EPISODE 4: “PAYING FOR GOOD PODCAST” WITH JOHN FEATHERBY, UK BCORP FOUNDING MEMBER

RESPONSIBLE REWARD

23th JULY 2020

[Corinne Carr: CC] [John Featherby: JF]

CC: Hi everyone, I’m absolutely delighted to introduce John Featherby to you today who will be telling us about B Corps. John is one of the founding members of B Corps in the UK and he’s also got a crucial role as a B leader. I’m going to ask John a few questions to guide the conversation. I’m really looking forward to learning more about John, John’s role and B Corp as well, so over to you, John.

JF: Well, thank you very much for having me. It’s fun to talk about this movement, particularly given that it seems to have captured everyone’s imagination in the last 12-24 months. So thank you for giving me the opportunity to tell more people about it.

CC: What’s your role at B Corp? and tell us about your background as well.

JF: I’m fortunate to be involved in this space. I grew up in a family that was very committed to rethinking this temporary economic model. Back when I was a child, my parents were the first social impact bond investors and you know, this is the sort of thing we discussed around the dinner table at home. And so I had a just a lucky start, I guess. And so by the time I started work, I was already saturated in this idea around ‘your work really mattered’ and what you did with your time. So I wanted to give my professional life to it more wholeheartedly. And so I left the city to combine what I learned in the business world with what I felt passionate about. I spent 10 plus years trying to build some of these movements and just showing up for conversations that felt like they would help move the system forward an inch or a mile. You know, lots of those things don’t go anywhere. And B Corp is one of those things that has.

Big B Corp is effectively made up of two parts. So there’s B lab, and the lab is the not for profit entity that runs the B Corp movement. So they do that because they help maintain the community. In particular, they run the assessment and the certification process. And the B Corps are the companies, they have to be a business, that make it through the certification process, and then become branded a B Corp. So people who work for B Corps aren’t generally employees of B lab so to speak, they’re two separate things. Most people have heard of things like Patagonia, Eileen Fisher, Ben and Jerry’s, Body Shop, Guardian Media Group. When we launched the B Corp movement in the UK, there was a small team of B leaders. And then there were 50 companies who had gone through the process, become certified, who felt like it was important to put your name on the team sheet for something that might drive some more systemic change. And this is September 2015. And now here we are in 2020, nearly five years on and lots of people know about it. I’m just very lucky to have been there at the start. So my company Shoremount was one of those 50 odd founding B Corps. And the role of B leader isn’t a formal B lab role. It’s a role where we’re working in partnership with B lab to a certain degree to raise awareness of the movement, but in particular to help companies certify if they want to. Occasionally I speaker at things in a bit of capacity. But just as a general rule, it’s Shoremount or the ‘Great Reawakening’ which is the think tank side of our work. And we’re a B Corp as opposed to B lab. And it always confuses people, but it’s an important distinction.

CC: So what does it mean being a B Corp? Is it about doing business in a different way? We’ll talk about the assessment in a minute.

JF: So to be a B Corp is to decide that you want to build a future where a broader range of stakeholders are taken into account when making decisions, thinking strategically. You recognise a need for a change, which goes beyond just a better leadership programme or a new project.The underlying philosophy of how we do business and business’s role, society need to change. And to be a B Corp means to have adopted this philosophy right across your organisation. It’s not a CSR (Corporate Social Responsibility) programme. It’s something that is wedded in the DNA of the business. So whilst we would always recommend giving, a good litmus test for me is ‘No, you didn’t write a check to a charity this year’, what stories could you tell about just a day to day way you run your business that still thinks like that. And the backstory of it is basically trying to come up with a way to corral people around a core idea, a theory of change, which went beyond one business at a time. And so it’s a mixture of adopting a legal framework that holds the company to account for all stakeholders and getting through an assessment.

CC: So when I look at the big goals of the B Corp community, you work towards ‘reducing inequalities, lowering levels of poverty, healthier environments, stronger communities’, all of which very much resonated with me and sounded like the UN Sustainable Development Goals. Were they the inspiration for the B Corp movement?

