The news cycle feels overwhelming at times. We get barraged with negative stories about violence, corruption, greed, injustice, hate, and massive weather damage.
As sustainability professional, I get questions all the time about whether our collective goose is cooked. Is catastrophic climate change irreversible? What can I as an individual do to combat it? How can I do better as a business leader? Do my actions and decisions really make a difference?
While my responses may vary depending on the news cycle influences, I’m always able to consistently share hope by highlighting a new type of company and a burgeoning movement of “B Corps”—the better companies that often go by the designation “benefit corporations” and/or “certified B corporations™.” B Lab, the non-profit that started the “global movement of people using business as a force for good™,” has a vision that one day all companies compete not only to be the best in the world, but the “Best for the World®.”
I’m old enough to remember when more companies acted with some semblance of a conscience. When they earned a good profit for the owner(s), when they paid their workers a fair wage, when they built lasting relationships with their customers, and when they built enduring products. When they took some effort to minimize externalities and do the ‘right thing’ even if the law strictly allowed them to do otherwise.
All before Milton Friedman’s principle of profit maximization at all costs became the prime directive for American business owners and investors. Those old-school businesses weren’t perfect nor always the most efficient, but the most successful took some measure to act ethically and legally—to engage in some level of social responsibility—for the mutual betterment of the owner(s) and society.
Don’t get me wrong. I love me some profit. It’s an elemental factor in business motivation and success. But, it doesn’t happen in a vacuum. And, a high profit today, may lead to a business failure tomorrow. To succeed, businesses also require good employees and customers and sufficient natural resources (i.e., raw materials for product-based companies, in the way of energy, buildings, computers, phones for service-oriented companies).
Some companies are bringing corporate America back to the future—where the power of business is used to benefit both shareholders and society. Some of these companies are successfully managing to the triple bottom line (factoring people, planet, profit). Some are designing their products to minimize their environmental and other social impacts (e.g., EPEAT electronics, Fair Trade coffee or chocolate, sustainably harvested forest products). Increasingly, some are using more comprehensive reporting frameworks such as the Global Reporting Initiative (GRI), ISO 26000, or the CDP (formerly the Carbon Disclosure Project) that measure corporate-wide practices and impacts.
There is also a smaller sub-set of for-profit companies that were launched to advance general or specific public benefits. Some of these do-good, for-profit companies may be called many things—social enterprises, conscious capitalism, benefit corporations, B corps. Some have been around for decades (e.g., Patagonia, Ben & Jerry’s, Stonyfield Farm, Eileen Fisher, Sokol Blosser Winery, Hog Island Oyster Company); others were launched more recently (e.g., Etsy, Warby Parker).
If an individual or business is looking to support these trends to redefine business success, how do they go about distinguishing between all these so-called good companies? Many, myself included, think that the Certified B Corporations™ set themselves from the rest of the pack because of the comprehensive, independent assessment and rating process they go through to become and remain certified.
I am working, with some collaborative partners, on a series of blog posts about some of these new breed companies. We’ll start by focusing on the benefit and certified B corporation designations.
This first article is a basic primer about the “what” (What is a Certified B Corp, What is a Benefit Corporation) and provides a brief history about the movement that introduces the who, why, where, and how Certified B Corps came to be. Subsequent articles will focus even more specifically and deeply on the B Lab Certified B Corporations, including:
Please travel with us as we explore these back-to-the-future companies and discover a movement that may just disrupt capitalism, our planet, and our communities—for the better. Along the way, we’ll feature some data about and conversations with Oregon-based B corporations. Thanks, in advance, for indulging some home-state pride! We come honestly to featuring Oregon B Corps as Oregon is home to a significant percentage of the certified B corporation community.
The Basics | What is a Certified B Corporation versus a Benefit Corporation?
Some of the phrasing for this new breed of company has caused some confusion. There are basically two terms to understand and distinguish: “certified B corporations” and “benefit corporations.” Part of the confusion is that the shorthand phrases “B Corp” or a “B” company are being informally used to describe either type of company. My preference is to use the “B Corp” term just for the B Lab Certified B Corporations. Certified B corporations and benefit corporations have a lot in common. A company can even be both. But, the two types can be distinguished by a few key differences.
In brief, Certified B Corporations™ are companies that have gone through a third-party assessment process (conducted by the non-profit B Labs®) that certifies their social and environmental performance, legal accountability, and public transparency. B Lab frequently uses the following analogy: a Certified B Corp is to business what Fair Trade certification is to coffee, USDA Organic certification is to milk, or USGBC LEED certification is to green buildings.
The B Lab assessment process is iterative and evolves to adapt to emerging best practices and standards. The assessment covers the company’s entire operation and measures the company’s impacts across four areas:
The applicability and weightings in each category are tailored to the company’s industry, geographic location, and number of employees. Under the current scoring system, companies can score a potential 200 points. A company must earn at least 80 points to earn the Certified B Corporation label. They must also re-certify and meet the scoring minimum every two years.
Today, more than 2,200 companies are B Lab Certified B Corps. These companies come from more than 140 industries and are from 50 countries. Tens of thousands of other companies have also used the B Lab assessment framework to measure themselves and provide a roadmap to improve.
