A call for 'responsible' entrepreneurs

Movement encouraging capitalists to think about more than capital has local players, including new accelerator

  • Julie Lenzer Kirk, executive director of the Maryland Center for Entrepreneurship, in part of the space that will become Howard County's new Conscious Venture Lab, a business accelerator for entrepreneurs wanting to focus on doing good for employees, the community and the environment as well as the bottom line. The space will be expanded and several businesses will operate in approximately 2000 square feet in an area that will become Excelerator Alley.
Julie Lenzer Kirk, executive director of the Maryland Center… (Kim Hairston / Baltimore…)
December 08, 2013|By Jamie Smith Hopkins, The Baltimore Sun

Few companies watch their bottom line with more anxiety than startup firms, but the ones who want to move into a new business accelerator in Columbia will need to think beyond revenue and expenses.

Howard County's Conscious Venture Lab is on the hunt for fledgling companies practicing a form of what's often called responsible or sustainable capitalism — businesses with aims that include but aren't limited to profits. The accelerator's organizers want firms that consider not just shareholders in their decisions but also a broad range of other "stakeholders" such as employees, suppliers and the environment.

"It's not about socialism," said Jeff Cherry, executive director of the accelerator and CEO of a financial consulting firm. "It's about a better form of capitalism."

The accelerator — funded by the county for two years with $750,000 — is one of a relative few in the business incubation world specifically focused on such companies. But it joins a long line of efforts to aid and prod corporations to do good while doing well, a movement that has gained momentum and high-profile advocates.

Unilever CEO Paul Polman, whose consumer-products firm is often named as a top "sustainable" company among the multinationals, said in a National Public Radio interview in June that one result of gridlocked governments is that "the need for change increasingly has to come from responsible business."

"If businesses understand that, they'll have a bright future," Polman said. "If businesses don't understand that, I think the consumer will increasingly vote them out of business."

That sums up the responsible-capitalism pitch: Stop focusing on short-term profits to the exclusion of all else, and you'll actually make more money.

Studies testing that theory have come to contradictory conclusions.

The research on "responsible investment" — funds that buy into companies they judge to be good in more ways than their growth potential — suggests the method delivers results "on par with conventional techniques," according to a 2011 paper by GMI Ratings, which researches environmental, social, governance and accounting risks faced by public companies.

Long-term benefit

But a more recent study by business professors from Harvard University and the London Business School, released in July, concluded that what they dubbed "high sustainability" companies "significantly outperform their counterparts over the long-term."

The authors said their study was unusual because it tracked performance over many years. They looked at firms that got serious about social and environmental issues no later than two decades ago, comparing them to firms that made few efforts along those lines but were otherwise similar.

"A more engaged workforce, a more secure license to operate, a more loyal and satisfied customer base, better relationships with stakeholders, greater transparency, a more collaborative community, and a better ability to innovate may all be contributing factors to this potentially persistent superior performance," the authors wrote.

Efforts to encourage such behavior include third-party certifications such as "fair trade" and "fair labor."

"People are expecting companies to be doing these things, and they look for certification as an indication that they are doing these things," said Dave Knight, sustainability services director at Two Tomorrows, based in the United Kingdom.

Many states now give businesses an option to structure themselves differently, too.

Maryland leads

In 2010, Maryland became the first state in the country to allow companies to form as "benefit corporations." Such firms are protected from lawsuits over decisions that put workers, customers or similar interests before profits. Much of the country has followed Maryland's suit, either passing or considering such legislation.

Some of the 60 companies that had organized as Maryland benefit corporations or LLCs as of May don't seem to be anything more than a name, but others have offices, employees and sales. For Clean Currents, a renewable-energy provider in Silver Spring, it seemed like a good business move to get that legal designation plus a separate certification that it meets certain social, environmental and accountability standards.

"Anybody can sell a green product," said Clean Currents co-founder Gary Skulnik, but the question for customers is whether "the company behind it is green as well."

Then there are the responsible-investment funds, which typically seek out companies deemed sustainable but also cajole firms that aren't.

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