Can companies force themselves to do good?
Ultimately, a board of directors, made up of a member of the community, a member of a non-profit social enterprise created by Emery, and an employee of the company, will oversee the trust; over time, the trust will buy Emery’s shares, providing him with retirement income. She won’t make nearly a hundred million dollars, but she will make sure that her business continues to provide good jobs and benefit the community in perpetuity.
Retired baby boomers like Emery are an important group that the Purpose Foundation works with. Another is that of younger, socially conscious business owners. Around the same time Emery started moving to a lifelong 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 has prioritized hiring workers who face barriers to employment – refugees, former homeless or incarcerated and at-risk youth. He sees these policies as fundamental to the identity of Firebrand.
Now forty, with a thick beard and tattoos covering both arms, Kreutz grew up in a middle-class suburb of northern Virginia. When he was twelve, his father, an alcoholic, left the family. Her mother struggled to support them with her nursing salary. They were often without phones and they lit the house with candles when the power was cut for non-payment. When Kreutz was sixteen, her mother stole money from the doctor’s office where she worked and was sent to jail for a few months. Her name and photo were published in the local newspaper and Kreutz felt isolated and humiliated. “Everyone in our life knew it, in high school and in the neighborhood,” he recalls. “As a result, I have definitely lost a lot of friends, contacts and relationships.”
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 in various wood fired bakeries in the Bay Area for several years. His father died and left him a small inheritance; that gave him just enough money to start Firebrand in 2008. The first few years were tough. Kreutz did all of the cooking and slept upstairs in the attic above the bakery for over a year, taking elaborate precautions so no one found out he couldn’t afford accommodation.
As of 2018, the bakery had a thriving retail cafe, a growing number of restaurant and store relationships across the region, and more than fifty employees, almost all of whom faced barriers to employment. Kreutz wanted to move to a larger space and launch a line of sliced breads and baked goods for sale in grocery stores across California. But it required funding, and after a few conversations with potential funders, Kreutz realized that conventional investors were a great fit. “It was very clear that people were really excited about the business,” he told me recently. “But they were like, ‘Yeah, I don’t like that social stuff that much.’ “
The “social stuff” that investors saw as a drag on profitability, of course, was precisely what Kreutz saw as essential for Firebrand. He was at an impasse. He needed financing to grow his business, but taking money from investors made it inevitable to abandon his company’s social mission. Large investors usually gain some control over the management of the companies in which they invest and use their influence to maximize their profits. Kreutz was surprised to learn that even so-called impact investors, who are committed to supporting social causes, expect at least triple the return on their investment; among standard venture capital firms, expectations were even higher.
In early 2019, on the recommendation of an impact investor, Kreutz called the Purpose Foundation team. They sent him an e-book on “models of steward ownership” and enduring trusts. He read the book all at once and realized that this type of arrangement could provide permanent protection to Firebrand’s defining values. Purpose Foundation consultants introduced him to progressive investors who would support his mission and accept smaller returns over a longer period. Ultimately, Kreutz donated fifty-one percent of his property to a perpetual trust. It articulates eleven objectives, including profit sharing and prioritizing the hiring of workers with barriers to employment. These purposes now constitute the legal charter governing the company. The trust is overseen by a five-person committee that includes Kreutz, an employee, a manager and two members of the Oakland community. Four separate impact investors contributed a total of $ 2.5 million to fund Firebrand’s expansion. The deal was structured like what is sometimes called a restaurant turnaround; investors receive ninety percent of all profits until they have made double their initial investment. At this point, the model shifts and the owners of Firebrand, including the employees, share the profits in proportion to their ownership.
This fall, Firebrand opened a 40,000 square foot factory in Alameda, where it expanded its production of pretzels, pastries and breads. The new space is a sprawling old, sunny warehouse converted into an industrial-scale production facility, complete with walk-in freezers for chilling dough, multiple baking ovens, and stainless steel mixing bowls the size of small whirlpools. On a recent morning, almond croissants and freshly baked blueberry scones sat chilling on racks of steel trays as workers stood in front of nearby folding tables, shaping the dough into batches of fresh dough.
The design of the new facility reflects Firebrand’s distinct social purpose. There are two full-size showers – Kreutz knows their worth for his days living in the old bakery location. At the new facility, Firebrand is providing rent-free space to a California nonprofit called the Five Keys, which helps formerly incarcerated people make the transition to life after prison. The space where the association operates is only accessible through a separate exterior door, so workers don’t have to feel embarrassed to ask for help. Five Keys will soon be offering free GED preparation, financial literacy classes, and other services to Firebrand employees and the community at large. The facility operates 24/7 and responds to a changing set of daily orders from approximately four hundred wholesale customers including Whole Foods, Google and many of the Bay Area’s top restaurants, such as International Smoke, Ayesha Curry’s barbecue destination. They now have eighty-five full-time employees and plan to grow to over 100 over the next year.
Working at Firebrand can be physically demanding. The Oakland location alone uses over eleven hundred pounds of flour per day; some of the bakers move fifty-pound bags of flour, while the packers and drivers work all night to get fresh bread and pastries delivered. Last fall I met Leonard, a 34 year old packer at Alameda’s new plant. (He has left Firebrand since we spoke.) He was 1 A M, and he was finishing his shift. He told me that he was less than a year out of prison after serving fifteen years for attempted manslaughter. Adapting to civilian life had been difficult for him; he had a cold sweat just going to the grocery store. After his release, he applied for numerous packaging jobs, at Amazon, FedEx, Frito-Lay and other companies. As soon as they did a background check he said, “It was like, ‘Oh, the job is filled’, or, ‘You’re not a good fit. “” At Firebrand, there had been no background check. They just invited him to do a shift and then offered him a job offer. “He’s an amazing man, right there,” he said of Kreutz. “I missed a lot of things after fifteen years. I’m just trying to get my life back on track. I am grateful that he gave me this chance.
In 2010, in Citizens United v. Federal Election Commission, the Supreme Court has granted businesses legal protections previously reserved for individuals. Since then, it has been hard to resist a natural question: if businesses are people, what are they? kind are there people? One answer, somber but justifiable, is that they are psychopaths, entirely dedicated to maximizing profits at the expense of everyone else, including their employees. Unusual business leaders like Emery and Kreutz show the limits of this generalization, as do many other socially conscious companies. But as long as prosocial businesses are vulnerable to acquisition by larger companies and investors who may neglect their social mission, they will remain fleeting exceptions to the profit-first rule. They will only last as long as their founders can continue to work, and avoid accepting investments with conditions.
By preserving fragile goodness in a lasting institutional form, Purpose Foundation offers a kind of corporate therapy. He rewrites corporate psychology, changing the deep structures that shape their behavior. There is genius in this approach. We often think that the system is immutable when in fact the rules can be rewritten. The imperative to make money can turn into a requirement to do well. “It’s not enough to have a sense of what the future might look like, you have to actually make it possible in practice,” Canon said. Business owners now have a powerful new tool to turn their ideas for a better future into reality.