B Corporation (certification)

In business, B Corporation (also B Lab or B Corp) is a private certification of for-profit companies of their "social and environmental performance." It is distinct from the legal designation as a benefit corporation. B Corp certification is conferred by B Lab, a global nonprofit organization with offices in the United States, Europe, Canada, Australia and New Zealand, and a partnership in Latin America with Sistema B. To be granted and to maintain certification, companies must receive a minimum score of 80 from an assessment of "social and environmental performance", integrate B Corp commitments to stakeholders into company governing documents, and pay an annual fee based on annual sales.[1] Companies must re-certify every three years to retain B Corporation status.

The "B Corporation" label.

As of July 2022, there are 5,325 certified B Corporations across 156 industries in 83 countries.[2]

PurposeEdit

 
Example of a B Corp certification label

B Lab certification is a third-party standard requiring companies to meet social sustainability and environmental performance standards, meet accountability standards, and 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.

An issue in deciding to be a Certified B Corporation would be the administrative and legal costs a corporation will face in changing their business model in accordance to B Labs regulations.[3]

As a matter of law, in Massachusetts or States that recognize B Corporation Certification, it doesn't bring any legal significance to its shareholders, stakeholders or to its employees. However, the certification brings a multitude of branding tools to the corporation.[4]

B Corp Certification will bring no legal liabilities to a C Corporation or any for-profit business structures apart from its business model structure which should adhere to the B Labs.[4] To add on, many C corporations usually adapt the B Corporation Certificate to gain goodwill.[5]

AdvantagesEdit

  • Similar to other business associations, certified B Corporations and their employees have access to a number of discounts from outside entities and fellow members.[6]
  • Academic contributions of loan forgiveness.[7][8][9]
  • A branding tool
  • No legal liability

DisadvantagesEdit

  • B Lab certification has no legal status.[5]
  • In order to obtain and maintain a B Corporation certification, B Lab charges annual administrative and legal fees depending on the revenue generated by the respective companies.[10][11]

Distinction from benefit corporationEdit

  • Benefit corporation is a legal status conferred by state law in the US; B Lab certification is issued by a non-profit organization and has no legislative framework.[12]
  • B Lab certification is not needed to obtain benefit corporation status.[12]
  • (USA only) Legislation for the passage of this corporate legal status has been passed in 35 states, including Delaware, whereas B Lab certification is privately issued by an organization run by people principally issued from the business community.[13]

Certification processEdit

The company needs to adhere their corporate legal structure to B-Lab regulation in order to qualify for the certification process.

Online assessmentEdit

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.[14] Socially and environmentally-focused business model points ultimately are accrued in their relevant impact area (governance, workers, community or environment).[15] 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.[16] B Lab has an established standards advisory council that can independently make decisions with or without the support of B Lab.[15] As of May 2014, 28 of 30 members were listed by their business affiliation.[17] 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.[15]

Currently the B Corp Impact Assessment is its sixth version which released in January 2019.[18]

RequirementsEdit

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 in which they are incorporated. Some states, known as "constituency" states, will allow for this change in the articles of incorporation, but 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.[19] 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.[19]
  • Define "stakeholders" as their employees, the community, the environment, suppliers, customers, as well as existing shareholders.[19][20]
  • No prioritization of one stakeholder over another.[21]
  • Allowing for the company's values to exist under new management, investors, or ownership.[19][22]

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

Verification and transparency requirementsEdit

On completing the assessment, companies are required to meet certain transparency requirements and background checks to become Certified B Corp(s). These requirements are: an in-depth review of public record of the companies, employees, products and other relative topics and randomised site visits.[23] Companies are required to re-certify every 3 years.

Notable B CorporationsEdit

CriticismEdit

B-Labs has been criticized for framing accreditation as a substitute for good governance.[36] Many B-Corps have run into issues and controversies, leading many to question the worth of corporation. For example, in 2021, BrewDog, a Fully Certified B Corp, was accused by former staff as having a "rotten culture".[37] In 2022, 30 Certified B Corps joined together, with certification watchdog, Fair World Project, to petition against Nespresso’s Certification as a B Corp.[38]

B-Corporation has also been criticized for not being the “force for radical change” required to tackle the world’s pressing problems.[39] The fact that B Corp standards are not legally enforceable, and that none of a companies' governing bodies and leadership are liable for damages if a company fails to meet them has also been flagged as a problem.[40]

International adoptionEdit

In February 2022, there were over 4,673 certified B Corporations across 155 industries in 78 countries, including Canada (78 companies), Australia, South Africa, and Afghanistan.[2] The most active community outside of the United States is Sistema B.[41] Since 2012, Sistema B has been the adaptation of the B Corps movement in Latin America, including in Argentina, Brazil, Chile, Uruguay and Colombia.[42] 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.[43]

