Can Companies Force Themselves to Do Good?

In the end, a board, comprising a community member, a member of a social-enterprise nonprofit that Emery started, and a company employee, will oversee the trust; over time, the trust will purchase Emery’s shares, providing her with retirement income. She won’t make anything close to a hundred million dollars, but she will insure that her…

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In the end, a board, comprising a community member, a member of a social-enterprise nonprofit that Emery started, and a company employee, will oversee the trust; over time, the trust will purchase Emery’s shares, providing her with retirement income. She won’t make anything close to a hundred million dollars, but she will insure that her business continues to provide good jobs and benefit the community in perpetuity.

Retiring boomers such as Emery are one major group with whom Purpose Foundation works. Another is younger, socially conscious business owners. Around the same time that Emery began transitioning to a perpetual-purpose trust, Matt Kreutz, the founder of a popular Oakland bakery called Firebrand Artisan Breads, was hoping to expand his business. Since opening the bakery, in 2008, Kreutz had prioritized hiring workers with barriers to employment—refugees, the formerly homeless or incarcerated, and at-risk youth. He sees these policies as fundamental to Firebrand’s identity.

Now forty, with a thick beard and tattoos covering both arms, Kreutz grew up in a middle-class suburb in northern Virginia. When he was twelve, his dad, an alcoholic, left the family. His mom struggled to support them on her salary as a nurse. They were often without a telephone, and they lit the house with candles when the power was switched off for nonpayment. When Kreutz was sixteen, his mother stole money from the doctor’s office where she worked, and was sent to prison for a few months. Her name and photograph were printed in the local paper, and Kreutz felt isolated and humiliated. “Everybody in our life knew, at high school and in the neighborhood,” he recalled. “I definitely lost a lot of friends and contacts and relationships as a result.”

After high school, Kreutz did a year of culinary school in upstate New York before moving to California for a job at a wood-fired bakery in Petaluma. He worked at different wood-fire bakeries in the Bay Area for the next several years. His father died and left him a small inheritance; this gave him just enough money to start Firebrand, in 2008. The first few years were a struggle. Kreutz did all the baking and slept upstairs in the loft above the bakery for more than a year, taking elaborate precautions so no one would discover that he couldn’t afford a place to live.

By 2018, the bakery had a successful retail café, a steadily growing number of relationships with restaurants and stores throughout the region, and more than fifty employees—almost all people who faced employment barriers. Kreutz wanted to move to a larger space and launch a line of sliced breads and baked goods to sell in grocery stores around California. But this required financing—and, after a few conversations with potential backers, Kreutz realized that conventional investors were a terrible fit. “It was super clear that people were really stoked about the company,” he told me recently. “But they were like, ‘Yeah, I don’t like this social stuff as much.’ ”

The “social stuff” that investors saw as a drag on profitability, of course, was precisely what Kreutz considered essential to Firebrand. He was at an impasse. He needed financing to grow his business—but taking investor money made it all but inevitable that the social mission of his company would be abandoned. Big investors typically gain some control over the management of the companies in which they invest and use their influence to maximize profit. Kreutz was surprised to learn that even so-called impact investors, who are committed to supporting social causes, expect at least a threefold return on investment; among standard venture-capital firms, expectations were even higher.

In early 2019, on the recommendation of an impact investor, Kreutz called the team at Purpose Foundation. They sent him an e-book about “steward ownership models” and perpetual-purpose trusts. He read the book in one sitting and realized that this sort of arrangement could provide permanent protection for the defining values of Firebrand. Consultants from Purpose Foundation introduced him to progressive investors who would support his mission and accept more modest returns over a longer time period. In the end, Kreutz donated fifty-one per cent of his ownership to a perpetual-purpose trust. It articulates eleven purposes, including profit sharing and prioritizing the hiring of workers with obstacles to employment. These purposes are now the governing legal charter for the company. The trust is overseen by a committee of five that includes Kreutz, one employee, one manager, and two Oakland community members. Four separate impact investors contributed a total of $2.5 million to fund Firebrand’s expansion. The deal was structured as what’s sometimes called a restaurant flip; investors receive ninety per cent of all profits until they have achieved twice their original investment. At this point, the model flips, and Firebrand’s owners—including employees—share in profits in proportion to their ownership.