Benefit corporations, on the other hand, are a new type of incorporation category that have a social, environmental, or some other identified public benefit as an integral part of their business purpose and meet the legal requirements established by state laws (where the company is incorporated and/or registered). Similar to S or C corporations, wholly owned subsidiaries, or limited liability corporations, benefit corporations are a legislatively recognized category of company. More than 30 states have enacted some form of benefit corporation laws; many other states are actively considering benefit corporation legislation.
Typically, these states require their benefit corporations have a stated public benefit and meet higher transparency and accountability standards than the other types of corporations. For example, many states with the benefit corporation designation require such companies to submit to periodic independent third-party assessments and publicly release the assessment results. Unlike other types of incorporated businesses, benefit corporations are legally obligated to consider impacts beyond profit or maximizing shareholder value. They must also consider the impact of their decisions on their workers, consumers, their communities, and the environment. This legal structure enables business owners to support the company’s business and mission while growing over the long-term.
New companies can initially file as benefit corporations. Existing companies may also amend their governing documents to change to the benefit corporation structure and re-file with the state to change their legal status.
Here is a brief summary from B Labs that outlines some of the intersections and differences between legislatively recognized benefit corporations and B Lab Certified B Corporations.
A Little History | How the B’s Began
About 10 years ago, B Lab was launched to accelerate the growth and amplify the voice of the socially and environmentally responsible business sector. The founders—Jay Coen Gilbert, Bart Houlahand, and Andrew Kassoy—identified three key elements needed to foment this movement:
The first foundational component of their strategy was to create a comprehensive set of best practices performance standards and legal requirements to distinguish and provide credibility to companies portraying themselves as a “good” company. In addition to measuring what matters, and benchmarking the impact against similar companies, the standards provide a framework for companies to improve their performance.
The founders worked with many leading businesses, investors, and attorneys to develop this initial set of standards. What has now become the “B Impact Assessment” started with a spreadsheet to measure some of the best practices in socially responsible businesses. The first 19 companies were certified as B Corps in June 2007. While most of the certified companies are American companies, companies in many other countries have been certified. Canada has the second most B Corps with more than 150 certified companies to date. By 2011, more than 500 companies had been certified. While companies must pay a fee to be audited and certified, any company can use the B Impact Assessment rating tool for free.
The standards for the B Corp certification evolved over the years and will continue to evolve. Moving forward, B Lab will update the B Impact Assessment about every three years. B Lab now uses an independent advisory council to maintain and advance the standards. It always welcomes public comments on the standards.
Passing legislation to create a new type of corporation was the B Lab founders’ second piece of infrastructure to spur a more massive and durable movement. B Lab (with pro bono attorneys from Drinker Biddle & Reath) developed model legislation to create a statutorily recognized class of social enterprise companies—the benefit corporations. B Lab, in partnership with many, worked (and continues to work) with states to enact benefit corporation laws. In April 2010, Maryland became the first state to pass a benefit corporation statute. In June 2017 Texas became the 33rd state to create a benefit corporation class. The Texas law is effective September 1, 2017. Six other states are actively exploring benefit corporation legislation: Alaska, Georgia, Iowa, Mississippi New Mexico, and Oklahoma.
These social innovators were motivated to create this new type of corporation, in large part, to counter the strong perception and several legal decisions—framed by Milton Friedman’s 1970 business social responsibility article—that protect shareholder profit maximization over all other business and societal interests. These battles over a company’s pursuing its mission versus shareholder’s rights to maximum profit typically arose in the context of potential corporate takeovers or other sales or after leadership changes.
The benefit corporation pioneers felt this type of legal structure was needed to ensure “long term mission alignment and value creation.” To protect the mission “through capital raises and leadership changes,” to create “more flexibility when evaluating potential sale and liquidity options,” and to prepare businesses to “lead a mission-driven life post-IPO.”
Since this type of corporate class is still relatively new, there are no known court cases ruling on the merits of these protections. One interesting corporate transaction that received some press and many have speculated about—whether Ben and Jerry would have fought the Unilever bid if they had the benefit corporation status protection. To Unilever’s and Ben & Jerry’s credit, Ben & Jerry’s became a Certified B Corporation in 2012, twelve years after Unilever acquired it.
The B Lab founders also understood the need to create a brand and community to both unify and amplify the voice of these like-minded companies and their supporters. B Lab has worked to construct a vocabulary that reflects the shared values of those who believe that businesses can be a force for good. They’ve also implemented a series of campaigns such as “Measure What Matters”, “Best for the World”, and “B the Change”. B Lab is also nurturing and expanding the community through events and recognition such as the B Corp Champions retreats, B Corp Leadership Development, and the B Corp Ambassadors.
Stay tuned for the next article in this series—a deeper dive about what it takes to become a Certified B Corporation and/or a benefit corporation and why companies are voluntarily choosing these routes.
Thank you for reading this blog post. Here at Corporate Sustainability Advisors LLC blog and on LinkedIn, I regularly write about organizational, community, and personal sustainability. If you would like to read my future posts then please subscribe via the adjacent link. Also, feel free to connect via Twitter and Facebook.
Hi. I'm Colleen, Corporate Sustainability Advisor's founder and owner. Blogging about corporate sustainability trends, benefits, and best practices.