B Corporation (certification)

B Corp certification (also known as B Lab certification or B Corporation certification) is a private certification issued to for-profit companies by B Lab, a global non-profit organisation with offices in the United States, Europe, South America, Canada, Australia & New Zealand. To be granted and to preserve certification, companies must receive a minimum score on an online assessment for "social and environmental performance”, satisfy the requirement that the company integrate B Lab commitments to stakeholders into company governing documents, and pay an annual fee ranging from $500 to $50,000.^[1]

As of April 2016, there are 1,704 "certified B Corporations" across 130 industries in 50 countries.^[2]

Purpose

Example of a B Corp certification label

The B-Lab certification is a third party standard requiring companies to meet social sustainability and environmental performance standards, meet accountability standards, and to be transparent to the public according to the score they receive on the assessment. B-Lab certification applies to the whole company across all product lines and issue areas. For-profits of all legal business structures are eligible for certification.

Advantages

• Provides a benchmark of company environmental and social activities.
• Similar to other business associations, certified B Corporations and their employees have access to a number of discounts from outside entities and fellow members.^[3]
• Academic contributions of loan forgiveness.^[4][5][6]
• The relative youth of the legislative movement as a source of confusion and the heavy legal investment to navigate rules and regulations, making B-Lab certification easier to obtain than Benefit Corporation status.

Disadvantages

• B-Lab certification has no legal status.
• B-Lab evaluation is not public, the general public does not have access to documentation in support of scores, only to the purely numeric scores accorded by B Lab.
• Some companies have found the assessment to be rigorous and difficult to complete and maintain.^[7] However more than 20,000 companies have taken the B Impact Assessment,^[8] the first step in the certification process, receiving a median score of 80, a certifiable rating.^[9]

Distinction from benefit corporation

• Benefit corporation is a legal status conferred by State law in the US; B Lab certification is issued by a private organisation and has no legislative framework.^[10]
• B Lab certification is not needed to obtain Benefit corporation status.^[10]
• Legislation for the passage of this corporate legal status has been passed in 20 states, including Delaware, whereas B Lab Certification is privately issued by an organisation run by people principally issued from the business community.^[11]

Certification process

Online assessment

To obtain a B Corporation certification, a company first completes an online assessment. Companies that earn a minimum score of 80 out of 200 points undergo an assessment review process, essentially a conference call verifying the claims made in their assessment. Companies are required to provide supporting documentation before they are certified.

The assessment covers the company’s entire operation and measures the positive impact of the company in areas of governance, workers, community, the environment, as well as the product or service the company provides.^[12] Socially and environmentally-focused business model points ultimately are accrued in their relevant impact area (governance, workers, community or environment).^[13] Depending on a company’s industry, geographic location, and number of employees, the online assessment adjusts the weightings of the question categories to increase its relevancy. For instance, companies with more employees will have a heavier weighting in the workers category, and companies in manufacturing will have a heavier weighting in the environment category.

To maintain credibility, the B Corporation certification standard operates under principles that are independent, comprehensive, comparable, dynamic, and transparent.^[14] B Lab has an established standards advisory council that can independently make decisions with or without the support of B Lab.^[13] As of May 2014, 28 of 30 members were listed by their business affiliation.^[15] The council recommends improvements to the B Corp assessment on a biennial basis. There is a 30-day public consultation period before releasing a new version of the B Corporation assessment.^[13]

Currently the B Corp assessment is its third version, with the fourth version scheduled to be released in January 2014.^[16]

Legal requirements

Certification also requires companies to integrate their stakeholder commitments into the company governing documents. In the United States, the avenue for corporations making the legal amendment to certify will depend on the state they are incorporated in. Some states known as “constituency" states will allow for this change in the articles of incorporation, other states, known as “non-constituency states," will not; and many states now have the option of adopting the benefit corporation legal structure, which also meets B Lab’s requirements for B Corp certification.^[17] Beyond the corporate model, other for-profit business entities make an amendment of the company by-laws or governing documents. These include:

• The establishment of clear wording to "consider stakeholder interests" in company articles of incorporation or company by-laws.^[17]
• Define “stakeholders” as the employees, the community, the environment, suppliers, customers, and shareholders.^[17][18]
• No prioritization of one stakeholder over another.^[19]
• Allowing for the company's values to exist under new management, investors, or ownership.^[17][20]

However, B-Lab certification allows the company bylaws to remain secret.

