B Corps and Benefit Corporations

Certified B Corps are leaders in a global movement to use business as a force for good. Businesses that become B Corps are attempting to set an example for other businesses in their city or their industry about how business can be used to solve society’s pressing social and environmental problems.

To earn their status, Certified B Corps meet meet rigorous standards of social and environmental performance, legal accountability, and transparency; this achievement is verified and supported by B Lab, a non-profit organization.  

Worldwide, over 2,600 Certified B Corps in more than 150 industries have achieved certification.  B Corps represent a wide range of business types and sizes, even sole proprietorships offering consulting services. Some internationally known B Corps include Patagonia and Kickstarter.

Benefit corporation is a new corporate structure that is available in 34 states in the US. The benefit corporation legal structure was created to make it easier for businesses to preserve their social mission over time by expanding the company’s fiduciary duties to include consideration of stakeholder interests (which is a key requirement of certification).

There are now over 3,000 benefit corporations in the US alone. Benefit corporation legal structure is separate from a company’s tax status, and does not come with tax incentives or other tax implications. While additional distinctions between Benefit corporations and B Corps exist, they are both held to higher standards for accountability and transparency than traditional for-profit businesses. One key difference is that benefit corporations self-report their performance while B Corps use the free B Impact Assessment to attain certification and are required to perform evaluations bi-annually to keep their certification. A company can be both a Certified B Corp and benefit corporation.

Value Proposition for Sustainable Consumption

Certified B Corps are required to behave in an environmentally and socially responsible manner. For many businesses that provide products, this means evaluating the impact of what they manufacture and potentially making changes in the pre-purchase phase to lower environmental impacts and improve social impacts and conditions for workers. For example, Patagonia works with its suppliers to develop and implement social environmental standards, scales its health benefits package to cover part-time employees, and 75 percent of its materials are environmentally preferred (organic, recycled, etc.).

Potential City Roles

Cities and anchor institutions have a large role to play in influencing the private sector to behave more like B Corps.   Here’s how other cities are getting involved:

• Demonstrate and Support -- Purchase products and services from B Corps as preferred suppliers.
• Convene -- Bring together local businesses and other stakeholders to discuss the potential for B Corps in your community.
• Expand influence -- Use the B Impact Assessment (the standards behind B Corps) to help all other companies in your city to measure and improve their impact.  
• Fund -- Provide grants for B Corp business start-ups.
• Make Policy Adjustments -- Consider adjustments to existing city incentives that could encourage businesses to measure and manage their impact with the same rigor as B Corps do.

Best Practice:  The best way to do leverage the power of cities for the actions above is to host a “Best for” program in your community.  See this example from Best for NYC:

The City of New York in partnership with B Lab has a program called “Best for NYC” to equip and celebrate all businesses in New York City to create higher quality jobs, strengthen communities, and preserve the environment.  The program offers a free, online tool (based on the B Impact Assessment) to help businesses compare their impact against 40,000+ other businesses.  In just the program’s first 6 months, over 1,200 businesses started the Challenge.

Implementation Challenges

• B Lab certification costs range from $500-$50,000/year based on annual revenues, which may present a barrier to businesses. To help businesses get started as B Corps, cities may consider offering subsidies to offset those costs or a grant program to help companies attain their first B Lab certification. The B Impact Assessment, the tool used to establish an organization’s baseline, is free to used and can be used as a tool to start engaging businesses around improving their impacts, prior to certification.
• Achieving B Corp Certification is a high bar for most businesses and may only be achievable for companies that truly have a demonstrable social impact. Additionally, limited staff time to complete the process and implement changes, especially fiduciary duties, may also be barriers to certification. For those that do not make the bar initially and have limited staff capacity, the process may require additional technical assistance from your city’s small business support sector.  
• Identifying and implementing action areas with highest leverage points could be challenging for business owners. While B Lab offers customized assistance in implementing improvements to Certified B Corps, local government can also offer technical assistance or local connections to companies that request help in the implementation phase.

Further Resources

• The Certified B Corporation website is the clearinghouse for the Certified B Corporation program
• The Benefit Corporation website provides a comprehensive overview and details about becoming a benefit corporation
• B Impact Assessment tool
• New York City: “Best for NYC” program

‍