JF: No. So the SDGs are separate. They weren’t necessarily the inspiration for it. Whilst it’s been in the UK formerly since 2015, the B Corp movement has been going, I think 12-13 years in the US. The inspiration behind it originally was a group of some chaps who built and sold a basketball business called ‘And One’. And when they sold it, they realised they wanted to be involved in something that went beyond one company change at a time and a new way of thinking about investment and what we see is value needed to be pursued. So there was a discussion around what does the system need for change? In general, the answer came back, we need something which creates legal accountability. And we need a whole company assessment because lots of companies can say, I’m in a building which is certified as green or we give to that charity or we have this employee well-being programme. But those things can operate in relative isolation, it does not mean that the business as a whole, from head to toe is thinking like this. So they wanted something that would encapsulate like an umbrella everything that an organisation was about, you know, the character of the organization that affected everything it did. And so the B impact assessment (BIA) was born to try and do that. And it just so happens that the UN Global Compact and the SDGs are similar in terms of pursuing system change. And actually, we do now have the B impact assessment which is the assessment we use to certify B Corps matched to the SDGs. So we have something called the SDG action manager, which we can talk about, which links the two. So last year B lab, and the B Corp movement worked in partnership with the UN Global Compact to create a resource so companies could understand what SDGs they were working within and how they might want to improve in their area. They are two things pursuing the same thing, but one isn’t necessarily responsible for the other.

CC: And in fact, when you look at the assessment questions of B Corp, you can see that there is a correlation between the questions and the SDG. So that’s something that I’ve noticed.

Let’s talk about the SDG action manager as you were just saying. What else can you tell us about that? So is it something that you come across as you do the B Corp assessment?

JF: If we talk about the B impact assessment, then it will link into the SDG question. So when you become or want to become a B Corp, you have to get through the online assessment, which we use, which is called the B impact assessment, it’s a free public resource. So anybody can just go and use it. It’s divided up into sections. And the idea was to create an assessment that would not just assess how you are getting on and how you are thinking, but actually offers you resources and questions and ideas about the areas you can make improvements. And importantly, I think it can show you these are areas where you’re already doing great things, go away and celebrate it. I think it’s a mistake to just look at where we’re going wrong, what could we be doing better? I think you need to be doing both. And once you go through the BIA, and if you want to become a B Corp, you require 80 points on their assessment to be eligible for B Corp certification. Whilst you’re doing that, it simultaneously maps the answers of your questions to the SDGs and the Action manager. So you can if you want to, but you don’t have to. Then also go and use the Action manager. I think if you complete the BIA 100%, about 40% of the SDG action merger will be complete. So it’s not totally like for like, because obviously they’re asking slightly different questions. But it’s a great starting point, you’re almost half-way there. Then go and look at the SDG action manager. And it’s the same thing. It has the same intent, like with the BIA, it’s not just something to assess you. The idea is to really help you make positive steps forward. It’s laid out in a way that’s user friendly, and helps you think, we could be doing this, we could be doing that. Because one of the challenges with the SDGs, I think, particularly for SMEs is what does this mean in practice? This sounds great. And I’m on board with 12345, whatever it might be. But at a granular level, how do I implement this? What does that actually look like if I’m running a small, local business? So the idea with the SDG Action manager is to help companies think along those lines in more practical ways, and both the BIA and the SDG Action Manager managed to do that.

CC: Just to be clear with our listeners, the BIA covers several areas such as governance, workers, community, environment, and customers and there are over 100 questions to answer with the ability to provide comments and multiple choice questions where people can answer according to where they are at that point in time. But you said, John, it’s also giving them ideas of what they could be doing. So imagine I’m a business and B Corp is something that I’d like to strive for, I can access this questionnaire online for free. And then I submit my answers. Can you just explain what happens next?

