UNC Kenan-Flagler Business School


Building socially responsible businesses


Bart Houlahan - UNC Kenan-FlaglerBart Houlahan’s first corporate venture – an early 1990s sporting shoe and apparel company named AND1 – was a socially responsible business ahead of its time. The firm treated workers like family, providing an office basketball court, regular runs at lunchtime, yoga classes and even a mother’s rooms – the list goes on.

“We didn’t do this because our consumers cared back then,” Houlahan said during a talk at UNC Kenan-Flagler. “We were selling kicks to 18-year-old ballplayers. We did it because we wanted to be proud of the workplace we went to every day.”

Houlahan – a former investment banker -- now leads B Lab, a nonprofit organization he co-founded which focuses on sustainable business and social enterprise. He spoke at the 12th annual Careers in Sustainability forum, hosted by the Center for Sustainable Enterprise, MBA Career Management Center and the MBA Net Impact Club Nov. 1.

Houlahan joined AND1 during its second year in business when revenues were $4 million. Over time, Houlahan realized that for the firm to scale up it had to go public, prompting rapid change in the firm’s culture.

“It was not easy back then to both make profits and be socially responsible, especially as a public company,” Houlahan said. “And it’s still not easy now.”

AND1 made its shoes in China, as did its competitors, Houlahan said, but it paid a living wage to its workers and ensured a safe working environment. It also donated 10 percent of profits to local charities involved in urban development.

Over the course of 11 years, Houlahan rose to become the president of AND1 and helped finance, operate and scale the business to $250 million in brand revenues and distribution in 80 countries.

His experiences at AND1 helped influence his current role at B Lab, which he launched with partners Jay Gilbert and Andrew Kassoy in 2006.

“Businesses can be an incredible force for good by making changes that are socially and environmentally responsible,” Houlahan said. “But as you scale a business, that gets more and more challenging, and there haven’t been any real standards for companies to go by. So B Lab decided to change that.”

B Lab sets standards and provides certifications for companies that include variables like environmental impact, community engagement, retention and turnover in their “corporate lexicon,” Houlahan said. “Ultimately we’re trying to create an environment where our companies compete not to be best in the world, but best for the world.”

To make this goal a reality, Houlahan knew different rules were needed to govern for-profit businesses. B Lab lobbied state legislatures to ease regulations surrounding public companies. “The 20th century focused on maximizing shareholder value, but now in the 21st century, there’s a vanguard moving the market into maximizing stakeholder equity,” he said.

So far 19 states and Washington, D.C. have passed legislation creating benefit or “B Corporations” and 18 states are “working on it,” Houlahan said. Today, there are more than 850 Certified B Corps from 28 countries and 60 industries, according to B Lab’s website.

Certified B Corporations voluntarily meet higher standards of transparency, accountability and performance to create higher quality jobs and improve the quality of life in work communities.

Businesses with the designation receive legal protection to work toward creating value for community stakeholders, in addition to shareholders. As a result, individuals and communities can enjoy greater economic opportunities, society can address challenging economic problems and more workers “bring their whole selves to work,” the company’s website states.

B Lab created the Global Impact Investment Rating System, which rates companies in various categories from environmental sensitivity to social responsibility. Roughly 15,000 companies have requested ratings and more than 900 companies have earned “B” certification, Houlahan said.

“What I have to tell you is to demand more,” Houlahan said. “Demand more of your organization, and you will help facilitate this transition.”