Ep 59: The Importance of B Corp’s with Jim Osgood of Klean Kanteen

Full Podcast Transcript

NASIR: Welcome to Legally Sound Smart Business.
This is Nasir Pasha.

MATT: And this is Matt Staub.

NASIR: Welcome to our podcast. This is where we cover business news and add our legal twist and also answer some of your business legal questions that you, the listener, can send in to ask@legallysoundsmartbusiness.com.
As I’ve said before, soon to be dot-pizza. I’ve looked it up and it is definitely coming – just not yet – TBD.

MATT: I’m glad you took my advice from the last episode and varied your intro. It did sound a little bit different so I do appreciate that.

NASIR: Okay, that’s good.
What do we have to the start of the show here today, Ji—Matt? I called you Jim which, of course, is the name of our guest.

MATT: Well, now you ruined the surprise.

NASIR: I know. I messed up.

MATT: So, in the last – I was going to say “couple of months” but, really, all of this year and some of the last year, there’s been a lot of people that I know have approached me or contacted us and asked about wanting to start a company but wanting some social good behind it, too. I think a lot of people do some preliminary searching and stumble across this B Corp idea. They might not know a lot about it but that’s typically a lot of the phone calls or contacts that I get is people saying, “Hey, I want to start this company, I want to do something good, not just be all about making money. How about this B Corp idea?” It is a cool idea and not every state currently allows it but it is out there for a good chunk of states. I think almost half of them now. In California, it’s still relatively new as well.

NASIR: Yeah, I think California has been around for probably four or five years, I want to say, but I’m lind of guessing there. I know it’s been a little bit of time and I know Delaware now has it, too. So, some of the more important states for these corporations are there.
But let me just break down here. Benefit Corporations – or I should say “B Corps” – is a legal status. It kind of depends. Colloquially, they’re used kind of synonymously but it can mean different things. But, basically, that kind of legal status, basically, it’s a for-profit corporation but the difference is that the shareholders can hold the company accountable differently in a sense that, in a for-profit corporation, the board of directors and their officers have to take the best interest of the company by making as much profit as possible. But, whereas, in a benefit corporation, they could also choose to add on a public benefit as a standard of their success, so to speak.
And so, they’re not held to the same kind of fiduciary duty as they would other companies to their shareholders. But then, on top of that, there’s this whole benefit corporation certification that a third-party, I think there’s at least one, I think there might be another main out there that goes through this process.
And so, to kind of get a better idea of how this works, we brought in Jim Osgood, he’s from Klean Kanteen.
Welcome to the program!
JIM: Great to be here, guys. Thanks for inviting us!

NASIR: Absolutely. Klean Kanteen is a B Corporation, certified by B Labs, correct?
JIM: That is correct. We were certified in October of 2012 and we are also, since that time, a registered benefit corporation of California.

NASIR: Very cool.
So, just to define that, your legal status as a benefit corporation in California but then you’ve been certified by B Labs, is that correct?
JIM: That is correct. The distinction there is that B Labs as a B Corp certification is an impact assessment third-party audit. That’s the objective measures of meeting that criteria. The legal status is one that is an outcome of becoming a B Corp. So, we were not a benefit corporation prior to going through the impact assessment process through B Labs.

NASIR: Oh, okay.
JIM: It was one of the many action items that came as a legal recognition of our status and, as you have very well put, the intent of that is that we’re not all about just maximizing economic value or shareholder value. It’s now legally a fiduciary responsibility to maximizing social and environmental impact as well.

NASIR: Yeah. So, tell us about your company and that process. I’ve heard the certification process is pretty rigorous, that it’s not for everyone, for sure, but if you can enlighten us on that, that’d be great.
JIM: Sure. Well, we’ve actually been kind of practicing the virtues and values of being a benefit corporation really since the beginning of our company. In fact, it was the very reason for starting our company back ten years ago. We’re celebrating our ten-year anniversary this year. We started with a very basic objective and that is help eliminate the impact of plastic water bottles in our environment and create a reusable solution. Hence, we created the very first stainless steel water bottle that actually that very first embodiment remains in our product offering today and we’ve built our business based on trying to provide reusable solutions for single-use items in today’s market. So, it’s reusable and responsible solutions for everyday life.
When we learned more about B Lab and the B Corp certification, you know, so often, we can kind of drink our own Kool-Aid and we think we’re doing great but we lack those objective measures. We also lack experimental focus of how we’re doing versus the other companies that are like-minded. And so, in 2010, B Lab came about and the certification process was born. Actually, I think the process was pretty painless. In fact, it was quite motivating and inspiring because it was very well-organized, there’s four areas of focus. The survey is available so you don’t have to go to the certification process to actually understand how you’re doing. You can actually take the impact assessment and use that for your own internal uses so you don’t actually have to go through the entire process of certification. But, once you do, part of the commitment is to transparency. You can go online at bcorporation.net and see Klean Kanteen’s score – how we did in 2012 in each of the four categories – and that is also the basis for where do we need improvement and that third-party assessment gives us the objective measures to see where we do better and where we can do more. So, that’s used as a progress report and objective measure both internally as well as as we manage our progress as a business at the board level.

