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 run your business according to your values. As one of my MBA instructors used to say, you can choose “both/and” – you can both make money and do good.
Now, you might be wondering:
“That sounds good, but how would it actually work for my business?”
This is where B Corps come in. Let’s take a closer at look.
What are B Corps?
B 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 look at the triple bottom line and use the power of business to address social and environmental problems.
For a quick overview of B Corps, check out the B Corp anthem below (less than 2 min.).
By the way, the figures given in the video are a bit out of date. There are now over 2500 B Corps in 50 countries representing 130 industries. It’s a growing, international movement – and this is just the beginning.
B Corps: The Official Definition
Because B Corps are still a relatively new concept – the first companies were certified in 2007 – there’s a lot of confusion about what they actually are.
Here’s the definition provided by B Lab, the nonprofit behind B Corps:
B Corp is to business what Fair Trade certification is to coffee or USDA Organic certification is to milk. B Corps are for-profit companies certified by the nonprofit B Lab to meet rigorous standards of social and environmental performance, accountability, and transparency.”
In short, B Corps are companies that get certified for their commitment to using business as a force for good.
By doing so, they provide a refreshing alternative to many of the problems that big corporations have contributed to, including environmental degradation and social exploitation. They provide a new model for sustainability in business.
B Corps are working to have business be a part of the solution, rather than part of the problem. Personally, I find this an inspiring approach, which is why I’m committed to advancing the B Corp movement.
How the B Corp Concept Changes the System
When I first heard about B Corps back in 2008, I was immediately attracted to the concept of a rigorous framework for sustainability to distinguish the companies that were greenwashing from those that were actually doing good.
Yet there was one other element about the B Corp movement that really caught my attention because it differentiated the B Corp certification from every other sustainability certification out there:
B Corps were committing to changing their legal organizing documents to include consideration of all stakeholders.
They weren’t just paying lip service to sustainability. They were willing to make changes to the company as a legal entity to preserve their commitment to being socially and environmentally responsible.
Instead of taking the shareholder as the primary person to which they would be legally responsible, B Corps were giving primary consideration to the stakeholder.
It’s an important distinction and one that directly challenges an economic system that views a company as having one purpose and one purpose only: to make money for its shareholders.
But what exactly is the difference between a shareholder and a stakeholder?
Well, a shareholder, as you 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.
B Corp vs. Benefit Corporation
In the video clip, President Clinton mentions that states were passing laws to create new Benefit Corporations.
This has been one of fundamental changes that the B Corp movement has brought about. Up until just a few years ago, there was no specific corporate form for a company that wanted to legally consider the impact of its activities on all stakeholders over the profits of its shareholders.
Now there is, at least in some states. However, this has caused confusion about B Corps vs Benefit Corporations. Are they the same thing? If not, what are the differences?
No, they are not the same thing.
Here’s the difference:
Certified B Corps earn a certification by scoring a minimum of 80 points on the B Impact Assessment.
Benefit Corporations adopt a corporate form similar that is legally recognized, similar to a C Corporation or S Corporation (the key difference being, of course, the consideration of all stakeholders).
It can get confusing when you consider the following:
- A company can be a Benefit Corporation but not a Certified B Corp if they use the Benefit Corporation structure but have not gone through the certification process.
- A company can be a Certified B Corp but not a Benefit Corporation if they got certified but don’t use the Benefit Corporation structure, either because it is not legally available in their state or because they are not incorporated (e.g., they’re a sole proprietor).
- A company can be both a Certified B Corp and a Benefit Corporation if they went through the certification and changed their corporate status.
To find out if your company would need to change its corporate status if you got certified, check out the B Corp Legal Roadmap.
Meeting the B Corp Requirements
B Corps meet rigorous and transparent standards around social and environmental responsibility that support the triple bottom line. These standards represent best practices in business sustainability and are laid out in the B Impact Assessment, the online tool that a business must take to become a Certified B Corporation.
To become a Certified B Corporation, a company must earn at least 80 points out of 200 on the Impact Assessment.
Yes, that’s right, you can get certified by earning less than 50% of the available points on the assessment.
How rigorous can that be, you might ask?
Actually, more rigorous than you might think! The Impact Assessment is designed to be challenging, to really represent the best practices that companies can implement. It’s not designed to be an easy way for companies to do just a few things around sustainability and consider themselves done.
In fact, it’s the comprehensive and aspirational nature of the assessment that makes it such a useful sustainability framework.
It’s also why companies can make money while doing good: they’re minimizing their negative environmental impact (often resulting in cost savings through improved efficiencies) and maximizing their positive social impact (often building goodwill and loyalty among employees and customers).
In addition to meeting the minimum threshold of 80 points, B Corps also have to provide documentation to verify the information in the online assessment, commit to changing their legal status if required to do so, and make it official by signing the necessary term sheet and paying the licensing fees.
If you’re interested in B Corps, a great next step is to take the B Corp Impact Assessment. There’s no cost involved to take the assessment (though there is a fee if you choose to get certified), and you’ll be able to fully evaluate your own company’s sustainability practices. Whether you’re just getting started with sustainability or are already far along your journey, you’ll find opportunities to improve your impact as a business.
Free sustainability audit checklist
Download it for free today and quickly see how you can begin or improve your sustainability program.