The Rise of Benefit and Certified B-Corporations
A Journey Towards Sustainable Business
In recent years, the business world has seen a significant shift towards sustainability and social responsibility, with Benefit Corporations and Certified B-Corporations leading the charge. These entities stand out not just for their profitability but for their commitment to broader social and environmental goals. This article delves into the differences between Benefit Corporations and Certified B-Corps, discusses the history and unique characteristics of Certified B-Corporations, and examines why B-Corporation Certification has grown in popularity.
Benefit Corporations and Certified B-Corporations: Different Structures with Diverging Levels of Rigor
Benefit Corporations and Certified B-Corporations often get conflated, but they represent distinct concepts within the realm of socially responsible business. A Benefit Corporation is a legal status in the U.S. that allows for-profit companies to prioritize social and environmental goals. This legal framework changes how a company can be held accountable by shareholders, broadening the company’s fiduciary duty to include non-financial interests. Benefit Corporations publish an annual “Benefit Report” that assesses their social and environmental performance, but there are rarely consequences for noncompliance.
On the other hand, a Certified B-Corporation is a distinction granted by the nonprofit B Lab to companies that meet rigorous standards of social and environmental performance, accountability, and transparency. A company does not need to be incorporated as a Benefit Corporation to become a Certified B-Corporation. The B Lab Certification process is rigorous and must be renewed every three years. Companies are required to meet high standards relating to social and environmental performance and adhere to transparency and accountability expectations.
Since Benefit Corporations and Certified C-Corporations both represent a declaration and commitment to socially responsible business practices, they are often referred to collectively as “B-Corporations.” However, the intensive nature of receiving and maintaining the Certified B-Corporation distinction is generally more rigorous and what we will focus on with the rest of this discussion.
The Origins of Certified B-Corporations
The concept of B-Corporation Certification emerged in the mid-2000s as a response to growing concerns about environmental sustainability and social inequality. Three friends—Jay Coen Gilbert, Bart Houlahan, and Andrew Kassoy—founded B Lab, the organization behind B-Corp Certification, in 2006. They recognized a need for a certification that would not only identify companies striving for more than just profit but also help consumers, investors, and policymakers to support these businesses. The first group of 82 Certified B-Corporations was announced in 2007, marking the beginning of a global movement towards ethical business practices.
Characteristics of B-Corporations
B-Corporations are characterized by their commitment to creating public benefits in addition to shareholder value. This includes:
Environmental sustainability: Implementing practices that reduce waste, conserve energy, and decrease carbon footprints
Social equity: Ensuring fair wages, benefits, and working conditions for employees, and often engaging in community development and philanthropy
Transparency: Regularly reporting on their social and environmental impact with as much rigor as financial performance
The Growing Popularity of B-Corp Certification
The popularity of B-Corp Certification has surged for several reasons:
Consumer Demand
Today's consumers are more conscious of their purchasing decisions' social and environmental impacts. They increasingly prefer products and services from companies that demonstrate a commitment to positive change. B-Corp Certification helps consumers identify these companies more easily
Investor Interest
Investors are progressively recognizing the value of sustainable and responsible business practices. Many believe that companies focusing on social and environmental goals are better positioned for long-term success. As well, there has been an increasing number of declared “Impact Investors” who may specifically look to support businesses like Certified B-Corporations that align with their values and investment goals
Societal Impact
The challenges of climate change, social inequality, and environmental destruction have prompted a reevaluation of traditional business models. B-Corporations offer a framework for companies to contribute positively to society, encouraging a shift towards more sustainable and equitable economic systems
A Network of Support
Certified B-Corporations benefit from being part of a global community of like-minded businesses. This network provides opportunities for collaboration, sharing best practices, and mutual support, further encouraging companies to pursue or maintain certification
Examples of B-Corporations: Selected Private Companies
Company
Industry
Certified Since
Consumer Retail
December 2011
Consumer Retail
December 2015
Distribution
November 2015
Healthcare
June 2016
Farmer-owned Cooperative
October 2020
March 2021
Food
Fashion
October 2021
October 2010
Services