Q: What Is a B Corp?
Learn about B Corp Certification and why some companies choose to become B Corps.
Certified B Corporations are a new kind of business that balances purpose and profit. They are legally required to consider the impact of their decisions on their workers, customers, suppliers, community, and the environment. Certified B Corporations are social enterprises certified and verified by B Lab, a nonprofit organization.
The B Corp Certification was introduced in 2007, and the number of firms earning certification has grown exponentially ever since. Today, there are more than 3,500 B Corporations in 70 countries. Regardless of its size, legal structure, or industry, any company can become a B Corporation. Some well-known B Corps include Patagonia, Ben & Jerry’s, Olukai, Dimagi, Burton, and Allbirds.
How do you become a B Corp?
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To become a B Corp, your company must get certified by the B Lab. This certification is based on how companies create value for non-shareholding stakeholders, such as their employees, suppliers, the local community, and the environment. Once a company gets to a certain level across a series of benchmarks, the company then makes amendments to its corporate charter to incorporate all stakeholders’ interests into the fiduciary duties of directors and officers — requiring their board of directors to balance profit and purpose. By making these changes to the corporate charter, the company legally and fundamentally adopts a different governance philosophy than a traditional shareholder-centered corporation.
What is the purpose of B Corp Certification?
The goal of the B Lab B Corp Certification is to accelerate a global culture shift to redefine success in business and build a more inclusive and sustainable economy. The underlying philosophy is that society’s most challenging problems cannot be solved by governments and nonprofits alone. The B Corp community works toward reduced inequality, lower levels of poverty, a healthier environment, stronger communities, and the creation of more high-quality jobs with dignity and purpose. By harnessing the power of business, B Corps use profits and growth as a means to a greater end: positive impact for their employees, communities, and the environment.
What’s the difference between a Certified B Corp and a benefit corporation?
The B Corp Certification is a third-party certification administered by the nonprofit B Lab, based in part on a company’s verified performance on the B Impact Assessment. On the other hand, the benefit corporation is a legal structure for a business, like an LLC or a corporation. Benefit corporations are legally empowered to pursue positive stakeholder impact alongside profit. Some companies are both Certified B Corporations and benefit corporations. In addition, the benefit corporation structure fulfills the legal accountability requirement of B Corp Certification.
Why do companies pursue B Corp Certification?
Generally, organizations pursue B Corp Certification because they believe leaders and executives of those organizations believe it is important to balance profit and purpose — to grow their business while creating a positive impact for their employees, suppliers, communities, and the environment.
B Corp Certification is a way for companies to build credibility, trust, and value. Consumers are increasingly interested in sustainable companies and want to be convinced of their social efforts, and B Corp certification is one way that consumers assess whether a company is engaging in sustainable and fair business practices. In 2017, Nielsen found that 66 percent of consumers worldwide said they were willing to pay more for sustainable products and practices.
In addition, some companies pursue B Corps to take advantage of the growing number of impact investors who share their goals to impact environmental and social change.
Are there other ways to get involved beyond B Corp certification?
Nonprofits, large multinationals, governmental organizations and companies of all sectors and sizes can join the B Economy by using B Lab’s impact management and stakeholder governance tools.
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Category: Ask Liquid Finance and Accounting Operations
Updated: May 6, 2021
Quick note: This is not to be taken as tax advice or legal advice or payroll advice. Since tax rules and laws change over time and can vary by location and industry, consult a CPA / tax advisor and/or attorney for specific guidance.