B Lab and the Impact Assessment Evolution

This 2014 case discusses the U.S. nonprofit organization B Lab and its mission to support and help drive investment capital toward private enterprises that 1) aim to provide social and environmental benefits, and 2) are accountable to stakeholders (such as employees and their community) in addition to their equity investors. B Lab created robust tools for assessing the impact of these enterprises so that the social and environmental Return on Investment could be measured and evaluated in a consistent, comparable and transparent fashion. The tools were based on a 200-point assessment scheme called the B Impact Assessment. In addition, B Lab created a certification called “B Corp,” which identified companies that considered diverse stakeholder interest in its definition of corporate and fiduciary responsibility. B Lab also created and championed a new legal form, the Benefit organization, which supported those organizations. Through these activities, B Lab played an important role in the relatively new practice of impact investing, which seeks to generate positive social or environmental value alongside financial returns. In 2014 the eight-year-old company was at a strategic crossroads. Many organizations found the B Lab assessment process to be burdensome, and the investment markets were showing a lack of interest, if not resistance to, using B Lab’s measurement systems. Many market participants wanted to focus only on specific parts of B Lab’s assessment, or wanted more customized tools to suit data collection for their own existing metrics. However, enabling investors to do that would make it harder for B Lab to create common standards - a key part of the organization’s mission. B Lab’s leaders were grappling with the issue of how far to go to meet the market with highly customized products and services that investors were demanding, versus how much B Lab should lead the market to a higher bar for measuring impact.