The conventional wisdom when it comes to business is that, as a business owner, you have to make a choice: you can either make money, or you can do good.
This is, however, a false dichotomy. You don’t have to choose to either ensure your personal livelihood or to live according to your values. As one of my instructors from the Green MBA used to say, you can choose “both/and” – you can both make money and do good.
What are B Corps?
Benefit Corporations, commonly known as B Corps, are a new type of corporation. Unlike the traditional corporation that gives priority only to financial profitability, B Corps actually use the power of business to address social and environmental problems.
How do they do this? Among other things, they “institutionalize stakeholder interests.” Instead of taking the shareholder as the primary person to which they are responsible, B Corps give primary consideration to the stakeholder. This is a very important distinction. A shareholder, as we know, is someone who owns shares in a company; a stakeholder, by contrast, is someone who has a stake in the company, regardless of whether he/she actually own shares. Who can have a stake in the company? Anyone who is affected by the actions of that company, such as employees, members of the local community in which the business operates, or members of the community in which the business has an environmental impact.
A traditional C Corporation will focus on increasing shareholder profits, often without regard to how that affects other stakeholders. This is why corporations sometimes do not pay living wages or provide inadequate health benefits – because those are costs that, if saved, can provide profit for shareholders. B Corps, however, are committing to taking social and environmental interests into account when making decisions.
Why are B Corps Important?
B Corps are important for several reasons:
However, beyond all of these reasons, there is one primary reason why I believe that B Corps are important. They are fundamentally changing the rules of the game when it comes to business.
You see, when a company becomes a B Corp, it doesn’t just earn a certification. It also commits to changing its legal organizing documents to include consideration of stakeholders. Earlier this year, the states of Maryland and Vermont became the first states to legally recognize B Corps.
One of the co-founders of B Lab, the non-profit that issues the B Corp certification, explained why this is important on the B Corp blog earlier this year:
“Today, there is a critical mass of entrepreneurs, investors, consumers, workers, and policymakers seeking to create social and environmental impact through business. However, they face two systemic obstacles: 1) the absence of transparent standards which allow all of us to support “good companies” not just good marketing; and 2) the legal concept of shareholder primacy which makes it difficult for corporations to include employee, community, and environmental interests in decision making.”
B Corp provides a fundamental alternative to these obstacles by establishing transparent standards and challenging the legal concept of shareholder primacy.
How can B Corps Help Your Business?
There are several ways that B Corps can help your business:
To learn more about B Corps, you might want to read a related post about “Completing the B Corp Impact Assessment.”