What is a B Corporation?

Michael Lawrence
Michael Lawrence
Businessman giving a thumbs-up
Businessman giving a thumbs-up

A benefit (B) corporation is a company certified by B Lab — a Pennsylvania-based non-profit organization — as existing to solve social and environmental problems. B corporations are different from typical corporations where the primary goal is to earn a profit for shareholders. By contrast, B corporations are obligated to consider the benefit to everyone they come in contact with.

B corporations take their name from the legal C and S corporation structures. While those common corporate designations carry certain tax and liability guidelines, a B corporation does not. They still must be legally incorporated.

In 2006, B Lab was founded to provide a more meaningful and sustained opportunity for companies to distinguish themselves on social and environmental issues beyond the level of marketing campaigns. Guided by a "Declaration of Interdependence," B Lab believes business must be conducted with the understanding that companies impact people and places. Accordingly, B Lab's management team is supported by a Standards Advisory Council, whose job it is to oversee certification procedures.

A company certified as a B corporation must agree to change its corporate governance documents to reflect these social values. Therefore, the importance of operating in an environmentally safe way, treating employees with respect and dignity, and giving back to their communities are all documented as more important than simply making a profit. By instituting these changes, B Lab believes a B corporation will be able to ensure ongoing commitment to these values, even if a company is sold or undergoes changes in management.

In order to become a B corporation, a company must formally agree to meet high standards of social and environmental concern. As part of the B Lab certification process, a company must complete four steps. These steps include completing a survey review that assesses all aspects of a company's operations, providing written documentation to verify at least 20 percent of the material in the survey review, agreeing to the possibility of being audited by B Lab for further verification, and submitting copies of the modified corporate governance documents.

B Lab explains that the idea behind this rigorous process is to ensure that companies are truly committed to common-good values, rather than just putting up a front for marketing. In exchange for going through the certification and maintenance process, B corporations can benefit from being part of a branded organization that speaks with one voice on matters of social and environmental concern. B Lab also indicates that it makes an annual investment in promotion of the organization, its mission, and its members.

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