In Episode 82 of The Wendel Forum (originally aired on October 27, 2012, on 960 KNEW AM radio), show moderator Bill Acevedo, chair of Wendel Rosen’s sustainable business practice group, welcomes Caroline Duell, the founder of Elemental Herbs, an organic body care company based on the central coast of California.

With a background in herbal medicine, Duell is a massage therapist and outdoor enthusiast who began making skin care products for her friends and family.  Later, after success selling the products at farmers markets, she launched Elemental Herbs, a California certified B Corporation.  That certification is to sustainable business what Fair Trade certification is to coffee – it measures a company’s commitment to operating a business responsibly and sustainably.

Caroline Duell, Founder of Elemental Herbs

Duell also runs a farm, from which she harvests some ingredients for her natural healing products such as All Good Goop, a moisturizer and salve.  While Duell also gets ingredients from outside suppliers, she only partners with similar-minded businesses.  In particular, she examines other companies’ employee benefits, utilities use, social benefits and transparency.  Though not certified organic, all Elemental Herbs holistic products and remedies contain organic ingredients and are free of GMOs (genetically modified organisms).

The Elemental Herbs farm also offers a CSA (community supported agriculture) and serves as an education center, including offering courses about sustainable living.  As a member of 1% for the Planet, one percent of all Elemental Herbs revenues is dedicated to fighting for social and environmental justice around the world.  Organizations it supports include a local marine mammal protection organization, a local trail organization, Save Our Snow, which provides information about how global warming affects the planet’s snowfall, and cityWILD, which brings inner city kids into the mountains.

Do you care about the company policies, as well as the ingredients, of your skin care products?

Post Links:

Listen to the interview with Duell: Episode 82 of The Wendel Forum (26:47 mins; mp3)

Elemental Herbs website: http://elementalherbs.com

B Corporation website: http://www.bcorporation.net/

1% for the Planet website: http://onepercentfortheplanet.org/en/

960 KNEW AM Radio website: http://www.960KNEW.com

Bill Acevedo’s online profile: http://www.wendel.com/wacevedo

In Episode 81 of The Wendel Forum (originally aired on October 20, 2012, on 960 KNEW AM radio), show moderator Bill Acevedo, chair of Wendel Rosen’s sustainable business practice group, welcomes Lauren Selman, founder of Reel Green Media, an environmental consulting and production company dedicated to greening the entertainment industry both on and off screen.

Lauren Selman of Reel Green Media

Lauren Selman of Reel Green Media

Reel Green Media started as a student project when Selman was at UC Berkeley. The company’s first movie project was Benjamin Bratt’s La Mission, which was filmed in San Francisco.  Selman initially zeroed in on composting and recycling movie set waste.  For example, the 80-person La Mission crew was going through as many as 500 disposable water bottles a day.  Selman substituted water jugs.  She then analyzed the energy used, including studying generators, transportation, hotel accommodations and caterers.  In addition, she consulted on whether the products that appeared on screen were environmentally friendly and promoting a green lifestyle.  In addition to movies, Reel Green Media now works on live events, such as the Golden Globes, the Emmys and the Oscars.

Selman also set out to reimagine beauty pageants, competing for the Miss Malibu title in a completely sustainable way with, for example, an all-organic dress and makeup.  She won the pageant’s Miss Congeniality title and the People’s Choice Award and influenced the way other contestants approached sustainability.

Bill and Selman discuss how greening the entertainment industry requires re-thinking basic concepts. For example, it’s not always easy to quickly get things – such as compostable plates – to remote areas where movies often film.  But studios are getting more on board with sustainable practices and both production structures and executives’ awareness is developing.  That, Selman says, will have ripple effect to entertainment industry vendors.

Are you more likely to see a movie that used sustainable practices in filming?
Post Links:

Listen to the interview with Selman: Episode 81 of The Wendel Forum (27:41 mins; mp3)

Reel Green Media: http://www.reelgreenmedia.com

960 KNEW AM Radio website: http://www.960KNEW.com

Bill Acevedo’s online profile: http://www.wendel.com/wacevedo

In Episode 80 of The Wendel Forum (originally aired on October 13, 2012, on 960 KNEW AM radio), show moderator Dick Lyons, co-founder of Wendel Rosen’s sustainable business practice group, welcomes Elliot Kallen, founder and CEO of Prosperity Financial, a San Ramon, Calif.-based money market fund with $200 million under management.

