The Rise of Benefit Corporations

Closed Caption Transcript

Hi, everyone, thanks for tuning
in to Impact Fort Worth.

What an incredible lineup of speakers
on the cutting edge of social impact.

I'm Dr. Vanessa Bouché,

associate professor of political science
at TCU and co-founder of Savhera,

a public benefit corporation diffusing
wellness and justice globally through

aromatherapy products that provide
jobs to survivors of sex trafficking.

Before I dive into Savhera,
I'm going to start my presentation

conceptually to bring you up to speed
on what public benefit corporations are,

why they exist, and how they are
outperforming conventional corporations.

Think about conventional models
of statutory entities as having two

dimensions, the first dimension
is purpose versus profit.

Does an entity exist to accomplish some

social purpose or provide some social
good, or does it exist to maximize profit?

The second dimension is public or private
is an entity run by a public sector

governmental organization or
by a private sector organization.

Given these two axes four major types
of entities emerge,

governments are public entities
that exist to provide social goods.

This would include things like public

safety, the justice system
or public education.

And of course, they're funded by taxation.

There are also public entities that can

make a profit,
and this includes the US Postal Service,

the FDIC, but their profit is supposed
to allow them to be self-sustaining.

On the other hand,
there are private entities that exist

to achieve some social good or
outcome, not make a profit.

These are typically non-profit or
non-governmental organizations that are

exempt from paying taxes because they
serve a public benefit and to incentivize

people to give to these organizations
there are tax benefits to the donors.

Finally, there are corporations which are
private sector entities that exist

for the sole purpose of maximizing
profit to shareholders.

They are taxed at corporate tax rates

to pay for the public goods
offered by the public sector.

We're all very familiar with these types

of entities and the taxing incentives
and structures around them.

However, these conventional models are not

exactly working well for the majority
of people or the planet.

A growing body of research provides ample
data showing the ways

in which the conventional models are
leading to significant wealth gaps between

the top 10 percent
and the bottom 90 percent.

According to the Federal Reserve,

the top one percent have seen a 300
percent increase in wealth in the 30 years

between 1989
and 2019.

Meanwhile, there has been negative or

at best, stagnant growth
for the bottom 50 percent.

At the same time, the earth's temperatures

have been rising and global CO2 emissions
are exponentially increasing,

and simultaneously the global population
has also been growing exponentially.

So the top one percent owns 90 percent
of global wealth even as the earth is

warming up and more people
are being born into poverty.

People have begun to realize

that something is not working
and something needs to change.

Enter the new business designation

of a public benefit corporation,
recall this graphic public benefit

corporations are private entities
that balance purpose and profit.

So there's really no space
for them on this graphic.

They exist somewhere between the space
of non-profits and corporations.

Public benefit corporations are a legal

business designation that allow a company
to consider all stakeholders,

not just shareholders,
when making business decisions,

put simply, a public benefit, corporations
have a quadruple bottom line purpose.

People, planet, and profit.

It's a very new designation,

it has only existed for 10 years
and the first state to pass it as a new

type of business designation
was Maryland in 2010.

Currently, 34 states have this

business designation and another six
states are actively working on it.

It appears to be the wave of the future.

It's important to note that there is
a distinction between registering

the company as a public benefit
corporation and obtaining a B Corp

certification
to apply for B Corp certification,

a company must take a 
200 question assessment.

That judge's performance across five

impact areas governance, the environment,
workers, customers and community.

The purpose of the assessment is to show
that the company has environmental

and socially beneficial business
practices, public transparency

and the legal accountability
to balance profit and purpose.

This certification is obtained
by a non-profit organization called B Lab

and B Lab has certified thirty
five hundred B Corps globally.

In other words,
a company can be registered as a public

benefit corporation, but not
have B Corp certification.

The rise in the number of states allowing

for PBC or public benefit corporation
designations has led to a rise in PBCs

across the country and a very large
increase in B Corp certifications.

And there are very good reasons for this.

First, B Corps appear to grow faster than

conventional corporations
and have greater ROI.

In fact, one study found that BCorps

in the UK grew 28% faster 
than the UK's GDP.

Of course, that doesn't account

for the social and environmental ROI
provided by those B Corps as well.

Second, and perhaps explaining why

the fast growth is that consumer demand
for socially conscious products is

increasing, especially among the younger
consumers, including millennials

and Gen Zers,
a new kind of consumer has burgeoned,

one who wants to support companies
that share their values.

Third, investors have
caught on to these trends.

Savvy investors spot future trends and
invest in those trends to realize growth.

And the trends are clear.

Conventional models are not
working for people or the planet.

B Corps grow fast,

in part because consumers are demanding
better ways of doing business.