International adoption

As of April 2015, there are over 1200 certified B Corporations across 41 industries in 121 countries, including Canada (78 companies), Australia, South Africa, and Afghanistan.^[2] The most active community outside of the United States is Sistema B.^[21] Since 2012, Sistema B has been the adaptation of the B Corps movement in Latin America, including in Argentina, Brazil, Chile, Uruguay and Colombia.^[22] This non-profit adapts proprietary certifications and evaluation metrics and modifies both to the context of each country. B Lab also assists Sistema B in incorporating a benefit corporation distinction into local legal systems.^[23]

See also

• Benefit corporation
• L3C

Further reading

• André, Rae (2012). "Assessing the Accountability of the Benefit Corporation: Will This New Gray Sector Organization Enhance Corporate Social Responsibility?". Journal of Business Ethics 110 (1): 133–150. doi:10.1007/s10551-012-1254-1.
• Boatright, John R. (2006). "What’s Wrong—and What’s Right—with Stakeholder Management" (PDF). Journal of Private Enterprise 21 (2): 106–130.
• Davis, Kevin E.; Fisher, Angelina; Kingsbury, Benedict; Merry, Sally Engle, eds. (2012). Governance by Indicators: Global Power through Classification and Rankings. Oxford University Press. ISBN 978-0-19-965824-4.
• Deskins, Michael R. (2011). "Benefit Corporation Legislation, Version 1.0—A Breakthrough in Stakeholder Rights?". Lewis and Clark Law Review 15: 1047.
• Johnstone, Harvey; Lionais, Doug (2004). "Depleted communities and community business entrepreneurship: revaluing space through place". Entrepreneurship & Regional Development 16 (3): 217–233.
• Lacovara, Christopher (2011). "Strange Creatures: A Hybrid Approach to Fiduciary Duty in Benefit Corporations". Columbia Business Law Review: 815–880. *
• Lencioni, Patrick M. (July 2002). "Make Your Values Mean Something" (PDF). Harvard Business Review.
• Reiser, Dana Brakman (2011). "Benefit Corporations—A Sustainable Form of Organization?". Wake Forest Law Review 46: 591.

References

1. "B Corporation: Welcome". B Lab. Retrieved 16 May 2014.
2. "B Corporation: Welcome". B Lab. Retrieved January 8, 2014.
3. "Save Money and Access Services". B Lab. Retrieved September 11, 2013.
4. "Loan Assistance Program — Overview". Columbia Business School. Retrieved January 8, 2014.
5. "Loan Assistance Program – Detailed Summary" (PDF). New York University Stern School of Business. Retrieved January 8, 2014.
6. "Loan Forgiveness Program". Yale School of Management. Retrieved January 8, 2014.
7. "Performance Requirements". B Lab. Retrieved January 9, 2014.
8. "Businesses Measure What Matters". B Lab. Retrieved January 9, 2014.
9. "Badger". B Lab. Retrieved 16 May 2014.
10. "What Are B Corps". B Lab. Retrieved 16 May 2014.
11. Schwartz, Ariel (July 23, 2013). "Delaware Just Made It A Whole Lot Easier For Socially Responsible Companies To Exist". Fast Company & Inc. Retrieved September 11, 2013.
12. Network for Business Innovation and Sustainability (October 2012). B Corporations, Benefit Corporations and Social Purpose Corporations: Launching a New Era of Impact-Driven Companies (PDF). NBIS. p. 2.
13. "GIIRS Governance". B Lab. Retrieved September 11, 2013.
14. "AB 361 Assembly Bill - BILL ANALYSIS". California State Assembly. Retrieved January 8, 2014.
15. "Standards Advisory Council". B Lab. Retrieved September 11, 2013.
16. "Corporate Social Responsibility Comes In Many Flavors, Some Not So Tasty". NonProfit Times Publishing Group.
17. "Corporation Legal Roadmap". B Lab. Retrieved September 11, 2013.
18. See Boatright (2006) and Johnstone and Lionais (2004).
19. "OLR Backgrounder: Social Enterprise and the Benefit Corporation". State of Connecticut, Office of Legislative Research.
20. See Lencioni (July 2002).
21. "The double bottom line: Profit and social benefit". Business Horizons.
22. Camacho, Manuel Antonio (August 15, 2012). "In Just a Few Months, Sistema B (AKA: B Corp) Finds Fertile Ground for Social Enterprises in Latin America". NextBillion.net. Retrieved September 11, 2013.
23. Ip, Melissa (September 26, 2012). "B Lab and Sistema B Partner to take B Corps Global". Social Enterprise Buzz. Retrieved September 11, 2013.