Elliot Kallen, CEO of Prosperity Financial, visits The Wendel Forum

Elliot Kallen, CEO of Prosperity Financial, visits The Wendel Forum

Years ago, socially responsible investing meant simply avoiding investing in so-called sin products such as tobacco or the defense industry.  Increasingly, though, socially responsible investing means more. While it can mean investing in green companies, the issue is somewhat muddy.  For example, is it socially responsible to invest in a solar module product if the parts were made in China and the manufacturing process included toxic chemicals that ended up in the water supply?

Not surprisingly, therefore, everyone has a different opinion of what it means to be socially conscious.  Generally, though, it means thinking about doing the right thing and considering every facet – from environmental issues to a company’s shareholder governance and charitable activities to the private activities (such as aiding the Nazis) of a company’s founder.

In addition, there are different approaches to socially responsible investing.  For example, an investor can proactively support companies that are doing good things for society or devote a portion of a portfolio to green companies. Alternatively, an investor can simply seek the highest possible return on investments but then commit to donating 10 percent of those earnings to a socially responsible cause.  Kallen recommends finding an advisor who will listen to your goals.

What does socially responsible investing mean to you?
Post Links:

Listen to the interview with Elliot Kallen: Episode 80 of The Wendel Forum (26:55 mins; mp3)

Prosperity Financial Website: http://www.prosperityfg.com

960 KNEW AM Radio website: http://www.960KNEW.com

Dick Lyons’s online profile:http://www.wendel.com/rylons

In Episode 79 of The Wendel Forum (originally aired on October 6, 2012, on 960 KNEW AM radio), show moderator Dick Lyons, co-founder of Wendel Rosen’s sustainable business practice group, welcomes Peggy Cross, founder of Bay Area-based EcoTensil, which produces eating utensils made from sustainable materials.

Peggy Cross of EcoTensil

With a background in packaging and marketing, Cross developed a whole line of certified compostable eating utensils made from “silky smooth” paperboard, similar in mouth feel to a soda cup.  The taster spoons are a particularly better alternative to plastic tasters, which are made from petroleum in China and are used for two seconds at ice cream shops, grocery stores or at trade shows, yet will exist on the planet for thousands of years.  In contrast, EcoTensil’s taster spoon offers efficiencies in storage, shipping and waste management, and companies using it can offer customers something obviously greener.  Interestingly, EcoTensil’s first clients, which still represent 25 percent of her business, were prisons because users can’t hurt themselves or others with a paper spoon.

In launching EcoTensil, Cross learned that everything in the start-up world takes longer than you think and costs twice as much money.  As a result, she recommends not launching a start-up without an abundance of tenacity and perseverance.  She also says that entrepreneurs should not just want to make money, but they must also have a passion for what they do.

Wouldn’t you like to ditch the splintery wooden taster spoon?
Post Links:

Listen to the interview with Peggy Cross: Episode 79 of The Wendel Forum (27:49 mins; mp3)

EcoTensil Website: http://ecotensil.com/about.html

960 KNEW AM Radio website: http://www.960KNEW.com

Dick Lyons’s online profile: http://www.wendel.com/rylons

In Episode 78 of The Wendel Forum (originally aired on September 29, 2012, on 960 KNEW AM radio), show moderator Dick Lyons, co-founder of Wendel Rosen’s sustainable business practice group, welcomes Scott Potter, managing partner of San Francisco Equity Partners, a private equity firm that specializes in consumer products growth companies.

Scott Potter of San Francisco Equity Partner

Scott Potter, San Francisco Equity Partners, in The Wendel Forum studio

Potter’s firm partners with companies that have demonstrated a proven demand for their products.  So while there’s no consumer adoption risk, the companies are usually facing operational and scale challenges to reach the next level. Typically, they are $5-10 million companies poised to scale their businesses, often to north of $100 million.

