Have you ever wondered what the term “B Corporation” means? And what does being a B Corporation mean for business sustainability—if anything?
B Corporations or B Corps are a relatively new idea, so it’s no surprise that many people are still confused by them. Further complicating Americans’ understanding is the confusion between B Corporations and benefit corporations, which are two different but intertwined ideas.
About B Corporations
B Corporations are businesses that receive a third-party certification from a nonprofit called B Lab. B Lab’s goal is to identify, assist and promote companies whose operations and mission positively impact workers, customers and their local community from a social and environmental perspective.
When evaluating companies, B Lab looks at things such as the sustainability of material sourcing, how brands are creating products with a lower carbon footprint, charitable giving and supporting employee volunteerism and activism. Companies seeking or maintaining B Corporation status can compare their efforts to those being undertaken by others, giving them some friendly competition and ideas about how they can improve their own business practices.
Similar to being certified organic or biodynamic, a company must submit proof that it conforms to these ideals to become a B Corporation. When it receives the certification, it can use the name, logo and other branding tools provided by B Lab.
About Benefit Corporations
On the other hand, the term “benefit corporation” refers to a legal structure that companies can incorporate under.
The mission of a traditional corporation is to maximize profits for shareholders. But this hampered the efforts of many companies that wanted to make money but also be involved in broader efforts around sustainability and social responsibility. Benefit corporations were the answer to this challenge.
According to B Lab, “a benefit corporation is a traditional corporation with modified obligations committing it to higher standards of purpose, accountability and transparency.” In addition to making money, the company must create public benefit in its work and consider the impact on the environment when it makes decisions. Benefit corporations must also be transparent about their efforts to work toward greater community and environmental good by making regular reports on how or whether they are achieving their social goals.
In many states, B Corporations must register as benefit corporations to quality for the certification. This is not true in all states, though, so it is possible to have B Corps that are not benefit corporations.
As you can see, being a benefit corporation or B Corp can mean a lot for business sustainability. Although companies have different goals and are progressing toward meeting them at different rates, environmental and social sustainability are baked into their DNA.