JF: So once you’ve gone through the assessment, you submit to B Lab for verification, and B lab will review your answers. They require more information to check your answers. So you have to be able to answer these questions authentically and with confidence. It’s a discussion. The idea is that you can support what you’re saying. And through a series of dialogues with B lab, eventually and it does take months. It doesn’t happen in two weeks. And you reach a point where they say you’re legitimately above 80 points. And so you have to adopt the legal framework. And depending on your structure, there’s different timeframes for that, but I always recommend that you do it as part of the certification not afterwards, and then B Lab checks of your answers. And if you’re a really big company, there’s a separate process, but for most companies that’s not relevant. And at the end, you have to sign what we call a Declaration of Interdependence. Because interdependency is a core value of the B Corp movement, and then you pay an annual fee like a sub to be part of the B Corp community, which is a percentage of your revenue. When you look at it as, for example, marketing costs, it’s more than worth it. And you get to support a movement that is doing great things. But for most people the cost of it is fairly irrelevant. People have decided whether or not they want to be a B Corp long before that. And it does take time and efforts to get across the line. But if you believe the changes needed and you think this is something worth doing, then people put the time in.

CC: So let’s talk about the Declaration of Interdependence: ’We believe that we must be the change we seek in the world, that all business ought to be conducted as if people and place mattered that through their products, practices and profits, businesses should aspire to do no harm and benefit to all. And that to do so requires that we act with the understanding that we are each dependent upon another, and thus responsible for each other and future generations.’ So it’s all about how you do business, that business should be conducted in a way where people and the planet matter. Would that be a fair summary of the declaration? So upon achieving the required score for the assessment, then firms sign up on this declaration. Is that right, John?

JF: Everybody signs that. It’s a symbolic act. If you’ve gone all the way through the B Corp assessment, and you’re committed to being a B Corp or just pursuing off the change, signing the Declaration of Interdependence is not something that is a defining choice. It’s not a decision making make or break. Generally people who get to that point, are in agreement about what’s on that piece of paper and wanting to contribute to it. All businesses are doing different things. The beauty of the BIA is that it moulds to your business. So it’s like a series of Russian dolls that depending on your size and sector, you will get a different stream of questions. So it’s not one size fits all. It does tailor to who you are. So if you’re a global retail business, you’re going to get a different set of questions to a local professional services business, for example.

CC: It covers all sizes whether you’ve got one employee or thousands.

JF: It doesn’t matter whether you’re a one person business or a global multinational. There are B Corps, of your size and of your sector. And I think it’s also important to mention that the BIA is not just used by the B Corps. So I think I’m right in saying there are around 3,300 B Corps but pushing 100,000 organisations now use the assessment just to think. So that’s not 100,000 organizations who’ve tried to become a B Corp and only 3,000 ish have made it. It’s not a 3% success rate. There are lots of companies like banks or not for profits or government departments that either can’t or won’t be a B Corp. But they see the B impact assessment as a gold standard in thinking along the lines of what does a really purpose led business look and feel like? So they use the BIA just to come up with ideas and think and make changes. And perhaps one day they decide, do you know what? We might actually go the full hog and become certified. And you don’t have to get above a certain threshold on every section. It’s a balanced score. So whilst 80 points is not easy to achieve, so you do have to be pushing it, everywhere. And what tends to happen as well is that businesses tend to be better in some areas than others, and particularly with a smaller business that often reflects what are the interests and historic passions of the ownership structure. So if you’re particularly passionate about people or about the environment, you tend to have ended up doing more in that area, and therefore you’re stronger in that area. So the BIA helps you bring the other areas up. But that’s true for everything from the local farm shop right through to the great and the good of the movement. Everybody has areas they want to grow in. And we can all be improving. So it’s not an easy threshold, but it’s doable.

CC:  And is it part of your role to help those companies get to the certification for those who want to achieve it?

JF: Historically, that’s not been the case. I mean, when you start a movement like this, it tends to just be a group of pioneers who think this matters We don’t know what we’re going to get out of this. There’s no brand value necessarily to becoming one, right ffrom the start. That’s not true now, but when you start something from scratch, nobody’s heard of it. It’s just about contributing yourself to something that might work and might catch fire. And then five years later it’s a very different kettle of fish, people are joining for different reasons. So early on, it was just about contributing to a movement and hoping it would land. And then it became about being a bit of an evangelist forest and talking about it regularly and getting the name out there. And yes, now we’ve reached a point where there is sufficient quantum in terms of businesses wanting to be a B Corp, where it makes sense to be offering help. So, they might have come to it, they may be of a certain size, and then they might decide that they want to get it done as quickly as they can because they want to make becoming a B Corp a strategic priority. People need help for all sorts of different reasons. I’ve had the same number of companies approach me in the last three or four months asking about, could we be one? might you help? as the previous three or four years. That just gives an indication in terms of the awareness of the movement has just gone totally bananas in the last 12 to 18 months.