MATT: Very good.
So, Jim, when these people contact us about B Corps, one of the things they always ask at some point is, you know, “What are the benefits – other than the philosophy of the company and the philosophy of being a B Corp – what are some of the benefits that a company is going to have if they get that B Corp certification?” I guess my question to you is what have you seen since becoming certified that’s really helped out your company.
JIM: Great question. That really is the cornerstone of “why bother?” and there’s really two paths – one is internal focus and one is external.
Internally, it helped us really organize ourselves around what do we think matters. How do we want to run our business? And so, it gave us important measures that were non-financial metrics. We can manage our business like a traditional corporation in terms of making sure that we’re growing the way we want to grow and we’re efficiently managing our business. So, there’s operational metrics, financial metrics, and so forth. But we didn’t have any kind of metrics to say how are we doing on those other elements for which we’re responsible. How do we measure our impact on the environment? How do we measure the robustness of our design? How do we measure the responsible use of resources that we consume in manufacturing that may not solely be financially related?
So, it really helped us identify those areas that we wanted to measure and manage. As a result of that, we’re a much healthier business. We are able to look at the total health, the wholistic health of our business – not just the financial health which can actually mask longer-term implications of the overall growth of our business and that gets across all functions. So, it’s not just a sustainability initiative; it’s an all-company woven into the fabric of our company culture and our priorities as a company. That internal focus allows us to run our business that much better and be that much more profitable and able to actually be better stewards of the resources that we consume at our business.
Externally, we’re a privately-held family-owned company in California so we don’t have obligations to external stakeholders in the sense of shareholders. We have responsibilities to our suppliers and our end consumers – of their confidence in buying our products and how they partner with us in helping us run our business. So, the idea of transparency – that this is how we’re running our business, this is what we’d like to do long-term, join us in this effort of openness so that we can both grow together.
So, it really forges deeper-rooted relationships with our supply network as well as the confidence and attitude of those folks that actually buy our products is part of their commitment to living a conscious consumer life and a well-informed consumer life. So, there’s many, many facets. It’s not just one area; it’s many areas of value and impact that we find that we benefit from and we’ve actually been taking many new steps to improve our performance to enrich our benefits to our employees, to provide better governance – all of which mitigates the risk of modern business.
I think that, in doing so, we’ve actually created a much more sustainable business in the sense of ensuring our future health – not just our day-to-day operation.

NASIR: Yeah, and I imagine, like you said, working with other vendors, customers that are benefit corporations themselves and are certified are going to be preferred just as customers are going to prefer those that are certified as well. That’s pretty great insight. I think a lot of people from the outside that are not aware of this kind of community can really benefit from what you’re saying, for sure.
JIM: Your comment about like-mindedness I think is really a key because it allows us to forge better relationships with those that work with us. So, that community of B Corps, it’s a wonderful filter as opposed to, if you’re looking for a new source for a material or a new partner to do some sort of service, if they’re a benefit corporation, you already know that, philosophically and in terms of core values, you’re already well-aligned so you’re mitigating the risk of selecting a poor partner through conventional vetting processes. So, it actually works in some of even the most basic steps of defining new partnerships.
[MUSIC]

NASIR: Every episode, we have a question of the day.

MATT: Here’s our question.
“One of our employees does great work and isn’t breaking any office rules but we’ve noticed he is posting very questionable content on his social media. Can we fire him for this since he lists us as his employer on his profiles?”
This comes from a company in Burbank, California.

NASIR: Okay. So, we’ve covered some issues with social media with your employees. I think the first thing that comes to mind is what? Privacy issues, right? But the whole question of whether you can terminate them or not, I would look at it this way. You can fire them for the same reasons or you cannot fire them for the same reasons whether or not it’s because of social media. In other words, social media doesn’t necessarily change the rule. It’s the same as if they’re posting questionable content on a public forum. It’s the same as them acting in a public place and acting up and so forth. If that’s cause for you to terminate them, and so long as it’s not for any illegal reason like discrimination or whatever else it could be – any kind of labor law violation that they complained about – then it’s totally kosher.

