B Corp: Purpose and Requirements

What is a B Corp?

A certified B Corp is a for-profit corporation that has been recognized for their commitment to business practices that promote positive environmental and social change . Any company can apply for B Corp certification whether they are an LLC , S Corp , C Corp , Limited Partnership , or Sole Proprietorship as long as they meet certain legal requirements. Companies with a B Corp Certification strive for both profit and purpose and promote positive change in their communities. They also must be legally incorporated and have a certain level of transparency and accountability.

It is not easy to become a Certified B Corporation. The company must go through an intense certification process that demonstrates the business meets the highest levels of standards for social and environmental performance. If a company meets these standards, they are certified by B Lab, a global non-profit organization.

The shareholders in a B Corp play an especially significant role in maintaining a company’s B Corp status. Shareholders are not only responsible for keeping a B Corp on track financially, but they also hold the business accountable for how successfully the company is benefiting people and the environment.

Some areas in which company standards are evaluated include:

• Balance of profit and purpose
• Transparency regarding supply chains, ingredients, and labor
• Hiring practices
• Sustainability and environmental impact
• Legal accountability

Currently, there are over 4,000 certified B Corps in 77 different countries. These companies are designated by a B Corp logo so consumes know that the company they are doing business with is meeting the highest standards in business practices.

For more information about B Corporation Certification, click here.

Purpose of a B Corp

The main purpose of a B Corporation is to promote social and environmental change through positive business practices. B Corps work to reduce inequality, lower poverty levels, create more sustainability for our environment, and build stronger communities.

Certified B Corporations are required to prioritize the impacts of their company on those around them like:

• Employees
• Customers
• Suppliers
• The community in which they operate
• The environment

B Corporations operate with this “ Declaration of Interdependence ” in mind:

“As B Corporations and leaders of this emerging economy, we believe:

• That we must be the change we seek in the world.
• That all business ought to be conducted as if people and place mattered.
• That, through their products, practices, and profits, businesses should aspire to do no harm and benefit all.
• To do so requires that we act with the understanding that we are each dependent upon another and thus responsible for each other and future generations.”

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Examples of B Corp Companies

B Corporations are far more common than you may think. Some of your favorite brands that you see every day, like Ben and Jerry’s ice cream are Certified B Corps.

Here is a list of some commonly known B Corporations operating in our economy and what practices make them Certified B Corps:

• Beautycounter: Beautycounter is a clean beauty and skincare company. They advocate for safer laws governing the beauty industry and work towards more sustainability in the industry. Beautycounter is also fully transparent about their supply chains, labor, sourcing, and ingredients.
• GoMarco: This company creates protein bars that are certified organic, plant based, vegan, gluten free, kosher, and non-GMO. The regularly give back to organizations like Solutions for Change, Feeding San Diego, and Sheldrick Wildlife Trust.
• Allbirds: Allbirds is a sneaker company that uses natural, recycled, and sustainable materials.
• Saalt: This B Corp manufactures underwear and menstrual cups using clean and ethical business standards.
• Cora: Cora is another company that specializes in women’s menstrual products. They donate their products and provide education to girls in developing nations.
• Thrive Market: Thrive Market is a popular company that delivers organic food from top brands at wholesale prices. Thrive is a B Corp because they have zero waste warehouses, ethical sourcing, and compostable packaging.
• Toms: Toms is another exceedingly popular company that many people may not have realized is a Certified B Corp. Toms donates shoes to people in need through their One for One Program.
• Athelta: This company makes activewear for women and girls using sustainable fivers, water saving techniques during manufacturing, and recycled packaging.
• Patagonia: For almost 40 years Patagonia has been donating 1% of their profits from their outdoor clothing and gear to preservation and restoration efforts in our environment.
• Butcher Box: This company provides 100% grass-fed free-range chicken, beef, and pork. Their meat is antibiotic and hormone free.