Identifying these optimal risk-reward companies is more science than art.  San Francisco Equity Partners is particularly focused on its companies’ channel strategy.  That is, a given beauty product can’t successfully be sold at both Sephora and Wal-Mart.  Channels include food (Safeway), drug (Walgreens), mass (Wal-Mart), club (Costco), prestige (specialty retailers and department stores) and direct-to-consumer (online and direct-response TV).  Determining the right channel for products is often a company’s key to success.

A growing channel is the so-called natural channel, as epitomized by Whole Foods, which is separate from the traditional grocery channel.  But Potter’s firm specializes in natural products that are targeted for the mass channel.  Companies targeting this channel should not ask consumers to pay more for an inferior product “just to save the fish,” Potter says.  Rather, the product’s value proposition has to work in and of itself outside of sustainability and natural missions.  The prime example is Method products.

When San Francisco Equity Partners first invested in Method, it was producing just hand and cleaning products.  It has evolved to include bathroom and specialty products and even successfully launched into the competitive laundry space.  Early on, Method knew it would never have the marketing budget of Proctor & Gamble.  So it chose to overinvest in packaging, focusing on the point of sale: when product is on the shelf.  Method’s in-house design team devised a distinctive look, including the bottle molds, and focused on the aesthetic and the user-experience (such as the one-hand laundry detergent dispensing system). With the “design baked into the products,” Method aspired to be like Apple.

At what kind of store are you most likely to purchase natural products?

Post Links:

Listen to the interview with Scott Potter: Episode 78 of The Wendel Forum (27:48 mins; mp3)

San Francisco Equity Partners Website: http://www.sfequitypartners.com

Method Products Website: http://methodhome.com

960 KNEW AM Radio website: http://www.960KNEW.com

Dick Lyons’s online profile: http://www.wendel.com/rylons

In Episode 77 of The Wendel Forum (originally aired on September 22, 2012, on 960 KNEW AM radio), show moderator Dick Lyons, co-founder of Wendel Rosen’s sustainable business practice group, welcomes Dr. Jay Udani founder and CEO of Medicus Research, a contract research organization for the natural health products industry, including botanical drugs, dietary supplements and functional foods.

Dr. Jay Udani of Medicus Research

Dr. Jay Udani of Medicus Research

Dietary supplements give people choices in their health care. Whenever manufacturers of dietary supplements make formal claims – such as “supports healthy joints” – the supplements must undergo clinical trials and testing, akin to pharmaceutical testing.  Dick and Dr. Udani discuss how both enforcement of and consumer interest in clinical trials for dietary supplements is increasing.  Even major food manufacturers, such as yogurt manufacturer Dannon, have received letters from the FDA about their formal health claims.

Whereas pharmaceuticals are chemicals that interact with the body by targeting a pathway or organ, dietary supplements assist the body in better performing normal, healthy functions.  As a result, clinical trials of supplements must be done on healthy people. Supplements can take longer than drugs to show effects so the best way to test the efficacy of supplements is for the individuals in the clinical trials to track how they’re feeling over time.  Udani’s research program uses iPods to monitor individuals, whose responses may be both subjective and objectively measurable. When evaluating a clinical trial, consumers should examine how the supplement was tested, the population used and the measuring tools.

When taking dietary supplements, does clinical testing matter to you?
Post Links:

Listen to the interview with Dr. Udani: Episode 77 of The Wendel Forum (27:52 mins; mp3)

Medicus Research Website: http://www.medicusresearch.com

960 KNEW AM Radio website: http://www.960KNEW.com

Dick Lyons’s online profile: http://www.wendel.com/rylons

[Editor’s note: Thanks to guest blogger Garret Murai for sharing this news with The Wendel Forum.  Garret is a construction litigation attorney at Wendel Rosen.  He posts frequently on construction issues at his blog www.CalConstructionBlawg.com.]

Construction Partner Garret D. Murai

Construction Partner Garret D. Murai

The Governor’s Office of Planning and Research’s Solar Permitting Work Group has published a guide to the solar construction permitting process entitled California Solar Permitting Guidebook.  The guidebook addresses California laws and regulations, the process for project approvals, and recommendations for improving permit processes for solar installations.