MATT: I’m glad this question came up because I do want to get Jim’s take on it because it sounds like culture is obviously very important to Klean Kanteen.
So, if this sort of situation would come up for you, Jim how would you handle it?
JIM: Oh, that’s a great question that, in many ways, the vast majority of the likelihood of this occurring starts with the selection of employees.
We first start selecting employees based on core value fit – that, philosophically, they understand what we stand for and we understand what they stand for and we start there. And so, the attitude, the philosophy, the shared core values are established on day one. So, the likelihood of that happening is minimized by virtue of that process that we use for adding folks to join our team here.
Secondly, like most companies, we establish expectations around their personal voice versus when they’re acting on behalf of Klean. We have pretty broad standards for that that we want each of our folks to be an ambassador of Klean Kanteen. We want them to be able to speak publicly in their own communities and in their own relationships about our business interest, what we stand for, what we’re doing, and to do it in a very informed way. So, training and education so they actually have a context of being informed. We spend a lot of time and energy working with our folks, sharing information, providing formal and informal training, exposing them to our operations so they actually do have an informed point of view as opposed to a perception of something. Again, that further reduces the risk of this happening.
We always invite questions. If someone is taking up a cause in social media that’s contentious, we would first invite that to be discussed internally to say, rather than taking it to the streets, if there’s a concern, create an atmosphere and openness at Klean and, well, the culture and the opportunity for escalation, if there’s a concern, we’ll talk about it. Let’s not force that person to seek a different outlet to share that concern or vent that frustration. Let’s address it directly and openly and candidly and honestly. Say, if we’re doing something wrong or if there’s something causing a problem, let’s deal with it one on one or let’s deal with it directly and not in a court or public opinion, if you will.

NASIR: Yeah, no doubt. That’s a great perspective.
You know, we talked about this in our last episode – that you have to go to the source of the problem.
If you have an employee that is doing that, yeah, there’s a way to deal with it – whether you want to terminate them or discipline them – but that’s kind of reacting to the problem and not really preventing it.
Great question, Matt. You’re obviously right. Jim has a very good understanding of company culture and the positive effects it can have on business and legal risk management for that matter.

MATT: Jim, we obviously said Klean Kanteen is your company but do you want to tell our audience a little bit more about it?
JIM: Sure.
As I alluded to earlier, we started the company in 2004 with that basic premise of a commitment to finding a better alternative to single-use plastic bottled water – not just because of the environmental impact but also because of the health effects.
As you may recall, in 2008, the research and science behind BPA and the effects on human health, it was banned in Canada. Shortly thereafter, other countries followed. But, literally overnight, the BPA-free initiative cleared the shelves in Canada of all plastic water bottles – reusable plastic water bottles – and created a huge vacuum of need for essentially the world now that there’s awareness of BPA and that’s what really put Klean Kanteen on the map.
Since that time, we’ve taken that momentum and continued our quest to essentially make reusable solutions as easy and obvious, cost-efficient and convenient as single-use that everyday life, using a reusable Klean Kanteen or other reusable bottle to go for your morning coffee and take it with you to school or work should be as easy and obvious as grabbing that single-use paper cup from Starbucks. The consciousness of it, the awareness of it, the vast majority of our effort is around education and advocacy. The products simply deliver the promise of our brand – of knowledge and awareness and making informed choices.
I guess I would say that we’re a for-profit business that thinks and acts like a non-profit – not just as a benefit corporation but truly our everyday actions and so we give back and part of being a benefit corporation is helping support non-profit organizations that do the good research, education, and advocacy because we simply can’t do it all on our own so we dedicate and have given one percent of our sales – not profits but sales – to qualifying non-profit organizations that are doing that good work and I’m proud to say that, this year, being in a modest-sized company that we’ve been, we’ll be giving our one-millionth dollar this year to non-profit organizations that we’re very, very proud of. Our commitment – not just in providing high-quality products but also serving our community and serving those non-profit organizations that are helping advance the awareness of the impact on our environment, in our communities of what single-use waste really does to our environment and our bodies.

NASIR: Excellent. Well, that’s Jim Osgood from Klean Kanteen. That’s at kleankanteen.com – “Klean” and “Kanteen” start with a K and not a C, but we’ll also put a link to it in our show notes, of course, in case people learn how to spell Klean Kanteen right – the correct way to spell it.
JIM: Right.

NASIR: Okay. Well, thank you for joining us and I’ll see you next episode.

MATT: Yeah, keep it sound and keep it smart.