CC: Do you find that the current situation with the Coronavirus is going to impact firms on how they look at their social factors for instance?

JF: Yeah, I think this is huge. I think, for those of us that have been in this space for a while that there is this paradigm shift that has been going on for more than a decade, at least, two, three. Slowly slowly, like all these things are on an exponential curve. And then you get trigger events. And this is a trigger event that has kind of lit a fire under a whole load of things. The obvious one being remote working, or working from anywhere, I’m not so keen on the phrase ‘working from home’.

Yes, I mean, when people are confronted with questions of health and wealth, generally it makes them stop and think what in my life was worth carrying on with, what matters to me, what should be a priority. And I’ve enjoyed being out in nature more or spending time with my family or slowing down or reading a book and what we were doing before that, we can’t do now, has fallen away, was it really worth doing? These things make people stop and things. So, yes, I do think it will have a significant impact. So it’s certainly what I’m seeing, I’ve seen absolutely no slowdown whatsoever in terms of people gathering around that big topic of change. And actually, these are moments where you have to double down on that. If you believe that your presence in the marketplace and in the world matters, and that on the other side of the crisis, society needs you to exist, that is a really important thing to believe about yourself in terms of what you’re doing professionally and your business. And often comes with it some kind of mission purpose-led way of being beyond just selling product. I’ve not seen any slowdown in the B Corp work. I hope I’m not speaking out of turn here, but I’m pretty sure from what I gather from B lab that B lab isn’t seeing a slowdown and people showing interest in being a B Corp. So the B Corp is just one movement of a number. You know, there are others like us in terms of wanting to change the system. There aren’t others which are certificated like us, but there are certainly other movements, doing positive things as well. And I would encourage people to look up something called Imperative 21 if they are interested in the B Corp movement, specifically because we’re talking about this.  Imperative 21 is a collaboration between B Corp and some of the other movements who are also trying to drive system change at the moment. They’re coming together to say we’re all trying to do the same thing. Let’s come together and try and do it together, as opposed to just by yourself. So that’s something to look up to.

CC: As a remuneration consultant, I wouldn’t be doing my profession any justice without looking at some of the questions that do cross refer to pay structures in the B Corp assessment. That’s one area amongst the many that we’ve covered it, which looks at how people are paid. So you do ask a specific question which is ‘how does your company integrate social and environmental performance into decision making?’ And some of the proposed answers are around employee training, whether social and environmental performance is included, how managers’ job descriptions are drafted, performance reviews, and compensation of executive team members. So, is there anything else that you can tell us in the answers that you’re receiving from your potential B Corp members or companies that are trying to become B Corporations on the way they are paying or proposing to pay their executives?