In other energy news, Energy Upgrade California, an alliance of California cities, counties, investor-owned utilities, including Pacific Gas & Electric Company, Southern California Edison, Southern Gas Company, and San Diego Gas & Electric Company, and others, has established a program to help train building professionals in the latest home performance standards, listing in an online contractor directory, and offering connections to clients looking for services.  If you are a contractor click on the link “I’m a contractor or rater.”

In Episode 76 of The Wendel Forum (originally aired on September 15, 2012, on 960 KNEW AM radio), show moderator Dick Lyons, co-founder of Wendel Rosen’s sustainable business practice group, welcomes Ben Lee, director of business development at San Francisco-based CircleUp, a crowd funding platform founded in April.

Ben Lee of CircleUp

Ben Lee of CircleUp

CircleUp provides an online mechanism for consumer products companies and retailers to reach out to a broad network of potential investors, who may fund the companies in exchange for equity. CircleUp, which affiliated with WR Hambrecht, takes a commission.

So far, they’ve received 600 applications; they’ve selected 10 companies and four – including a baby skin care brand and an organic food brand – have been successfully funded.  CircleUp’s team serves as a curator for the investors. In evaluating companies, they look for businesses with $1 million to $10 million in annual revenue.  Usually these companies are seeking to raise $500,000 to $2 million to launch new products and achieve the next stage of growth. The typical investment is $5,000 to $25,000 (while each company’s offer is different, these are generally in the form of preferred stock shares); CircleUp assists with larger transactions offline.

While CircleUp streamlines what can otherwise be a year-long funding process, raising money through the platform can still take several months. Although CircleUp selects companies and presents opportunities, investors must do their own due diligence.  Like any private company investment, crowd funding is risky and the investment horizon may be three to seven years.

Lee says CircleUp’s goals include enhancing the ecosystem around consumer products, helping as many small consumer brands get financing as possible, and making sure CircleUp’s platform is a great experience for investors and companies.

Have you participated in crowd funding?  What do you see as the biggest opportunities and challenges to this form of financing?  

Post Links:

Listen to the interview with Lee: Episode 76 of The Wendel Forum (27:56 mins; mp3)

Circle Up Website: https://circleup.com

960 KNEW AM Radio website: http://www.960KNEW.com

Dick Lyons’s online profile: http://www.wendel.com/rlyons

[The following post is written by Wendel Rosen Green Business Practice Group Partner Donald S. Simon in response to a recent article addressing legislation that allows for the formation of benefit corporations.  Regular readers of The Wendel Forum will remember we have covered Benefit Corporation in prior episodes.]

A REAL WORLD RESPONSE TO A PROFESSORIAL CRITIQUE

I just read the article entitled “The Truth about Ben and Jerry’s” in this Fall’s edition of the Stanford Social Innovation Review (SSIR).  This article challenges the reasons Ben Cohen and Jerry Greenfield have given for approving the company’s sale to Unilever.  It also argues that recent legislation creating benefit corporations is unnecessary because traditional corporate law allows social entrepreneurs to accomplish their goals equally well.  The article advances erroneous, incomplete and misleading analysis of applicable law and evidences a lack of appreciation for how business and law interact in the real world, outside the halls of academia where the authors reside. 

Green Business attorney Donald Simon

Wendel Rosen’s Donald Simon helped draft and promote new Benefit Corporation legislation (AB 361)

I was not involved in the Ben & Jerry’s transaction; however, I was co-chair of the California Benefit Corporation Legal Working Group that authored the California benefit corporation law (AB 361) I provide this brief response to rebut some of the key inaccuracies in the SSIR article.

The article presents a misleading discussion of corporate law.  Corporate law differs from state to state.  The article claims that most states do not require corporate directors to maximize shareholder value (i.e., profits) and instead allow directors to consider the interests of other stakeholders impacted by the company’s actions, such as employees, community and environment.  This is a gross and misleading overstatement.  In fact, directors are permitted to consider broader stakeholder interests only in states that have adopted so-called “constituency statutes.”  Such statutes have been adopted in less than two-thirds of U.S. states.  And among those that have adopted constituency statutes, each state defines a different list of stakeholders whose interests the directors may consider.  For example, some states allow directors to consider the company’s impact on the environment, while most do not.  In states that do NOT have constituency statutes (including California), directors lack statutory authority to consider stakeholders interests and must act exclusively based on the interests of the corporation and its shareholders.

