B-Certified: A Better Way to do Real Estate
By Contributing Writer Brian J Barth
A select number of North American developers are forging a new path, where people, planet, and profit have equal standing on the balance sheet
Every corporation wants to convince you of their inherent goodness. And their PR people know all the right buttons to push: “dedicated to the community”; “a greener way of life”; “leaving the world a better place.” Images of healthy ecosystems and happy people are abundant in advertising for a reason. But the extent to which these marketing clichés reflect actual practices that benefit society at large, not just the corporation, is impossible to discern without some form of third-party verification.
After all, the legal structure of a conventional corporation requires that the decisions and strategies of its directors be geared entirely toward the fiscal benefit of its shareholders.
So how does an enlightened consumer, seeking to change the world through their purchasing power, get past the ubiquitous “green” and “socially responsible” advertising claims, and know that they’re putting their money where their ideals are?
Enter the B Corporation. You surely know the names of at least few: Patagonia, the outdoor clothing manufacturer; Ben and Jerry’s, the ice cream company; Etsy.com, the online marketplace for handmade goods. What these corporations have in common are business practices designed to nurture people, planet and profits on an equal basis—not just when the first two goals happen to align with the third, but as an ethical stance written into the corporate charter.
Most importantly, B Corporations employ rigorous standards to define and quantify their social and environmental impacts. In other words, their benefits to people and planet are just as measurable as the assets listed on their balance sheets.
B Corporations are certified by B Lab, a non-profit that has bestowed its stamp of approval on more than 1900 corporations in 50 countries and across 130 industries since its founding in 2006. The b, as you may have guessed, is for benefit. And the goal of a B Corporation—as laid out in B Lab’s Declaration of Interdependence, which must be signed upon certification—is to “create benefit for all stakeholders, not just shareholders.” As the B Lab founders are fond of saying in their Ted Talks, the idea is to “not just be the best in the world,” at whatever your company does, “but the best for the world.”
B-Certified Real Estate
So while you’ve probably known of some of the larger B Corporations all along, if not made use of their products or services (Kickstarter.com and Method, the all-natural cleaning products company, are a couple of the other more famous B-certified brands), you probably didn’t know that there were B-certified real estate companies—23 of them to be exact, including three in Canada.
What does a B-certified real estate company look like?
Trish MacKenzie, the sales and marketing manager at TAS, a Toronto-based design-build firm that became Canada’s first B-certified real estate developer in 2013, likens it to Organic, Fair Trade coffee, but for buildings. Rather than eliminate pesticides, build rich soil, provide living wages for farmworkers, and encourage habitat for wildlife among the coffee bushes, a B-certified developer might eliminate toxic materials in their office, build to LEED standards, provide affordable housing units, and encourage walkable, diverse mixed use communities.
It’s not enough to just focus on one area of “benefit,” such as energy efficiency. B-certified companies must demonstrate benefits across five categories: environment, workers, customers, community, and governance. Points are awarded based on specific criteria within each category, with a minimum of 80 required (out of 200 possible points) for certification.
The 128 points TAS received on their B Impact Assessment—enough to place them in the top 10 percent of all B-certified companies—came from things like their strict adherence to the Toronto Green Building Standards as a baseline for all their projects, purchasing two Smart cars (one of which is electric) for employees to use while on company business, and offering more than six weeks of paid maternity/paternity leave to their employees.
But it’s worth noting that most of the practices TAS received points for were already in place, which MacKenzie says is typical among B Corporations; the certification largely serves to recognize companies that are already doing the right thing—and to encourage the rest of the business community to up their game.
“It wasn’t really changing how we did business, it’s more that it got people excited about how we were doing business, both internally on the team, and externally,” MacKenzie says. “Our reputation as a builder is very important to us—when people are looking to purchase a condo, they don’t just look at the product, they look at who is selling it.”
B Certification and the Bottom Line
Far from diminishing shareholder value, a triple bottom line approach typically bolsters financial returns, especially over the long term. While purely profit-based business strategies may look to exploit any available market opportunity for short-term gain, the B corporation mentality is to seek stable long term growth that does not undermine the greater social, environmental and economic good—ultimately the only way for any business to remain viable on a planet of finite resources.
Jonathan Arnold, the CEO of Kansas City-based Arnold Development Group, one of 12 B-certified real estate development companies in the US, says such strategies have been key to his company’s success.
“From an investment standpoint, it’s just logical,” says Arnold. “Building things that last longer, use less energy, and are better for people is a clear trend as we move from a planet of 7 billion people to one of nine or 10 billion toward the end of the century. And it means people will enjoy living in what we build more than our competition, which means we’re going to have less turnover. If we are in a leadership role in making this change, we are going to have a clear early adopter advantage.”
The Arnold Development Group (ADG) focuses on mixed use urban infill projects designed for walkability and “passive solar,” an approach of maximizing the sun’s energy for lighting and heating needs, which in Arnold’s experience has netted an 80 percent reduction in energy use compared to conventional construction techniques, with minimal additional construction costs. The company also designates approximately 20 percent of its residential units as “affordable” (i.e. below market rate) workforce housing, a strategy that Arnold says helped his company weather the US housing bubble, which burst in 2008.
“Building affordable housing means that we have a more diverse tenant mix which helps us through recessions, because we’re not dependent on chasing the upper end of the market,” says Arnold. “Businesses have to look at the social good, because if we don’t have a strong middle class, at the end of the day you won’t have anyone to do business with.”
As MacKenzie noted, the triple bottom line approach creates brand recognition among consumers, but according to Arnold it also boosts the reputation of real estate developers with local governments. “You get a much better reception as you are trying to get your zoning approved, and any tax incentives that you may need,” he says. “Because politicians and city council leaders realize that if they can help developers build long-term assets that are going to perform well both environmentally and from a social justice standpoint, that that is going to help them build more resilient communities—and that is their mandate.”
The prestige of a B Lab stamp can also comes into play with talent acquisition and retention. Arnold recently hired a PhD urban planner, who was attracted to the company because of their innovative approach. “Her ability to bring a level of rigor and sophistication to what can sometimes be a less sophisticated approach has paid for itself in spades,” he says. “I think solely because of the fact that we are on the B Labs website, we have been able to attract talent that normally wouldn’t want to work for a company of our size and our location.”
Sometimes It’s the Little Things That Count
It may sound like a cliché marketing slogan, but in a way, B corporations are all about feeling good—which in this case is a legitimate claim, since doing good usually does, well, feel good. So perhaps it’s not a coincidence that both TAS and the Arnold Development Group have adopted a practice that is almost universally acclaimed for making people feel good: growing food together, and sharing in the harvest. Both companies are starting to integrate rooftop food gardens as an amenity for their residents, who are giving rave reviews thus far.
TAS also has a rooftop garden at their office. MacKenzie says they just brought in the fall harvest about a month ago. “We had an event where we all brought dishes that were made just from the food that we grew in the garden,” she says. “After putting the garden together as a team in the spring, it really brought the connection home to share the food in a meal together.” In many ways, becoming B-certified was just an affirmation of what the company was already doing, but MacKenzie says it has sparked a shift in the office culture, which is snowballing into new business ideas, like urban agriculture.
“Becoming B-certified got people excited about how we were doing business, and that’s encouraged us to further our efforts within the company,” says Mackenzie. “The environment you create within your team is really important to how a business can thrive.”
In other words, being beneficial is contagious. Says Arnold: “Like any competitive company we want to not just be certified, we want to get the highest score possible. That what I love most about the process.”