JF: I think it’s important at this point to separate what’s happening out into two different overlapping connected movements or paradigm shifts but are also separate entities. The B Corp  Community falls very squarely within this idea that we can be better, more holistic, purposeful businesses. And that business, specifically because the B Corp movement is all about businesses, has a more positive role to be playing in driving social, environmental change. And, but there is another thing at work here and a bigger narrative around where the West in particular as a whole is going, I’ll just say the West because I obviously can’t speak from any great position of experience to other parts of the world. In terms of quite a radical rethinking about what does it mean to be a human being? How do we organize ourselves? What is the purpose of enterprise and organisations? and that goes much deeper and is much broader and potentially much more systemic than this idea about sustainability. So, sustainability as a term will I suspect over the next 10 years fall away and we’ll be talking about other things like regeneration and regenerative business models, etc. There’ll be more self-managed and self-organized structures. And this is about a change in philosophy about what assumptions do we build organizations on? So the BIA is an assessment, which grew out because of timing, a paradigm which we’re starting to leave behind and incentives and how we pay people are a really obvious characteristic of that. So this is not something that B Lab or the B Corp isn’t aware of. It’s the same thing with policies. Policies are important to the B impact assessment as a proxy for action. We all know that you can write a good policy, but not actually do it. But it’s very difficult for companies to demonstrate they’re doing something if you’re being assessed by an analyst on the other side of the world without having a policy in place. These are all questions that are difficult to solve. And in time, may find new ways of doing it. But specifically on the incentives: in the BIA, there are answers around incentivisation for people who think along more ESG lines, that means, environmental, social and governance lines helping create other areas of information that help drive decision making and choices and behaviour within your corporate life or your business life. But fundamentally, what you’re doing there is you’re still incentivising direction, you’re still incentivising action. That is still the same to a certain degree, whilst it’s an improvement, on using money or using incentives as a way to make somebody else do something different. What it is not, is a recognition that perhaps incentives are a bad idea, and they don’t help full stop. So whether you’re incentivising with ESG, or whether you just incentivizing with a straight up bonus, one might be better than the other, but it still sits within the same box, if that makes sense. Whereas a different worldview would say, we shouldn’t be incentivising people at all potentially.

So these two movements overlap, because they have overlapping characteristics, they require quite a high degree of empathy, and connectedness and they’re seeing the world in a new way. But there are still some quite deep differences. And you know, B Corp is the best of the bunch in its paradigm. And it’s recognising that paradigm is changing. But there are still things within the BIA that n four or five years’ time down the line will look very different. And it’s changing all the time. I think we’re on version six. Now, there’s a whole load of stuff in the BIA that wasn’t there at the start. And some things have fallen away as things become more important or our information changes or the science shifts, and we realise that should be in there, that shouldn’t be in there. So it’s not a criticism of the BIA. It’s just a recognition that there are different ways about going about how you pay people. And I think it’s important to have a deeper conversation about what’s the starting point, not just what different incentives should we use?

CC:  “We do live in a world where we are rewarded for what we do and penalized for what we don’t do.” That’s part of a report I wrote a couple of years ago on the subject of Responsible Reward, which is the integration of ESG into bonuses. How do we move from this current situation, have we got it all wrong? Do we need to make a transition to what you are suggesting from a B Corp point of view where incentives may not be the right answer, but people rely on them. They form a very large proportion of their remuneration, what they receive every month and every year. So how do we transition from the current situation to a situation where suddenly bonuses may not exist?

JF: Well, I would never advise a client or somebody to go anywhere near people’s pay early on and in a transition between two underlying philosophies in how you run an organisation. It’s too political, it’s too personal, it carries too much emotional heat. And if you reach a point where people want to be paid differently or in a new way that needs to emerge out of the soul of the organisation, a general consensus that we need to be doing things differently. And eventually, yes, that means people are getting paid differently. But if you rush to the pay question, it’s a rush to the answer without stopping and asking why and having a discussion first. And actually, that questioning, that culture of questioning, curiosity, dialogue, building relationships is where you need to go. And eventually you might come out with the answer, we need to change how people get paid. But if you look at it at a really simple level, if we need to be incentivising people to make decisions along this kind of ESG lines, what we’re saying at a deeper level is ‘if I didn’t incentive them to do it, they wouldn’t, or they might not’. So then you have to step back and ask why? Have we hired the wrong person? I would make decisions along those lines, whether you incentivise me to or not, because I’m intrinsically motivated to want to live and work in that way. So that’s why I don’t need incentive schemes. And then we think like that. It might be that I work within a company where that’s difficult because the structure and the culture of the organisation is working in opposition to how I want to take decisions. So I understand I’m simplifying something that’s more complex. I’m just trying to break it down to simple ideas to kind of get the message across. I’ve come across companies that have incentivised pretty basic health and safety things. You know, you have to ask the question where have we gone wrong if we’re incentivising people to do basic health and safety things that are going to save people’s life and limb. So and then it becomes a question around what, how do we hire, who are we hiring? Why are we hiring? So it’s a deeper question than just about the money. And it’s a reframing of the question of motivation, away from the idea that if we don’t intervene through carrots and sticks, people won’t do what we want, they won’t go in the direction we need them to, they won’t show up, they don’t have the energy to invest. They won’t be able to make decisions for themselves, they need direction, they need some form of invention. That’s a different starting point from where we need to be which is actually people do want to show up to work and do a good job, they are interested, they do want to take responsibility,  everybody does have inbuilt creative power. Those are two different starting points, and you end up in very different discussions about pay if you start in one or other place. So I would always trend people towards paying people as much as reasonable, reducing the emotional burden of incentives. The reality is, for a lot of companies, incentives sit within a pay structure that effectively tie people to their jobs. They’re not always as simple as a well-meaning bonus at the end of the year. For a lot of professions, your bonus structure is the difference between living as you’re trying to and not, and it’s a way of keeping you trapped in the business. And that’s hugely unhealthy. There’s not just about what do we incentivise and what are the characteristics in the incentive scheme? It’s why are we using an incentive scheme, how are we using it and what is the time differential between when we give it to them, and what their base salary is, and all those sorts of questions, which goes back to the questions about what do we think about human beings? And how much dignity and choice are we affording them? And, how do we treat them when they come here? Would we do this to our family?

