through simple energy audits, appliance upgrades and practical energy-saving measures. “We’ve seen a pretty good reduction in utility bills, so now I can guarantee that our service pays for itself in one year or less,” Cooney says, proudly.
Pono Home also offers health tips to identify and eliminate toxic chemicals in food, cookware, home furnishings and personal care products that are often made overseas. According to Cooney, this is important because in the rush to maximize profits and pump out the least expensive products, many of America’s largest companies have moved their factories to Third World countries that have much lower health, labor and environmental standards. This is the high cost of low prices that the triple bottom line is poised to avoid.
“It’s a race to the bottom or a race to the top,” explains Cooney, reflecting on companies trying to produce the cheapest goods at any cost versus social entrepreneurs. “They operate on thinner and thinner margins because the only thing they can compete on is price. Brand loyalty is basically zero because as soon as the prices go above a competitor, the customers will switch.”
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Social entrepreneurs value collaboration and brand loyalty over fierce competition and cheap products. “The race to the top is to create the best products that really benefit people and also help the company,” Cooney adds. “Patagonia is a great example because they create quality products and they back them up.” The outdoor apparel company also supports environmental causes, pays their workers fair wages and gives back to local communities. This emphasis on quality over quantity creates more customer loyalty that makes sustainable, financial sense.
Growing up in the concrete canyons of New York City, where skyscrapers towered over his youth, Ari Patz loved the electric hum of the city. However, once he got a taste of Hawai‘i’s natural beauty, he decided to move to the islands. In Honolulu, the former chef took over a company called Styrophobia, which distributed compostable food service products. Living in the land of plate lunches where Styrofoam containers rule supreme, Patz had to educate customers about the health and environmental hazards of these expanded polystyrene foam (Styrofoam) products and other plastic utensils and containers.
Although many businesses were hesitant to purchase the slightly more expensive compostable products, they began switching once Patz explained the health and environment risks of Styrofoam products. “Education is the key,” he says. “Most of my sales calls are crash courses in environmental degradation, providing key points of information like the difference between biodegradable and compostable. Even without county and state composting facilities, our compostable products are infinitely better environmentally.”
When Patz’s wife was accepted to graduate school, he moved back to the American northeast with her for a two-year stint. While still overseeing Styrophobia from abroad, he began working with a nonprofit called World Centric, which had supplied most of his company’s compostable food service products. Patz loved the organization’s mission and helped boost sales of their eco-friendly business. They were impressed by his business savvy and commitment to the cause.
“As the sales increased, it became clear that World Centric, founded as a nonprofit, needed to convert into a for-profit entity,” Patz explains. “With the recent establishment of B Corps, this transition was made much easier as it was felt that the mission and vision did not need to be sacrificed.” Although the first B Corp was certified in 2007, Patz could see they were already changing the face of business.
Just as social entrepreneurs are driven by the triple bottom line, Certified B Corps use the power of business to solve social and environmental problems. Unlike traditional businesses, B Corps are required to meet comprehensive and transparent social and environmental performance standards, along with higher legal accountability standards. This heightened accountability brings in high-level investors and employees who are attracted to this model. Along with donating more than 25 percent of its profits to like-minded organizations every year, World Centric offers profit sharing with its employees and they plant trees to offset their carbon footprint.
When Patz and his wife returned to Hawai‘i, he decided to stay with World Centric because the new B Corp combined the mission of a nonprofit with the agility and growth potential of a for-profit business. He’s now in the process of turning Styrophobia into a nonprofit to educate people about the health and environmental pitfalls of single-use plastics and the need for a composting facility in Hawai‘i to reduce our waste.
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Reducing energy use and waste is a common theme among social entrepreneurs and B Corps across the world. Originally from Canada, Shanah Travena worked as an engineer before moving to Hawai‘i and switching to sustainability studies. A Ph.D. student in political science at University of Hawai‘i at Ma-noa, her dissertation focuses on Benefit Corporations. To add to her already full plate, Travena has also created her own B Corp called Smart Sustainable Consulting, which helps institutions be more sustainable by cutting their energy, water and waste expenses.
As part of her research, Travena interviewed leaders from more than 30 B Corps. They all emphasized the importance of collaboration over competition. “It’s such a tough leap to go from the mainstream status quo to this more progressive way of doing business. It can be scary,” Travena says, emphasizing why she chose to work with the B Lab, a nonprofit that oversees the certification process, while creating her own B Corp. Although she faced a daunting checklist of criteria like employees’ wages, workforce diversity, profit sharing, corporate donations and community benefits, there was a network of people and companies willing to help. Travena says the certification process was well worth the effort, “What LEED certification did for building, B Corps will do for business.”
An early adapter, Hawai‘i is one of 20 states that have already passed laws creating B Corps and momentum is reaching a tipping point across the country. The Sustainability Association of Hawaii (SAH) works with the B Lab as a clearinghouse for sustainable B Corps. Although there is no separate IRS designation yet, the hope is that these B Corps will receive some kind of tax benefit when people will see the value they bring to local communities.
According to Travena’s research, B Corps were 65 percent more likely to survive the recession and not declare bankruptcy, when compared to similar companies in their industry. Travena says a B Corp’s resiliency comes down to three things: “Customer loyalty, employee loyalty and efficiency—all of this translated into a fatter bottom line in producing goods and services.”
Along with resilience, B Corps also tend to emphasize local culture and values over the generic global corporate model. That local ethic appealed to Kainoa Casco, a business consultant who was born in Maui with Filipino roots and grew up in Lahaina. After going away to college at Portland State University, he began working for a company that provided consulting and educational services on the profit-making side of green building. “I realized that creating profits and positive social or environmental impacts don’t have to be mutually exclusive,” Casco says. “Something clicked for me and I made it my mission to bring this concept back to Hawai‘i and improve the lives of the community and the environment through business.”
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After going back to school for a master’s degree in sustainability, Casco began thinking about starting his own business. In 2012, he partnered with a sustainability leader named Jennifer Chirico to form consulting company Susty Pacific. The two are currently in the process of applying to become a B Corp.
A firm believer in social entrepreneurship, Casco expands upon the triple bottom line to create a new quadruple bottom line: people, planet, profit and culture. “In places such as Hawai‘i, where culture plays a significant role in a company’s social, environmental and financial performance, culture should also be at the forefront of a company’s strategy, performance accounting and reporting,” Casco says, deeming it a triple bottom line with a local twist.
There can be a strong resistance to change in the islands, but there is also an increasing frustration with the status quo that favors the old boy network and mainland investors. Casco believes that the people of Hawai‘i are reaching a point where they are looking for something that works for them, not just for the people at the top or outside of the state. He feels there needs to be solutions that help communities thrive, regenerate natural resources and stimulate local business activity while staying true to local culture.
Like the wise king of Bhutan, social entrepreneurs are building a better model of business. Building on the legacy of the Founding Fathers and Hawai‘i’s kings and queens, these B Corp leaders hope to create companies that will perpetuate the life of the land, the prosperity of the people, the richness of their cultures and the pursuit of happiness. Maybe it’s time for a Declaration of Inter- Dependence.
Stuart H. Coleman is a freelance writer and the award-winning author of Eddie Would Go and Fierce Heart. He serves as the Hawaii Coordinator of the Surfrider Foundation and is working on a new book called The Fourth Wave.
Photos: Jessica Pearl