Image via Pexels by Marta

Requirements for B Corps

For a corporation to achieve a Certified B Corporation designation, the company must go through a rigorous certification process. B Lab will assess the company’s impact on their employees, customers, community, and environment. From this assessment, B Lab will grade the company in a B Impact Report. To achieve a B Corporation certification, the company must score at least an 80 in every impact category. A company is required to be in business for at least one year to be eligible for the B Lab assessment.

To become a B Corp, companies must take the following steps:

Step 1: The B Impact Assessment and Disclosure Questionnaire

The BIA is a series of around 200 questions about your company. Questions will cover the company size, sector, and market. These questions will vary depending on the type of company being assessed. The BIA works as roadmap for improved performance in areas like best practice guides, goal setting, and improvement reports.

At the end of the BIA, the final questions are the Disclosure Questionnaire. Companies will be required to disclose any sensitive practices, fines, and sanctions relating to their business practices. This disclosure is kept confidential and does not affect the company's score on the BIA.

If B Lab determines that any responses need further attention, the company will be notified and required to implement remedies. In rare occasions, B Certification can be denied.

The BIA and the Disclosure Questionnaire are electronically submitted to B Lab with a $150 submission fee.

Step 2: Meet the Legal Requirements

In addition to the assessment, the corporation must legally amend their corporate bylaws to include the balance of profit and purpose that will be evaluated and upheld by shareholders.

The company must offer legal protection to directors and officers to consider the interests of all stakeholders, not just shareholders when making decisions for the company. Furthermore, shareholders must be granted additional rights to hold the directors and officers accountable for any of these decisions.

Step 3: Assessment Review

After B Lab receives the B Impact Assessment, a company owner can schedule a time to review the BIA. At this time, you can provide supporting documentation for verification of company practices and correct any unclear answers.

Step 4: Submit Additional Documents

B Lab may require additional company documents for some of the question responses.

Step 5: Background Check

In most cases, B Lab will conduct a background check of the company using public records, news sources, or searches for company names and executives.

Once this process is complete, if the company has scored 80 points or above in every category, then they are eligible for B Corporation Certification. The process however is not over. B Corps are required to update their BIA every three years and recertify as a B Corporation.

Recertification ensures that companies are maintaining the ethical business practices that earned them the B Corp Certification in the first place.

For more information about the certification process and B Lab, read this article.

Why Become a B Corp?

Becoming a Certified B Corp has many advantages for a company. In addition to the good that comes from committing to business practices that keep positive social and environmental change at the forefront of the business model, companies often experience the following benefits after receiving B Corp Certification.

1. Credibility, Trust, and Loyalty- B Corporations are required to adhere to strict legal practices to maintain their B Corporation Certification. This means that any company that is B Corp Certified is legally required meet the highest levels of standards for social and environmental performance. The company must be transparent, committed to balancing profit and purpose, and working to improve the communities in which they operate. This makes any B Corp credible, and these practices create trust and loyalty from customers.
2. Attractive to Investors- Very often, investors are looking for worthy causes to invest their money. A B Corp will be an attractive option for any investor who wants to ensure that their money is going to a business that aligns with their principles.
3. Control Over the Company- A traditional corporation requires owners to be focused solely on profitability to appease investors and shareholders. A B Corporation, however, is required to commit to goals other than profit. This allows an owner more control over managing their company in a way that is important to them.
4. Employee Recruitment- B Corps are required to be committed to better business practices all around, this includes the hiring and treatment of their employees. You will be able to staff your company with employees who not only know that the company they work for is doing good in the world, but that they will be treated well in the workplace.
5. Savings Through Less Waste- One of the areas that B Corps are committed to improving is the environment. When a company pledges to be more sustainable, they will not only help the environment, they will also save money.

Read this article for more reasons why companies are becoming B Corps.

Forming a B Corp

Do you have questions about obtaining your B Corp Certification and want to speak to an expert? Post a project today on ContractsCounsel and receive bids from corporate lawyers who specialize in Certified B Corporations.