CC: A remuneration strategy usually supports the business strategy in the first place. It doesn’t exist as a stand-alone strategy. And that’s something that we see more and more from a responsible reward point of view. There must be a direction from the business before the remuneration strategy is changed at all. What I’d like to explore as well is that as part of the assessment, there are lots of questions with a number of supporting documents to answer the questions. Companies can be a bit reluctant sometimes to share information because they do realise they don’t always have the right processes and policies in place. So it can be a bit of a dilemma between requirements for transparency versus the fear of litigation and reputational damage. So how do we manage this dilemma of asking companies to disclose more and more and share what they’re doing internally vs   what are you going to do with this information, what if I’ve got it wrong, what if it goes out there against what we’re trying to do? We haven’t got it all right, right now, but we want to improve, that’s why we’re doing this.

JF: Transparency: it depends on which level we’re talking about here. For the most part, most information held within organisations are not a question of deep strategic need or intellectual property or something that makes a difference between the company living or dying. It’s not always secret sauce that makes you who you are. Most information held within organisations is not always intentionally, sometimes certainly for sure. But it becomes effectively about power and the authority. Transparency has to go an awfully long way from where we are, before you start getting into questions about our ‘What about what’s the market going to say?’ And my instincts and experience tells me that most of what we say we can’t share for market reasons is a myth. And actually the boundaries of organisations are becoming ever more porous, the idea that companies or corporates are castles within which information doesn’t leak, or doesn’t leave with the people that are there. I don’t mean people taking files with them. I mean, just the fact that they’re human beings and they have the information in their brain is massively out of date. And companies actually know the kinds of problems we’re trying to solve and the new possibilities we want to bring into being cannot be solved by companies trying to create strategies by themselves. They need to work together, we need to collaborate, we need to share information. The need to be transparent and collaborative significantly outweighs the risks. And if you want to become a more adaptable purpose led business where people are motivated intrinsically rather than motivated externally to do something, they need information to be able to make rapid decisions on the ground, to take responsibility, to feel connected to their work, and that they’re contributing something worthwhile to the overall effort. So transparency, we always talk about ‘defaulting to open’, your starting place should be not keeping information. And this is a responsibility of central teams, executive functions, not to see information as something they held on to because it is privileged and therefore shores up their position of authority, but actually something that they should be sharing as far and wide across the organisation as they can to help people feel empowered to act. So the idea that transparency creates risk in a marketplace that moves as fast as this, if you’re going down that road, you’re going to end up falling over. It becomes a terminal concern for an organisation if they don’t share information.

CC: We need to collaborate to achieve big goals. That’s a great way to end this interview.

Useful links:

https://bcorporation.uk/

https://www.imperative21.co/

Corinne’s website: www.peoplenet.ltd.uk

https://www.linkedin.com/in/corinnecarr/