What Is a B Corporation? [Full Breakdown]
For many entrepreneurs, it’s important to not only turn a profit but also ensure that the company is doing its part to make the world a better place. Through positive interactions with their communities, employees, and the environment, companies can do so much more than just make money.
This is why many companies have chosen to become B corporations. A B corporation is a type of corporation that has been certified for making a positive social, community, and environmental impact.
In this article, we will look at what a B corporation is, how the certification process works, and some examples of highly successful B corps. By the end, you should have a great sense of what makes a B corporation and if certification is right for your company.
A Brief Guide to B Corporations
A B corporation is a company that meets the highest standards of corporate social responsibility. To be certified, you must meet third-party standards for environmental performance, public transparency, and legal accountability.
B corps are for-profit companies working with the belief that making a profit should not sacrifice a company’s commitment to high standards and a positive impact on the world.
From a business entity perspective, a B corporation is a different type of corporation than a C corporation or an S corporation — those are legal entities that are chosen for tax and liability purposes. A B corporation is a for-profit company that has earned an additional level of certification for good business practices and social responsibility.
B Corporation vs. Benefit Corporation
A B corporation is also different from a benefit corporation, though it’s easy to see why they are often confused. A B corporation is a company that passes an independent assessment from the non-profit B Lab, and is certified as a mission-driven business with positive social impact. A benefit corporation is a legal structure, like an LLC or a sole proprietorship. Benefit corporations are enabled to pursue social good along with profit.
Some benefit corporations have also been certified as B corporations, though certification from B Lab is not required to be a benefit corporation. Likewise, you don’t need to be a benefit corporation to be certified as a B corporation.
How B Corporations Are Certified
B corporations are certified by the nonprofit B Lab, a third-party, neutral organization that conducts a test called the B Impact Assessment. Companies are graded on impact — impact on their workers, customers, environment, and community.
If a company passes the assessment, it becomes a certified B corporation. At that point, it must change its bylaws or governing documents to reflect its new social mission and require its board of directors to balance public good with profit.
Examples of B Corporations
There are lots of B corporations out there, all committed to doing more for their community, their workers, and the environment. They aren’t all Fair Trade coffee roasters or organic farms, either. Plenty of large companies doing big business have been certified as B corporations.
Here are some examples.
This outdoor goods supplier, based in Ventura, California, has been a steadfast supporter of the environment. It also works to control the entire supply chain, making sure workers are treated fairly at every step of the production process.
New Belgium Brewing Company
The Colorado-based brewer has grown to the third-largest craft brewery in the United States, but it hasn’t sacrificed its values along the way. This certified B corporation diverts 99.9% of its waste from landfills, along with having great employee benefit programs — and making some delicious beer.
You may not have heard of this bakery, based in New York, but you’ve almost certainly eaten it in some capacity — they’re the bakery that supplies Ben & Jerry’s ice cream. They’ve made an incredible commitment to their community as well by building a workforce development and mentorship program for ex-convicts.
It’s also worth noting that Ben & Jerry’s is a certified B corporation.
Yes, even plastics manufacturers can be certified as a B corporation. The Michigan-based manufacturer works with their community to aide employees moving from welfare to lasting careers. It also diverts 100% of its waste from landfills.
Natura Cosméticos SA
B corporations can be from all over the world. A makeup company based in Brazil, Natura Cosméticos SA employs over 2 million people while making carbon-neutral products and spending tons of money and resources to help regrow the Brazilian rainforest.
Why Get Certified?
There are plenty of great reasons to be certified as a B corporation, beyond just “doing good.” (Though that should be the main reason!)
Getting certified as a B corporation can help your bottom line and create shareholder value by demonstrating that you are a mission-driven business.
Companies like Patagonia and New Belgium have shown that there are customers committed to supporting businesses with a positive social impact, and getting certified as a B corporation can be a tremendous marketing tool.
B corporation certification can also help with recruiting. You can attract top talent by demonstrating that you’ve been vetted as a place that treats its employees well and does its part to make the world a better place.
Lastly, getting certified allows you to take the values of your company and set them in stone within your company’s legal structure. B corporations are required to rewrite their bylaws (included in your company’s articles of incorporation) to ensure that the company is committed to public benefit as a social enterprise moving forward.
Certification Requirements and Process
B Lab runs the certification process. Their requirements to get certified may vary depending on the size and structure of your company.
The basic steps of the process are the same, however.
1. Complete a B Impact Assessment (BIA)
This is a free, online platform that asks you questions about how your company operates and then assesses you on how your company treats its workers, customers, environment, and community.
2. Meet Legal Requirements
Certified B corporations are required to change their company’s legal structure to ensure they remain a mission-driven business moving forward. To see if your company can meet the requirements, they have a handy online tool which helps you find out.
3. Get Verified by B Lab
If you’ve taken the assessment and meet the legal requirements, the B Lab staff will then review your assessment to verify that you’ve passed (you have to clear an 80-point bar). When you’re certified, you’ll need to have B Lab review your assessment every three years to maintain your certification.
4. Maintain Certification Through Annual Dues
Maintaining B corporation certification requires annual fees that range from $500 to $25,000, depending on the company size.
Frequently Asked Questions
We’ve covered what a B corporation is and how the certification process works. Let’s get to some frequently asked questions.
1. How can I find other B corporations near me?
B Lab has an online directory of all their certified B corporations, so you can reach out to these companies directly to learn more or to apply for a job there.
2. Can B corporations go public?
Sure can, and many have. It’s also possible for a publicly traded company to become certified as a B corporation, though it requires shareholder approval, and the process could be a bit more complicated.
3. Can I get my company certified even if we’re a small business?
Absolutely. There is no size requirement for your company, and B Lab is helpful in setting different costs for different size companies. While very small companies may not think the $500 annual fee is worth it, that can be a great investment for growing companies that want to show credentials as a mission-driven company and attract top talent.
Getting Certified For Social Good
If your company is committed to doing good work, and you want to make that official, getting certified as a B corporation is a great way of going about it. It signals to your customers and your employees that you’re committed to more than making a profit, and it gives your board or business owners a concrete commitment to running the business the right way.