By: Aaron Gurley

Social enterprises are a relatively new phenomenon that represents an increasing portion of the business world. Whether non-profit or for-profit in their legal status, social enterprises “seek to maximize profits while maximizing benefits to society and the environment” rather than purely focusing on personal or shareholder profits.[1]

A social enterprise’s pursuit of positive social impact not only provides benefits for its stakeholders and society at large, but it also represents a rewarding business practice. A company’s strong commitment to social and environmental change can pay dividends in a time where consumers value companies that demonstrate this commitment.[2] Consumers, however, do not take claims of commitment to social impact at face value. To reap the benefits of this consumer preference, companies must take steps to demonstrate an authentic commitment to social and environmental impact.[3]

One way that entrepreneurs can demonstrate their commitment to a social mission is by gaining B-Corp Certification.

What is B-Corp Certification?

 

A Certified B-Corp is a business that “meets the highest standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose.”[4] Certification is evaluated not on the basis of a company’s product or service but the company’s impact on non-shareholder stakeholders, such as their employees, local community, and the environment.

 

https://www.youtube.com/watch?v=V-VFZUFJwt4

 

The non-profit B-Lab administers B-Corp Certification. B-Lab’s goal is to use profits and growth as a means to an end of a “more inclusive and sustainable economy.”[5] Unlike a benefit corporation, a type of corporate legal entity that is legally empowered to pursue positive stakeholder impact alongside profit, B-Corp Certification is simply a certification, like Fair Trade or USDA Organic.[6] B-Corp certification grants a company access to use the Certified B-Corp logo on its products and services and a large community of other B-Corp Certified companies.[7]

 

There are over 3,500 Certified B-Corp organizations across the world, spanning 74 countries and 150 industries.[8] Some of the most notable B-Corp certified companies are Ben and Jerry’s, Patagonia Works, and Natura Cosmetics.

What is the B-Corp Certification process?

 

A company seeking B-Corp Certification must meet the requirements of what B-Lab calls the three pillars: performance, legal, and transparency.

 

The first step in the certification process is the performance pillar. To fulfill the performance pillar, the company seeking certification must complete the B Impact Assessment (BIA). This free tool asks a series of questions to determine performance in four areas: governance, workers, community, and environment.[9] Certification requires a total score of 80 points out of 200 across all four areas, with the score determined by the company’s BIA responses. The BIA consists of around 200 questions, and the content of the questions depends on the company’s size, sector, and market. The time it takes an entity to complete the BIA will also vary with the company’s size and complexity. [10]

 

The BIA also contains a Disclosure Questionnaire, a series of questions that allows the company seeking certification to disclose any sensitive practices, fines, and sanctions related to the entity or its partners. If this questionnaire raises an issue of serious concern, B-Lab may require the company to provide further disclosure or implement specific remedies to obtain and maintain certification. In rare cases, the company’s certification will be denied or revoked.[11]

 

Entities seeking B-Corp Certification must also meet specific legal requirements. The core of this legal requirement is that Certified B-Corps must consider the impact of their decisions on all stakeholders.[12] Rather than considering the implications of decisions only on shareholders, Certified B-Corps must consider how their actions will affect a broader group of stakeholders, such as their employees, the local community, and the environment as a whole.[13] This legal requirement varies depending on the applicant’s legal entity type and location. For example, a corporation in a state where the benefit corporation form is available may be required to convert to that form. And an LLC is required to amend its operating agreement within 90 days of certification to conform with certain requirements. Those interested in the legal requirements for a specific type of entity and location should check here.

 

The final pillar of the certification process is the transparency and verification review. This multi-step process involves submitting additional documentation to support verification, reviewing the BIA with a B-Labs analyst, and performing a background check. The transparency and verification portion may take 1-6 months to complete. If the company’s score is above 80 after all answers and documentation have been submitted and reviewed, then the performance requirement will be met.[14]

 

Once a company satisfies the performance and legal requirements, it may register with B-Lab and pay the required certification fees, which vary based on its annual sales revenue.[15] The annual certification fee ranges from less than $1,500 for companies with an annual revenue of less than $1M, to more than $30,000 for companies with an annual revenue of over $100M. The complete fee schedule can be found here.

 

Why Become B-Corp Certified?

 

One reason why an entity may choose to become B-Corp Certified is because certification signals to consumers that the entity is genuinely committed to social and environmental change. The B-Corp Certified logo on a product or website helps conscious consumers distinguish between companies that are genuinely committed to a social mission and the crowd of conventional profit-driven companies trying to convince consumers that they are committed to social and environmental causes.[16]

 

Additionally, the process of obtaining or maintaining B-Corp Certification helps companies to improve their social impact. To meet the required 80-point threshold for certification, a company be required to set more ambitious goals, develop new ways to increase their social and environmental impact, and track their impact over time.[17]

 

Furthermore, many talented workers today don’t choose where to work based on compensation or career advancement opportunities. Top talents often seek greater meaning in their careers and make their employment decisions based on a desire to work for a company that has a positive social impact and treats its workers well. B-Corp certification helps a company attract high-quality workers who share the same values and are engaged in its mission.[18]

 

Finally, by implementing the legal requirements for B-Corp Certification, a company can protect its mission and social impact in the long run. The legal framework instituted by B-Corp Certified companies enables them to remain mission-driven, even in the face of capital investment or organizational change, by building a foundation of values, processes, and standards.[19]

 

 

[1] https://www.insidesources.com/social-enterprise-is-growing/.

[2] https://hbr.org/2016/12/it-pays-to-become-a-b-corporation.

[3] https://www.nielsen.com/us/en/insights/report/2015/the-sustainability-imperative-2/#

[4] https://bcorporation.net/about-b-corps

[5] https://bcorporation.net/about-b-corps

[6] https://www.cooleygo.com/b-corp-what-does-that-mean/

[7] https://www.delawareinc.com/blog/what-is-a-certified-b-corporation/

[8] https://bcorporation.net

 

[9] https://www.cooleygo.com/b-corp-what-does-that-mean/

[10] https://bcorporation.net/certification/meet-the-requirements

[11] https://bcorporation.net/certification/meet-the-requirements

[12] https://bcorporation.net/certification/legal-requirements

[13] https://www.cooleygo.com/b-corp-what-does-that-mean/

[14] https://bcorporation.net/certification/meet-the-requirements

[15] https://www.cooleygo.com/b-corp-what-does-that-mean/

[16] https://hbr.org/2016/06/why-companies-are-becoming-b-corporations

[17] https://bcorporation.net/certification

[18] https://hbr.org/2016/12/it-pays-to-become-a-b-corporation/

[19] https://hbr.org/2016/12/it-pays-to-become-a-b-corporation/