What about Delaware?  The most surprising omission in this article (among many) is the authors’ failure to mention Delaware.  Writing an article on American corporate law without discussing Delaware is like writing a history of the space program without mentioning the Apollo moon landings.  Because companies can incorporate under the laws of any state they wish (regardless of where they’re physically located), Delaware sought to dominate the market by providing companies what they seek most – legal certainty.  Delaware has achieved this by creating the largest body of corporate law and a specialized (Chancery) court system dedicated exclusively to such matters.  As a result, more companies are incorporated in Delaware than any other state.  When a court in any other state considers issues of corporate law that have not already been definitively answered by higher appellate courts in their state, they typically look to Delaware court decisions for guidance. 

Delaware is critical to this discussion because in a high-profile case from 2010, where eBay sued the founders of Craigslist (eBay vs. Newmark), the Delaware Chancery court reaffirmed the shareholder primacy rule made famous in Dodge v. Ford, ruling that “[p]romoting, protecting, or pursuing non- stockholder considerations must lead at some point to value for stockholders.”  The following excerpt from the court’s decision is instructive:

“[Craigslist founders, Newmark and Buckmaster] did prove that they personally believe craigslist should not be about the business of stockholder wealth maximization, now or in the future.  As an abstract matter, there is nothing inappropriate about an organization seeking to aid local, national, and global communities by providing a website for online classifieds that is largely devoid of monetized elements.  Indeed, I personally appreciate and admire [Newmark’s and Buckmaster’s] desire to be of service to communities.  The corporate form in which craigslist operates, however, is not an appropriate vehicle for purely philanthropic ends, at least not when there are other stockholders interested in realizing a return on their investment. … Having chosen a for-profit corporate form, the craigslist directors are bound by the fiduciary duties and standards that accompany that form.  Those standards include acting to promote the value of the corporation for the benefit of its stockholders.  Thus, I cannot accept as valid … a corporate policy that specifically, clearly, and admittedly seeks not to maximize the economic value of a for-profit Delaware corporation for the benefit of its stockholders….”

The authors’ failure to discuss Delaware law and the Craigslist case, while mentioning an obscure 1953 case from New Jersey, is puzzling.  Surely they were aware of these well-known legal precedents that refute the central theme of their article.

The Article misunderstands the purpose and need for new corporate forms.  The article correctly notes that companies can incorporate in one state while locating and doing business in another.  Because of this, the authors argue that there is no need for other states to adopt benefit corporation legislation because a handful of states already have.  The authors are apparently unaware that states like California impose their key corporate laws (including shareholder primacy) on all companies doing business in their state, regardless of where they are incorporated.  See Cal. Corporations Code section 2115(b).  This critical fact illustrates the danger of making simplistic generalities about a legal system that differs in each of the 50 states.

A quick primer of how law works in the real world.  Although neither of the article’s authors were involved in the Ben & Jerry’s deal and apparently never spoke to anyone who was, they claim to know more about the thinking, motivations and legal concerns than the principals and lawyers who lived it.  Ben & Jerry said they accepted Unilever’s higher offer over lower ones because their lawyers (correctly) advised them that doing so could expose them to personal liability if a shareholder chose to sue them for not maximizing their profits by taking Unilever’s higher offer. 

The authors apparently read the company’s corporate documents, from which they devised legal arguments they believe would have enabled Ben, Jerry and their board of directors to prevail in such a lawsuit.  While their analysis makes for an excellent law school essay question, it is divorced from the reality that governs such transactions. 

