This is the third in a weekly series of excerpts from the upcoming book “The B Corp Handbook: How to Use Business as a Force for Good.” (Click here to read the rest of the series.)
By Ryan Honeyman
If you are confused about the difference between the two — or didn’t even know there was a difference — don’t worry. This is one of the most commonly confused aspects of the B Corp movement.
Certified B Corporations and benefit corporations share much in common but have a few important differences. For a direct comparison, see the chart at the bottom of this article.
Q: What are Certified B Corporations?
Certified B Corporations (also referred to as ‘B Corps’ or ‘B Corporations’) are companies that have been certified by the nonprofit B Lab to have met rigorous standards of social and environmental performance, accountability, and transparency. B Corp certification is similar to LEED certification for green buildings, Fair Trade certification for coffee or USDA Organic certification for milk.
A key difference, however, is that B Corp certification evaluates an entire company (e.g., worker engagement, community involvement, environmental footprint and governance structure) rather than looking at just one aspect of a company (e.g., a building or product).
This big-picture evaluation is important because it helps distinguish between good companies and just good marketing.
Today, there is a growing, global community of more than 1,000 Certified B Corporations across 80 industries and 35 countries working together toward one unifying goal: to redefine success in business so that one day all companies will compete not just to be the best in the world but to be the best for the world.
“A good certification may help set us apart from our competitors, but the most powerful and transformative certifications focus on bringing us all together.” – Rebecca Hamilton, director of product development, W.S. Badger Company
Q: What types of companies can become Certified B Corporations?
B Corp certification is available to any private business in the world. For example, any of the following companies can become Certified B Corps:
- Benefit corporation
- C corporation
- Employee stock ownership plan (ESOP)
- For-profit company outside the United States
- Limited liability company (LLC)
- Low-profit limited liability company (L3C) Partnership
- S corporation
- Sole proprietorship
- Wholly-owned subsidiary
Nonprofits, such as 501c(3)s in the United States, and government agencies are not eligible to become B Corps.
Q: What is a benefit corporation?
A benefit corporation (also referred to as a ‘benefit corp’) is a new type of corporation that voluntarily meets higher standards of corporate purpose, accountability and transparency. In particular, benefit corporations:
- have a corporate purpose to create a material positive impact on society and the environment;
- are required to consider the impact of their decisions not only on shareholders but also on workers, community, and the environment; and
- are required to make available to the public an annual benefit report that assesses their overall social and environmental performance against a third party standard.
“Patagonia is trying to build a company that could last one hundred years. Benefit corporation legislation creates the legal framework to enable mission-driven companies like Patagonia to stay mission driven through succession, capital raises, and even changes in ownership, by institutionalizing the values, culture, processes, and high standards put in place by founding entrepreneurs.” – Yvon Chouinard, founder, Patagonia
Q: Why was the benefit corporation legal structure created?
One of the primary challenges that the B Corp movement was created to address is the difficulty that many entrepreneurs have in raising capital, growing or selling their business without diluting the company’s original social and environmental values.
Through the leadership of B Lab and the community of Certified B Corps, laws have been passed in many states (and are moving forward in many more) to create a new type of corporation — the benefit corporation — that best meets the needs of entrepreneurs and investors seeking to use business to solve social and environmental problems while supporting sound financial performance.
Q: Aren’t companies such as Whole Foods, Aveda and Eileen Fisher already socially and environmentally responsible without a benefit corporation legal structure?
Companies such as Aveda, Ben & Jerry’s, Burt’s Bees and Tom’s of Maine prove that one can run a profitable business and have a social mission. However, in times of crisis, such as the recent financial collapse, or under a leadership change, social and environmental values can get pushed aside if they are not embedded in the company’s foundational documents. The benefit corporation legal structure provides entrepreneurs, owners and investors with the assurance that the company’s social and environmental values will remain equally important to making a profit — no matter what.
“The benefit corporation has allowed us to preserve our mission and culture against unsolicited tender offers. We don’t have to worry that our board of directors might feel compelled to accept an offer that isn’t in our overall best interests.” – Jenn Vervier, director of strategy and sustainability, New Belgium Brewing Company
A more thorough discussion of the need for and rationale behind the benefit corporation, state-by-state instructions and detailed technical information about benefit corporations is available through the Benefit Corp Information Center website, benefitcorp.net.
Image credit: B Lab
Ryan Honeyman is a sustainability consultant, executive coach, keynote speaker, and author of The B Corp Handbook: How to Use Business as a Force for Good. Ryan helps businesses save money, improve employee satisfaction, and increase brand value by helping them maximize the value of their sustainability efforts, including helping companies certify and thrive as B Corps. His clients include Ben & Jerry’s, Klean Kanteen, Nutiva, McEvoy Ranch, Opticos Design, CleanWell, Exygy, and the Filene Research Institute.