A B-Corporation is hybrid business model between profit and non-profit enterprises that focus on social issues and benefits. These companies are structured as for-profit businesses although they seek the tax benefits of non-profit businesses. An organization by the name of B-Lab can provide the third-party certification that declares a company at B-Corporation status. The certification is voluntary and recognizes that the company’s profit and purpose will generate benefits for the society.
B-Lab , a non-profit organization, reviews and certifies submissions made by companies vying for B-Corporation status. According to their website, the three criteria to become certified are as follows:
1. Earn a minimum score of 80 (out of 200 available points) on the B Impact Assessment. This sets a benchmark for social and environmental impact for good companies. A B Lab staff member reviews each assessment and is always available for help.
2. Adopt the B Corporation Legal Framework to bake the mission of the company into its legal DNA. This allows the company’s values to thrive under new management, new investors, and new ownership.
3. Sign a Term Sheet and Declaration of Interdependence to make the certification official.
Also stated on their website, “once certified, 20% of B Corporations are randomly selected for an on-site review during every two-year term.”
Differences with Traditional Businesses
Unlike traditional enterprises, B-Corps fundamentally structure their business to be transparent in their social and environmental practices; this information is readily available to the public through the company’s B Impact Report. They are built to sustain public policies and are held to higher legal accountability standard. Currently, there are a little under 500 Certified B-Corporations across 60 various industries.
Confusion with Benefit Corporation
With the new era of Social Enterprise upon us, we are seeing more and more companies blend their business structures between for-profit financial efforts and philanthropic social returns. This rise in social awareness and communal benefits has led to rise of Benefit Corporations and B-Corporations across the nation. Often confused, these two types of enterprises contain many similarities yet key differences.
A company may be both a Benefit Corporation and B-Corporation. This may only be done in states that allow Benefit Corporation entities and if the company in question has met B-Lab certification requirements.
Although Benefit Corporations must produce and publish annual Benefit Reports, it is not required that a third party assess or audit their performance and verify their procedures. In comparison, B-Corporations must first pass B-Lab’s B-Impact Assessment with a minimum score and are then liable to be randomly reviewed on-site every two years to make sure standards are being met.
In general, both Benefit Corporations and B-Corporations have the same objective: to further their social aims through a for-profit driven business. They are both held accountable for their decisions in regards to their customers, shareholders, and the environment as well as for their transparency in their publically published reports on social and environmental performance.