And so there's an increasing demand

for impact investing opportunities
for socially conscious investors who want

to realize financial,
social and environmental dividends.

Enter Savhera. In 2017
I met a woman named Pushpa sitting

on the floor of a medical clinic
in the red light district of Delhi,

I came to learn later that she was
trafficked to the brothels in Delhi when

she was 13 years old and had
been stuck there ever since.

On that day, though, she said,

with great courage and conviction,
"Why should I tell you my story?

You're no different from those who exploit
my body. You're exploiting my story."

When I asked her what she needed,

she said, "I need dignified employment
to get out of this dirty business."

I told her that I would help.
When it became clear that I would have

to start something if I was going
to help her, I faced a choice.

Would we be a non-profit or a for profit?

Savhera registered as a public benefit
corporation in the state of Texas

in 2018,
just one year after the Texas legislature

had made it a business designation
in 2017.

By 2019 we had pending B Corp
certification status with a score

of 85.2
on the B Corp assessment.

And just for your information,

Savhera means new beginning or morning
in Hindi, and it was named by our very

first employees because this is their
opportunity to live a new life.

It's a new dawn.

In addition to the clear trends towards
public benefit corporations,

there were two other reasons
for the decision and the first is scale.

Our mission is to provide work
for marginalized women by providing

a product or service that could be built
to scale that would then produce more

jobs, increasing numbers of products
and units and more scale.

So scale was important to us not
only financially but also socially.

We want to provide more jobs to more women

and our profit would serve
as a vehicle for that.

Second, was lessons learned
from those who had gone before us.

There are two companies employing

marginalized women, similar to Savhera,
Akola and Thistle Farms.

Both of these started as non-profit
organizations, and both of them realized

that the non-profit model was untenable
for them to scale. Both of them

have since shifted gears
and become for profit.

Taking these learnings and implementing

my own intuition and study,
it became clear

that the Public Benefit Corporation
model was the way to go for Savhera.

First and foremost,

we invest in people and we care about
people, our employees who are survivors

of sex trafficking in two different
countries work the P.I.E.S model,

which is Savhera's model of human
flourishing and stands for physical,

intellectual, economic and spiritual
growth and development.

We have a systematic approach to monitor
and evaluate the impact of Savhera on our

employees livelihoods,
and it's encompassed in this model.

I could spend an hour just delving
into this model and how it operates,

but suffice it to say that it serves as
our theory of change as we invest in our

people to realize the social
dividends of our work.

Investing in people looks different

in different contexts. For our team members
in India, they're learning how to read

and write, how to ride public
transportation and read maps,

how to work with their hands and develop
fine motor skills through production

of sustainable packaging
and aromatherapy jewelry.

Our team members in the US are learning
how to write professional emails,

work on spreadsheets
and communicate with customers.

They are teaching each other and growing
in their confidence every day.

Even our registered aromatherapist
is a survivor of sex trafficking.

But we also care about our customers,
which is why we are wellness

and mindfulness company that genuinely
desires to spark joy in and delight our

customers with our products
and our practices.

We also honor the planet in what we do,

we sell only USDA certified organic
essential oils so that our products don't

contribute to water pollution or soil
frailty. We're a plastic free company.

And all of our packaging uses
sustainable materials.

We teach our employees about reducing,
reusing and recycling.

And they even reuse dishwater to water

the plants in the office so as
to not waste this precious resource.

And every day we exist to fulfill our

purpose, which is helping everyone
to live well and do good.

We are passionate about holistic wellness

and restorative justice,
and we work tirelessly every day towards

this purpose and what
we do and how we do it.

But none of this is without
significant challenges.

First, the vast majority of people still

have a very nascent understanding
of public benefit corporations.

Most people confuse Savhera
as a non-profit organization.

So our recommendation to ourselves here is
to continue to write about and speak about

benefit corporations so that they
become more mainstream.

A second and related challenge is

the ability to raise capital investments,
even as there's greater demand for impact

investing, the transfer of wealth to
younger investors is slowly taking place.

Older investors are still somewhat

skittish about the idea of social
dividends, and they are yet to be

convinced that it's good
business to do good.

Additionally, while the longer term

financial gains of public benefit
corporations appear to be clear,

the fact that it does take longer to see
those returns is a turnoff to some,

especially if they're
not sold on the purpose.

Also, the truth is that 97% of venture capital goes to male

founders, which leaves female founders
in the impact space in a particular

quandary with where all
the startup capital is.

Another hurdle in terms of investment is
that PBCs are taxed at the same rate

as conventional corporations,
despite the fact that more of their profit

is being invested into
their social mission.