In the real world, cases aren’t decided by attorneys or professors declaring what they believe the law should be.  They are decided by lawsuits, trials and lengthy appeals that can take five or more years to reach a final conclusion.  How many businesses do you know that can wait in limbo that long, especially on critical decisions like who will own the company?  Ben & Jerry’s lawyers also (correctly) advised them that they could be held personally liable for losses claimed by their disgruntled shareholders.  The authors dismiss this fact by saying that Ben & Jerry could have sued the company to recover any personal losses based on indemnity provisions in the corporate documents.  I’m sure Ben & Jerry’s lawyers discussed this, and equally sure it provided Ben & Jerry little comfort.  After spending years in litigation losing one case and paying the verdict out of their own pocket, I suspect nothing would sound less appealing than spending six or seven figures litigating a new case pursing their indemnity claim against the company they no longer own or control.  The delay and costs attendant to litigation, coupled with the inability of companies to remain in limbo while awaiting a final decision, is the central reason why there are so few reported cases addressing these issues. 

The article ignores the central advantage that the Benefit Corporation provides.  The article conveys the authors’ opinion that social enterprise does not require benefit corporations or any of the other new forms provided by recent legislation, while ignoring the benefit they provide.  That benefit is legal certainty, which as noted above, is a critical commodity.  Social entrepreneurs operating as a traditional corporation are like guinea pigs waiting to be called for an experiment.  So long as all the shareholders remain mission-aligned, the experiment will be a success.  But shareholders and their attitudes often change over time, and in traditional corporations, the result is often a dilution of the company’s original social or environmental values.  If the values-driven shareholders control the company, then they can do as they wish and roll the dice to see if they’re sued.  And if they do, they’ll experience the thrill of litigation, with expensive legal fees, years of watching the slow grind of our legal system and the excitement that comes with never knowing how it’ll end until the appeals have been exhausted or a settlement is reached.  For the gambler, this sounds as fun as betting the company payroll on a roulette wheel in Vegas.

The benefit corporation was created for the more temperate social entrepreneurs who prefer not to be a legal guinea pig.  The benefit corporation was created for them so that they don’t have to worry about their continued ability to operate their business in a socially responsible manner.  No questions, no uncertainty, just clarity and peace of mind so that they can focus their attention on their business instead of threats to their vision of what that business should be.

Donald Simon
Partner, Wendel, Rosen, Black & Dean LLP
Oakland, California
September 17, 2012

In Episode 75 of The Wendel Forum (originally aired on September 1, 2012, on 960 KNEW AM radio), show moderator Bill Acevedo, chair of Wendel Rosen’s sustainable business practice group, welcomes Gary Eberhart, who serves on the board of the Mt. Diablo Unified School District, which serves 32,000 children and adult students at 56 campuses, making it one of the largest school districts in California.

Gary Eberhart

Amid decreasing budgets and increasing energy costs, the Mt. Diablo School District secured a $350 million bond from the community to add solar energy to 51 of the district’s schools.  Eberhart and his fellow board members determined that purchasing a solar energy system through a bond program would be more cost-effective than buying power from a solar provider under a long-term purchase agreement. Specifically, Eberhart, who has served on the school board for 17 years, determined they could invest the estimated $220 million savings back into the schools over the system’s 30-year life expectancy.  The bond measure was approved by 60 percent of the community.

Mt. Diablo’s 12.2-megawatt system is the largest program in the world for a school district and will meet 92 percent of the district’s energy needs.  After a competitive selection process for the contractor, the installation took one year and all but a handful of the 51 systems are now up and running.  The solar panels were installed primarily in parking lots and on playground structures, which Eberhart says look better and are easier to maintain than roof panels.  The solar energy systems are also providing a unique educational tool for students, who can monitor energy and cost savings through real-time data.

Could your school district use solar energy?

Post Links:

Listen to the interview with Eberhart:   Episode 75 of The Wendel Forum (27:43 mins; mp3)

Mount Diablo Unified School District Website: http://www.mdusd.org/Pages/default.aspx

Information about the Bond Program: http://mdusdmeasurec.org

Strategic Facilities Planning, Eberhart’s Company Website: http://www.strategicfacilitiesplanning.com

960 KNEW AM Radio Website: http://www.960KNEW.com

Bill Acevedo’s Online Profile: http://www.wendel.com/wacevedo