What is a B Corporation? Certification, requirements, and benefits

Do you want your business to positively impact society and make money?

Modern consumers seek socially responsible companies; so, your potential to find this balance is greater now than ever before. Unfortunately, due to the popularity of green business and sustainability, making changes and then “announcing” them isn’t enough.

If you want to commit to positive social impact in a way that’s credible to skeptical consumers, B Corporation Certification may be exactly what your small business needs.

What is a B Corporation Certification?

B Lab is a nonprofit organization that created the B Corp Certification. The B Lab team describes the Certification as meeting “the highest standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose.”

In other words, the desire to act socially responsible combined with operational and organizational structures that achieve that goal.

B Corp requirements vs. ‘benefit corporation’

B Corporation Certification is not a legal status or entity type. A benefit corporation or a public benefit corporation is a legal entity type.

Instead, the certification acts similarly to labels such as Women Owned Small Business (WOSB), Leadership in Energy and Environmental Design (LEED), or USDA Organic. A benefit corporation is a legal entity type alternative to Limited Liability Company (LLC), Corporation (Inc.), or Partnership.

As such, certification is based on your social and environmental performance, not your legal structure. The government plays no role in that process.

B Lab awards and manages certification through a three-step process:

1. The B Impact Assessment (BIA)
2. Certain legal requirements
3. Ongoing verification and transparency

The BIA evaluates your business’ impact to those it interacts with: workers, customers, community, and the environment. The assessment is free and confidential until certification is processed. At that point, all BIA scores are made public.

Alternatively, if you want to operate as a benefit corporation, you must submit paperwork to your state government and meet state-specific requirements. Benefit corporation rules vary from state to state, and the entity type is not available in all states. 34 states currently include a benefit corporation entity option, and 6 have proposed legislation.

Many states follow Delaware’s lead when drafting benefit corporation laws. The Delaware Corporation Law requires public benefit corporations to “produce a public benefit or public benefits and to operate in a responsible and sustainable manner.”

Legal requirements

Although a B Corp Certification is not a legal status, obtaining it requires you to meet certain legal requirements.

The legal requirements address your corporate structure and governance documents. The aim is to balance shareholder value with stakeholder value. Stakeholders include those your business impacts including workers, customers, community, and the environment.

If your articles of incorporation don’t expressly demonstrate a balance between making money and being socially responsible, you will need to amend the articles as one of the legal requirements.

The legal requirement step requires satisfaction of three elements:

• B Corporate Certification inclusion into governance documents and structure
• Stakeholder protection in the legal structure and decision-making process
• Ongoing protection as the company evolves through changes in management, ownership and otherwise

To help you understand whether you meet the legal requirements, or you need to make changes, B Lab offers a Legal Requirement Tool.

Verification and transparency

If your company receives at least an 80 on the BIA, and you meet the legal requirements, you will be asked to meet with B Lab staff.

During that meeting, you will discuss your BIA and submit documentation that supports the responses you made in the BIA. Next, you will need to …

• Sign the B Corp Declaration of Interdependence
• Also sign a B Corp Agreement, and
• Pay an annual fee

Fees are based on sales: the lowest fee is $500 and the highest is $50,000 for companies that generate over $1 billion in annual sales.

The verification and transparency requirements aren’t a once in time exercise. Rather, B Corp Certified businesses need to recertify every three years. This check-in process demonstrates to stakeholders that the dedication to social responsibility effectively plays out over time.

Is B Corp Certification right for your business?

The B Corp Certification exists to push businesses towards sustainable and socially responsible success. You don’t have to formally complete the certified B Corp process to run a socially responsible business, but there are benefits to doing so.

Naturally, there’s money to be made—both through customers and investors. Harvard Business Review identified a host of benefits: operational savings, customer attraction and retention, and more satisfied employees.

Wealth advisors such as Natural Investments and Caprock direct billions of investment dollars to B Corps and other public benefit companies. Venture firms like the Collaborative Fund are backing them the belief that they are good long-term investments.

Modern consumers and employees care about corporate social responsibility. Both are loyal to companies that demonstrate social responsibility.

Monetary benefits aside, formal participation in the global movement helps shift legacy thinking regarding the role of businesses in society. Focusing on your bottom line at the expense of greater societal good is no longer an option.

As Rose Marcario, Patagonia CEO, commented: “The B Corp movement is one of the most important of our lifetime, built on the simple fact that business impacts and serves more than just shareholders — it has an equal responsibility to the community and to the planet.”

The future of our planet depends on the growth of socially responsible companies. Be part of this positive change.