B-Corporation

1. Overview

A Certified B Corporation, or B Corp, is a for-profit company that has been certified by the non-profit B Lab to meet rigorous standards of social and environmental performance, accountability, and transparency. The core purpose of the B Corp certification is to redefine success in business, by creating a framework for companies to consider the impact of their decisions on all stakeholders, including workers, customers, suppliers, community, and the environment, not just shareholders. This movement was born out of the idea that business can be a force for good in the world, moving beyond a purely profit-driven motive to a model that balances purpose and profit. The B Corp framework was developed and is popularized by B Lab, a non-profit organization founded in 2006 by Jay Coen Gilbert, Bart Houlahan, and Andrew Kassoy. These founders shared a vision of a new sector of the economy that uses the power of business to solve social and environmental problems.

The problem that the B Corp model addresses is the inherent conflict within traditional corporate structures, where the fiduciary duty to maximize shareholder value often comes at the expense of other stakeholders and the broader community. This concept, known as shareholder primacy, can limit a company’s ability to pursue a mission-driven path, especially when faced with decisions that might benefit society but not immediately translate to higher profits. By requiring companies to amend their legal governing documents to consider the interests of all stakeholders, the B Corp certification provides a legal and operational framework to protect a company’s mission through capital raises and leadership changes. In the context of commons-aligned value creation, B Corps represent a significant step towards a more equitable and sustainable economy. By embedding a commitment to social and environmental responsibility into their legal DNA, B Corps are better positioned to contribute to the creation and preservation of shared resources, or “the commons.” They are encouraged to adopt practices that promote transparency, collaboration, and a more holistic view of value that extends beyond financial returns.

2. Core Principles

1. Stakeholder Governance: B Corps are legally required to consider the impact of their decisions on all stakeholders, not just shareholders. This principle is at the heart of the B Corp movement and represents a fundamental shift from shareholder primacy to a multi-stakeholder approach to governance.
2. Transparency: B Corps are required to publicly report on their social and environmental performance. This transparency builds trust with consumers, employees, and the community, and holds the company accountable to its mission.
3. Performance: B Corps must meet a minimum verified score on the B Impact Assessment, a rigorous assessment of a company’s impact on its workers, customers, community, and environment. This ensures that certified companies are truly walking the talk and meeting high standards of social and environmental performance.
4. Accountability: The legal framework of a B Corp holds the company accountable to its mission and stakeholders. This legal protection allows the company to prioritize its purpose, even during times of economic pressure or changes in ownership.
5. Interdependence: The B Corp community is built on the idea that businesses are dependent on each other and on the planet. The “Declaration of Interdependence” that B Corps sign reflects a commitment to collaboration and collective action to build a more inclusive and sustainable economy.
6. Continuous Improvement: B Corp certification is not a one-time event. Companies must recertify every three years, which encourages them to continuously improve their social and environmental performance.

3. Key Practices

1. B Impact Assessment: The first step to becoming a B Corp is to complete the B Impact Assessment, a free, confidential online tool that measures a company’s social and environmental performance.
2. Legal Requirement: Companies must amend their legal governing documents to require the consideration of all stakeholders in decision-making. The specific legal requirement varies by state and country.
3. Disclosure Questionnaire: Companies must complete a Disclosure Questionnaire to identify any sensitive practices, fines, or sanctions related to the company or its partners.
4. Verification and Transparency: Companies must undergo a verification process with B Lab to confirm their score on the B Impact Assessment. Once certified, their B Corp profile, including their score, is made public on the B Lab website.
5. Annual Fees: Certified B Corps pay an annual fee to B Lab, which is based on the company’s annual sales.
6. Recertification: Companies must recertify every three years to maintain their B Corp status. This involves updating their B Impact Assessment and going through the verification process again.
7. Community Engagement: B Corps are encouraged to engage with the broader B Corp community, sharing best practices and collaborating on initiatives to advance the movement.
8. Mission-Aligned Governance: B Corps often establish internal governance structures, such as a dedicated board committee or an internal “B Keeper,” to ensure that the company stays true to its mission.

4. Implementation

Implementing the B-Corporation pattern involves a structured process of assessment, legal changes, and verification. The first step for any company is to take the B Impact Assessment. This free, comprehensive tool helps a company measure its current social and environmental performance across five key areas: governance, workers, community, environment, and customers. The assessment provides a score out of 200, and a minimum score of 80 is required for certification. This initial assessment serves as a baseline and helps identify areas for improvement. It is a valuable exercise even for companies not immediately seeking certification, as it provides a detailed roadmap for enhancing their positive impact.

Once a company achieves a score of 80 or higher, the next critical step is to meet the legal requirement. This involves amending the company’s articles of incorporation or other governing documents to legally require the board of directors to consider the interests of all stakeholders—not just shareholders—when making decisions. The specific legal pathway depends on the company’s legal structure and the jurisdiction in which it is incorporated. Many states in the US now offer the “benefit corporation” legal structure, which satisfies this requirement. For companies in other locations, B Lab provides guidance on the appropriate legal changes. This legal change is a cornerstone of the B Corp model, as it provides the legal protection for a company to pursue its mission and consider its impact on society and the environment.

After meeting the performance and legal requirements, the company submits its B Impact Assessment to B Lab for verification. This involves a review of the company’s assessment, supporting documentation, and a verification call with a B Lab analyst. Once verified, the company signs the B Corp Declaration of Interdependence and the B Corp Agreement, pays the annual certification fee, and becomes a Certified B Corporation. The company’s B Impact Report is then published on the B Corp website, providing transparency about its performance. Real-world examples of B Corps are abundant and diverse, ranging from well-known brands like Patagonia and Ben & Jerry’s to smaller, local businesses. These companies have successfully integrated the B Corp framework into their business models, demonstrating that it is possible to be both profitable and purpose-driven.

5. 7 Pillars Assessment

6. When to Use

• When a for-profit company wants to legally protect its social and environmental mission.
• When a company wants to differentiate itself in the market and attract conscious consumers.
• When a company wants to attract and retain mission-aligned talent.
• When a company is seeking to build trust and credibility with stakeholders.
• When a company is looking for a framework for measuring and improving its social and environmental performance.
• When a company wants to join a community of like-minded businesses and collaborate on creating a more sustainable economy.

7. Anti-Patterns and Gotchas

• “B-washing”: Using the B Corp certification as a marketing tool without a genuine commitment to the underlying principles.
• Ignoring the legal requirement: Failing to make the necessary legal changes to the company’s governance structure, which undermines the core of the B Corp model.
• Treating certification as a one-time event: Not engaging in the continuous improvement process and failing to recertify every three years.
• Lack of internal buy-in: Pursuing B Corp certification without the full support of the company’s leadership and employees.
• Focusing solely on the score: Becoming overly focused on achieving a high score on the B Impact Assessment, rather than on making meaningful improvements to the company’s impact.
• Not leveraging the community: Failing to engage with the B Corp community and missing out on opportunities for collaboration and learning.

8. References

1. B Lab. (n.d.). B Corp Certification.
2. Wikipedia. (2024, January 29). B Corporation (certification).
3. Cultivating Capital. (n.d.). What is a B Corporation? Everything You Need to Know.
4. Harvard Business Services, Inc. (n.d.). What is a Certified B Corporation?
5. Investopedia. (2023, May 1). B Corp: Definition, Advantages, Disadvantages, and Examples.