See alsoEdit

ReferencesEdit

  1. ^ "Certification | Certified B Corporation". bcorporation.net. Retrieved 2020-08-31.
  2. ^ a b "B Corporation: Welcome". B Lab. Retrieved 28 June 2019.
  3. ^ Gerner-Beuerle, Carsten; Schillig, Michael (2019-04-29), "Legal and Theoretical Foundations of the Business Corporation", Comparative Company Law, Oxford University Press, pp. 3–84, doi:10.1093/oso/9780199572205.003.0001, ISBN 978-0-19-957220-5
  4. ^ a b "Benefit Corporations Have Arrived in Massachusetts". bostonbar.org. Retrieved 2020-04-13.
  5. ^ a b "Benefit Corporations & Certified B Corps | Benefit Corporation". benefitcorp.net. Retrieved 2020-04-13.
  6. ^ "Save Money and Access Services". B Lab. Retrieved September 11, 2013.
  7. ^ "Loan Assistance Program — Overview". Columbia Business School. 21 November 2012. Retrieved January 8, 2014.
  8. ^ "Loan Assistance Program – Detailed Summary" (PDF). New York University Stern School of Business. Retrieved January 8, 2014.
  9. ^ "Loan Forgiveness Program". Yale School of Management. 31 May 2013. Retrieved January 8, 2014.
  10. ^ Ginsburg, Bryan Cave Leighton Paisner-Aaron B (8 March 2018). "Making a Difference (and a Profit): Advantages and Disadvantages of Forming or Converting into a "B" Entit". www.lexology.com. Retrieved 2020-04-11.
  11. ^ Bagley, Constance E. (21 February 2017). The entrepreneur's guide to law and strategy. Dauchy, Craig E., 1949- (Fifth ed.). Boston, MA. ISBN 978-1-285-42849-9. OCLC 953710378.
  12. ^ a b "What Are B Corps". B Lab. Archived from the original on 17 May 2014. Retrieved 16 May 2014.
  13. ^ 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.
  14. ^ 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. Archived from the original (PDF) on 2015-02-23. Retrieved 2013-08-26.
  15. ^ a b c "GIIRS Governance". B Lab. Archived from the original on September 30, 2012. Retrieved September 11, 2013.
  16. ^ "AB 361 Assembly Bill - BILL ANALYSIS". California State Assembly. Retrieved January 8, 2014.
  17. ^ "Standards Advisory Council". B Lab. Retrieved September 11, 2013.
  18. ^ "Corporate Social Responsibility Comes In Many Flavors, Some Not So Tasty". NonProfit Times Publishing Group.
  19. ^ a b c d "Corporation Legal Roadmap". B Lab. Retrieved September 11, 2013.
  20. ^ See Boatright (2006) and Johnstone and Lionais (2004).
  21. ^ "OLR Backgrounder: Social Enterprise and the Benefit Corporation". State of Connecticut, Office of Legislative Research.
  22. ^ See Lencioni (July 2002).
  23. ^ "Certification Requirements | Certified B Corporation". bcorporation.eu. Retrieved 2020-04-13.
  24. ^ "Allbirds, Inc. - Certified B Corporation - B Lab Global". www.bcorporation.net. Retrieved 2022-01-16.
  25. ^ "Ben & Jerry's Joins the Growing B Corporation Movement". www.businesswire.com. 2012-10-22. Retrieved 2021-08-20.
  26. ^ "Coursera Receives B Corp Certification". blog.coursera.org. 2021-02-02. Retrieved 2022-04-10.
  27. ^ a b c "B Corps Grow Up (SSIR)". ssir.org. Retrieved 2021-08-20.
  28. ^ {{Cite web|title=Ecosia GmbH|url=https://www.bcorporation.net/en-us/find-a-b-corp/company/ecosia-gmbh/
  29. ^ "Ethique has been named the most environmentally responsible company in New Zealand". MINDFOOD | Style. Retrieved 2021-08-20.
  30. ^ Gazette, Dennis Huspeni The. "Meow Wolf Denver set to astonish: A 'trippy' wonderland of art, culture, food". Colorado Springs Gazette. Retrieved 2022-04-05.
  31. ^ "Nespresso achieves B Corp certification" (Press release). Vevey, Switzerland. 2022-04-26. Retrieved 2022-04-26.
  32. ^ Mackey, Zoe. "The B Corp Revolution: How Companies like Patagonia Are Driving Positive Social Change". ideas.bkconnection.com. Retrieved 2021-08-20.
  33. ^ "Rudenetworks Srl Società Benefit". BCorporation.net. Retrieved 17 May 2022.
  34. ^ "Greenvest becomes a Certified B Corporation | Vermont Business Magazine". vermontbiz.com. Retrieved 2021-08-20.
  35. ^ Prance-Miles, Louise (2019-09-27). "The Body Shop achieves B Corp certification". Global Cosmetics News. Retrieved 2021-08-20.
  36. ^ "B Corp certification won't guarantee companies really care for people, planet and profit | The Conversation". theconversation.com. Retrieved 2021-09-05.
  37. ^ "Former BrewDog staff accuse craft beer firm of culture of fear". The Guardian. Retrieved 2021-09-05.
  38. ^ "The B Corp Standard is at Risk". Fairworld Project. Retrieved 2022-07-05.
  39. ^ "Purpose over profit: are B-Corps the future of sustainable business?". Reuters. Retrieved 2021-09-09.
  40. ^ O'Regan, Michael. "B Corp certification won't guarantee companies really care for people, planet and profit". The Conversation. Retrieved 2022-06-15.
  41. ^ Wilburn, Kathleen; Wilburn, Ralph (2014). "The double bottom line: Profit and social benefit". Business Horizons. 57: 11–20. doi:10.1016/j.bushor.2013.10.001.
  42. ^ 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.
  43. ^ Ip, Melissa (September 26, 2012). "B Lab and Sistema B Partner to take B Corps Global". Social Enterprise Buzz. Archived from the original on 28 June 2017. Retrieved September 11, 2013.

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