This potentially leaves less room

for profit and the payout
of larger dividends.

Further, there's not a clear vernacular

in terms of what impact investing even
means, many use the term only refer

to investments in nonprofit organizations
where the payout is a social dividend as

opposed to impact investing
being both financial and social.

All of these challenges in terms

of raising capital lead to room
for many recommendations.

First, there should be more research
into the actual ROI and time horizon

for impact investors and PBCs to realize
their ROI and the return should be

quantified in both
financial and social terms.

That means that PBCs need to do a better
job of quantifying their social dividends,

not just in terms of output, but in terms
of real outcomes with cash value.

Second, legislature should consider new
tax structures for PBCs,

and I say this with hesitation because it
would require increased accountability

of some form to ensure that these
companies are not just registering as PBCs

to take advantage of the tax benefits
of the designation,

but are actually producing the social
mission that they claim to be.

Third, legislature should also consider

entirely new asset classes
for impact investors.

And finally, there needs to be more
awareness of gender bias that exists

within the investing space so that we can
all do a better job in the future

of mitigating gender
gaps in wealth creation.

And then a third challenge is intention
to exit. Conventional startups are often

looking for a quick exit through
acquisition or an eventual IPO,

Savhera faces challenges
with both of these strategies.

Unless there's another PBC with exact

purposive alignment,
acquisition is out of the question.

IPO is also out of the question because

there's no stock exchange for PBCs
that allow for the company to consider all

stakeholders and not just
shareholders in making decisions.

Shareholders in a publicly traded company

expect the company's main
objective to be profit.

The goal is to make everyone
that invests more money.

Perhaps then the creation of a benefit

corporation stock exchange,
where the value proposition is more than

profit, but also people,
planet and purpose should be considered.

So at Savhera, we are building a global
brand, using profit as a means to the end

of diffusing wellness and justice
globally, and we want you on our team.

Given the challenges I just told you about
raising capital,

Sahvhera has embarked on an ambitious
crowdfunding campaign to raise 

$50,000, and there's only
a few weeks left to contribute.

So many startups raise millions of dollars

in crowdfunding campaigns
for the next new, cool gadget.

But Savhera is not 
crowdfunding for things.

Though we do have some pretty cool

products in development,
we are fundamentally crowdfunding

for people to see lives restored and hope

renewed, the world needs everyone
to exercise their unique gifts,

and millions are denied the right to ever
realize what their gifts even are.

Savhera is investing in women who,
for the first time in their lives,

are realizing that they have been uniquely
gifted so that they too can give.

And we are crowdfunding through
the platform IFundWomen,

which was created to close
the gender gap in venture capital.

So thank you so much for your
contributions to this critical campaign.

You can contribute at 
Ifundwomen.com/projects/savhera

Second, Savhera is one of 12 finalists

across the country to win a 
$25,0000 Amber Grant for female

founded companies, please go
to AmberGrantsforwomen.com/voting.

Scroll down to Savhera and click
the up arrow to vote for us.

And you can even vote on every device

that you own because we want
to keep the votes coming. Third,

Of course, you can buy our products,
which also make excellent presents

for friends, family, teachers,
co-workers, clients, etc.

With the holidays coming up,
we are hoping to crush our holiday sales.

We literally have gifts
for everyone on your list.

The aromatherapy industry is anticipated
to grow 100% in the next 10

years, and Savhera is well poised
to capture that new market share.

Our products are organic,

100% pure and more
affordable than the competition.

And I can guarantee you that no other
company comes close to accomplishing what

we have accomplished
for marginalized women.

Switch your brand loyalty.

You will not be disappointed.

Additionally, we are launching
an affiliate program very soon.

You can refer people to our e-commerce
site and receive an 8% commission

on every referral, while earning
perks as you gain more referrals.

We love the tried and true word of mouth

referral system and we can't wait to give
you the chance to earn money and rewards.

As a token of our gratitude for your

referrals and opening
up your networks to us.

Another fun way to tell your friends about
us, while also educating about essential

oils and human trafficking
is to host a DIY party.

The party package is coming down the hatch

early in 2021
and we can't wait to give you or your kids

the opportunity to host a severe party,
make a DIY essential oil spritzers,

hand sanitizer, lip balm, scandals,
neck pillows, cleaning sprays, etc.

, etc.
, etc.

, while also learning about human

trafficking, raising awareness, and hearing
stories of hope and redemption.

Thank you so much for being
a part of Impact Fort Worth.

I hope you gained lots of insight and that
you walk away with ideas and inspiration.

Please feel free to email me if
you're interested in connecting.

I look forward to hearing from you

and learning about the incredible
work you are sure to be doing.

Thanks again.