What is a benefit corporation?

The “B” in B Corp stands for “benefit”—but it’s not the same as a benefit corporation. This B refers to the B Corp mission, which can be summed up as using business as a force for good.

B Corps are often confused with benefit corporations, for obvious reasons. A B Corp may also be a benefit corporation, and vice versa, but these terms indicate very different things. A business receives a B Corp certification, while a benefit corporation indicates a specific legal entity.

They overlap through their common adherence to business practices that prioritize:

  • Social responsibility
  • Environmental sustainability
  • Corporate transparency
  • Corporate accountability

Certified B Corp:

A Certified B Corporation can indicate a business with any legal structure, and at any stage in the lifetime of the business, but has been certified by B Lab—the organization that designed and advocates for Benefit Corporation legislation, and set the initial standards for B Corp certification. Certification includes impact assessment and evolving standards that require recertification every two years.

Benefit Corporation:

A benefit corporation is a legal structure (like an S Corp, LLC, etc.), for-profit business and is currently available in most states and many countries. Benefit incorporation is explicitly organized around the principle of the triple bottom line. Basically, it legally empowers management to balance their businesses’ impact on society and the environment with their financial bottom line, and is self reported—no certification involved. This protects the benefit corporation from being sued under the normal corporate rules of maximizing shareholder value solely on a financial basis.

What does it take to form a B Corp?

Rigorous Evaluation

The key step to achieving certification is successfully completing the B Lab Impact Assessment. This process requires both self-reporting and review by independent evaluators to assess your company’s social and environmental performance and the impact of your business on your shareholders.

Legal Requirements

A B Corp that is legally incorporated must have governing structures and documents in place ensuring that management is explicitly empowered to pursue the interests of all stakeholders, including employees, local communities, customers, etc. A benefit corporation will already meet these requirements.

The legal requirement means that the B Corp ensures:

  • Legal protections for directors and officers when they make decisions that consider the interests of all stakeholders
  • Ways of holding directors and officers accountable
  • Limits on who holds these expanded rights

Each form of legal entity will face different requirements for B Corp certification:

  • Corporate entities other than a benefit corporation will need to assess and amend their governing documents, with special rules for:
    • Multinationals and publicly-traded companies
    • Subsidiaries and franchises
    • Companies incorporated outside the U.S. or Canada

Making it Official! The final step is to sign the B Corp Declaration of Interdependence.

Special Circumstances: Startups and New Businesses

Because B Lab requires a year of data for the assessment, startups (defined by B Lab as any company in business less than 12 months) can apply for pending status, good for 12 months.

Benefits to pending status include:

  • Out-of-the-gate branding as a member of the B Corp community ( has called B Corp certification “the highest standard for socially responsible businesses”)
  • Resulting access to markets and funding
  • Access to the peer group of existing B Corps (2,000+ businesses internationally)

Why Form a B Corp?

According to B Lab, as of 2017, there are over 2,100 Certified B Corps in 50 countries across 130 industries, from real estate to energy to chocolate to insurance. A company may become a B Corp out of a desire to change the world, or simply because it makes good business sense.

The range of reasons is wide, and could include any of the following:

  • Attract investors
  • Effectively advocate for or pass legislation regarding a specific issue; be a movement leader
  • Gain public notice from the press, potential employees, or other supporters
  • Partner with like-minded businesses and peers
  • Access funding and services
  • Protect and advance your mission
  • Benchmark your performance

Consumer Perception = Consumer Dollars

More and more consumers are basing buying decisions on factors other than advertising. This is especially true for millennials, who are expected to account for 75% of the global market by 2025. Brand-name B Corps like Ben & Jerry’s Ice Cream, Patagonia, Warby Parker® and Seventh Generation® are all examples of the positive impact social and environmental responsibility can have on a company’s bottom line.

B Corp: Pros and Cons

Cons

There are questions about the ability of B Corps to become more than a small percentage of the overall business world. As of 2017, the vast majority of B Corps are small and mid-sized businesses. So, just as organics occupy only about 1% of U.S. farmland, it can be argued that there is little likelihood of the U.S. corporate world switching from its current culture of putting financial profits over all other considerations.

Pros

However, the number of certified B Corps jumped from 500 in 2012 to 1,200 in 2015. And,

the kind of business mentality that lead to B Labs founding in 2006 is shared by many well-known and well-established companies. Siemens, the venerable and hugely profitable German industrial giant, is neither a B Corp or a benefit corporation. Yet, Siemens came in first in Corporate Knights’ 2017 Global 100 ranking, scoring over 90% for sustainability in categories like energy, innovation, and human resources.

B Corps: Live Your Values

Most importantly, becoming a B Corp reflects a strong desire on the part of many people to take charge of their lives and have a positive effect on the world. B Corps allow consumers, employees and business leaders to put their values and resources to work. While the idea of people + planet = profits may not resonate with everyone, for those it does, there can be great satisfaction in feeling that your business is having a daily positive impact.

Ready to form a B Corporation?

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