B-Coming a B-Corp: The Background, the Benefits, and How to Become One By Obtaining a Certification of "Social and Environmental Performance”
Nearly fifteen years after the formation of the first B-Corp, 37 states, including Ohio, have passed a B-Corp legislation, and four states are pending. With the majority states recognizing B-Corps, and major companies, such as Patagonia, Jeni’s, Cabot Creamery Cooperative, and Ben & Jerry’s being “B-Corp certified,” you may find yourself thinking what a “B-Corp” is, and whether your company should become “B-Corp certified.” Keep reading to learn more about the B-Corp, its benefits, and how your company can become one.
What is a B-Corp?
Simply put, a B-Corp is a corporation that harnesses the power of businesses to address social and environmental problems. B-Corps are driven by their mission to build a more inclusive and sustainable economy for consumers and the people involved in their businesses.
B-Corp and the Consumers:
As part of their mission for inclusivity and sustainability, B-Corps seek to establish public transparency so that their consumers can see how the B-Corps are making a difference. As an example of this transparency, local ice cream company, Jeni’s, has the following language on their website evidencing its social and environmental commitment as a certified B-Corp:
“Jeni’s is a Certified B Corporation endorsed by the international nonprofit B Lab as a company that meets rigorous standards of social and environmental performance, accountability, and transparency. Using Direct Trade and Fair Trade ingredients, employing a diverse team of people, working with women—and minority-owned businesses—it’s all part of how we operate and an important part of our company culture.”
B-Corp Business Model:
The B-Corp mission to create an inclusive and sustainable economy is not limited to the consumers. It also extends to the businesses as well. On the business entity side, B-Corps hold the owners and their practices accountable for maintaining its social and environmental responsibility.
In fact, B-Corps change the legal organizing documents to include consideration of all stakeholders. In other words, rather than acting for the benefit of the shareholders, B-Corps ensure benefits for the stakeholders, which refers to anyone who has a stake in the company: employees, members of the local community in which the business operates, and members of the community in which the business has an environmental impact.
B-Corp Benefits
Being committed to a mission allows corporations to have definite goals. By having a clear mission and becoming B-Corp certified, business owners may find themselves with many benefits: (1) easier time making decisions; (2) access to a community of likeminded people; and (3) credibility, followed by an increase their business.
B-Corps allow for pragmatic decision making.
Decision-making is a big part of owning a business and having clear goals can make that that process much easier. Following the social and environmental goals, becoming B-Corp certified can lessen the decision-making burden on business owners and ultimately help the company:
Tighten up governance practices
Refine its business model and maximize positive impact
Treat employees better
Receive more support from the local economy
Promote company goals and values
Accessing the B-Corp Community:
Becoming B-Corp certified and taking an active role in social missions also enable business owners to access a network of likeminded people. This allows for (1) consumer happiness, (2) employee wellbeing, and (3) growth of the B-Corp.
Consumers: People will be more inclined to shop at companies that promote the same type of values that they do.
Potential Employees: Many people want to work for companies that are transparent and that care about them. Having a B-Corp status and maintaining that status will allow for more happiness among the employees and help promote its missions.
Growth: Business owners can build a network with other B-Corps, which will allow them to generate more ideas for their companies. Being B-Corp certified will also allow business owners to have access to B-Corp community data. Through this database, business owners will be able to see what other B-Corps are doing to eliminate needless and wasteful spending.
Credibility:
Finally, being B-Corp certified will lend credibility to businesses. Although some people may equate B-Corp with Corporate Shareholder Responsibility, in which corporations are driven to by the responsibility to do what is right, being a B-Corp entails more than “being responsible.” B-Corp owners are required to take an active role in promoting their company’s missions and to be successful at the said missions. Therefore, by becoming B-Corp certified, people will be more inclined to trust the company’s commitment to being responsible and support that the B-Corp.
Becoming a B-Corp:
The requirements to becoming B-Corp certified are simple:
The company has to be in operation for one year,
The company has to earn at least 80 points out of 200 on the Impact Assessment,
The company has to complete an interview with a B Lab staff member, who reviews the findings of the B Impact rating system,
The company has to provide documentation to verify the information in the online assessment,
The company commits to changing their legal status if required to do so, and
The company makes the status official by signing the necessary term sheet and paying the licensing fees.
After the company has been certified as a B-Corp, they must get a recertification after two years that reflects any change in their corporation and other standards.
As with any businesses, becoming a B-Corp is a big decision and should be considered carefully. If you are planning to become a B-Corp, the most important thing to do is to be intentional about incorporating the B-Corp standard into your business model, governance structure, worker practices, community engagement, and environmental stewardship from the beginning. It is also recommended that you use the Impact Assessment (free of charge!) to measure how your business idea fits into the B-Corp model.
A Note for New Startups:
The first requirement of becoming a B-Corp is that the company has to have operated for at least one year. If you are a new business owner who is committed to establishing a B-Corp, but has not met the one-year requirement, you will not be eligible for a B-Corp status. However, in that first year, you may be eligible to obtain a B-Corp Pending status. This status signals to customers and investors that your company is committed to meeting the highest standards for social and environmental responsibility. For more information on the B-Corp Pending status, please visit https://bcorporation.net/certification/pending-b-corps
If you are interested in obtaining B-Corp status for your company, please reach out to us here.
*Any reference to existing B-Corporations in this blog are for reference only and do not imply any relationship between Anthony Law and the company referenced.