This fall, Firebrand opened a forty-thousand-square-foot facility in Alameda, where it has expanded production of pretzels, pastries, and breads. The new space is a vast, sunlit former warehouse converted into an industrial-scale production facility, with walk-in freezers for cooling dough, multiple baking ovens, and stainless-steel mixing bowls the size of small Jacuzzis. On a recent morning, freshly baked almond croissants and blueberry scones sat cooling on racks of steel trays as workers stood at nearby folding tables, shaping dough into fresh batches of pastry.

The design of the new facility reflects the distinct social purpose of Firebrand. There are two full-size showers—Kreutz knows their value from his days living in the bakery’s old location. Within the new facility, Firebrand provides rent-free space to a California nonprofit called Five Keys, which helps formerly incarcerated people transition to life after prison. The space where the nonprofit operates is only accessible through a separate external door, so that workers don’t have to feel embarrassed about requesting help. Five Keys will soon offer free G.E.D. prep, financial-literacy classes, and other services to Firebrand employees and the broader community. The facility runs 24/7, fulfilling a shifting set of daily orders from roughly four hundred wholesale clients, including Whole Foods, Google, and many of the Bay Area’s finest restaurants, such as International Smoke, Ayesha Curry’s barbecue destination. They now have eighty-five full-time employees, and are planning to grow to more than a hundred within the next year.

Working at Firebrand can be physically demanding. The Oakland location alone uses more than eleven hundred pounds of flour a day; some of the bakers move fifty-pound bags of flour, while packers and drivers work through the night to get fresh bread and pastries delivered. Last fall, I met Leonard, a thirty-four-year-old packer at the new Alameda facility. (He has left Firebrand since we spoke.) It was 1 A.M., and he was finishing his shift. He told me that he’d been out of prison for less than a year after serving fifteen years for attempted homicide. Adjusting to civilian life had been tough for him; he broke into a cold sweat just going to the grocery store. After his release, he’d applied for many packing jobs, with Amazon, FedEx, Frito-Lay, and other companies. As soon as they’d run a background check, he said, “It was like, ‘Oh, the position is filled,’ or, ‘You’re not a good fit.’ ” At Firebrand, there’d been no background check. They simply invited him to work a shift, then extended him a job offer. “That’s an amazing man, right there,” he said, of Kreutz. “I missed out on a lot, after fifteen years. I’m just trying to get my life back. I’m grateful he gave me that chance.”

In 2010, in the Citizens United v. Federal Election Commission case, the Supreme Court granted corporations legal protections previously reserved for people. Since then, it’s been hard to resist a natural question: If corporations are people, what kind of people are they? One answer, bleak but justifiable, is that they’re psychopaths, devoted entirely to maximizing profits at the cost of everyone else, including their employees. Unusual business owners such as Emery and Kreutz show the limits of this generalization, as do many other socially conscious companies. But as long as pro-social companies are vulnerable to acquisition by larger firms and investors who are likely to disregard their social mission, they will remain ephemeral exceptions to the profit-first rule. They will last only as long as their founders are able to keep working, and to avoid accepting investments with strings attached.

By preserving fragile goodness in a lasting institutional form, Purpose Foundation offers a kind of corporate therapy. It rewrites the psychology of companies, changing the deep structures that shape their behavior. There’s brilliance in this approach. We often think of the system as unchangeable when, in fact, the rules can be rewritten. The imperative to make money can be transformed into a requirement to do good. “It’s not sufficient to just have an idea of what the future could look like—you have to make it actually possible in practice,” Canon said. Business owners now have a potent new tool to translate their ideas for a better future into reality.

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