If your for-profit business is not only revenue-driven but also socially conscious, you might want to consider forming a B Corporation. What is a B Corporation? It’s a for-profit business entity that’s committed to social good, both within their corporation and for the community and globe writ large.
There’s a lot to know about B Corporations, and the B Corporation definition in and of itself is a little tricky and layered—as are some of the verification processes. We’ll review this in-depth as well as provide B Corporation examples so you can understand if this entity is right for your business.
B Corporation Definition
Certified B Corporations are for-profit businesses that are verified to meet the highest environmental and social standards as well as public transparency and legal accountability, as certified “B Lab” in the online B Impact Assessment (more on this below). They use profits and influence to affect positive impact both within and outside of their company. Verified B Corporations are meant to work toward serving the greater global good, such as impacting the number of quality jobs, bettering their communities and the environment, working toward sustainability goals, and more.
Not all businesses need to meet the same criteria to certify as a B Corporation, and many may have to change their operations or practices in order to meet the standards of certification. B Corporations must also provide a public report of their efforts, which lends to their transparency.
Important to note: A B Corporation is different from a benefit corporation as it is not a legal designation, but rather a seal of approval.
B Corporation Certification
With this B Corporation definition in mind, let’s go through the certification processes. Like the B Corporation definition itself, B Corporation certification is multi-layered as well.
Understanding the B Lab
The biggest part of the B Corporation certification process is the B Lab, which is a nonprofit organization devoted to building a network of certified B Corporations that are verified to meet high standards for social good, environmental efforts, and legal accountability. Any business can be certified through the B Lab.
The B Impact Assessment
The B Lab uses what’s called the B Impact Assessment, a standardized tool, in order to decide whether a company meets the standards for B Corporation certification.
The assessment includes questions that inquire into the following activities within a company:
- Community and environment
Companies that wish to be approved by the B Lab must score a minimum of 80 out of 200 points on this self-reported data. A portion of companies gets audited each year to verify the reported data.
B Corporation Fees
There are a few fees to incur once you pass the B Lab certification. Fees will vary, but they’re based on your annual sales. For instance, if you have $250,000 in revenue, your fee will be far less than a business with revenue of $1 million or more. Think in the hundreds of dollars on the low end, through thousands on the high end.
B Corporation Seal
Why would you pay a fee to be certified as a B Corporation?
Once you are registered, you are part of a community of other B Corporation businesses, which signals your values to consumers. To let these consumers know you possess this certification, you can use the B certification seal on your packaging. As sustainability and social good are becoming more and more important to buyers, they may choose your product over others that don’t have the certification.
According to B Corporation Patagonia, some consultancies have even seen an increase in profits directly related to this certification.
B Corporation Examples
To find B Corporation examples, you can search the B Corporation directory online. As you’ll see, there is a wide range of businesses, spanning various sizes and more than 50 countries.
Names you might recognize include:
- Gap Inc.
- Uncommon Goods
- Eileen Fisher
- Happy Family
- Ben & Jerry’s
- Seventh Generation
And the list goes on! These are some of the biggest, highest-profile companies, but don’t forget that the vast majority of B Corporations are far smaller.
Let’s take a look at Patagonia, which is known for being a highly socially and environmentally conscious company. Patagonia, which has been a B Corporation for eight years, says it became a B Corporation to join a community of socially conscious companies that help guide consumers toward sustainable decisions. For those who are already familiar with the brand’s commitment to a reduction in impact, it is another signal that the company is committed to their mission.
Who Should Form a B Corporation?
For-profit businesses that are highly conscious of their impact and footprint should actively consider applying to be a B Corporation. It proves to consumers your business is committed to both transparency and global good, and that you have processes and infrastructure that represent this.
Businesses that are planning to pursue a B Corporation must understand that the process takes time, and it may require an investment to change certain processes. You also must be willing to be transparent about your practices and values.
If you feel like your business is too small to be a B Corporation, don’t be discouraged. Businesses of all sizes can be B Corporations, and many companies even start with the mission of becoming a B Corp, which helps them set up their operations as sustainable and socially conscious so they don’t have to update them later to meet B Lab standards.
Advantages and Disadvantages of B Corporations
Those who are considering forming a B Corporation should also consider the advantages and disadvantages. It’s worth noting that the advantages may outweigh the negatives due to the potential profit upsides. It’s not guaranteed, of course, but business owners might want to consider the possibility. Additionally, the advantages of B Corporations may seem a little more intangible.
- Transparency for consumers: As consumers become more and more conscious about the way they consume—particularly younger customers, who are drawn to ethical and sustainable products—your B Corporation designation and seal can separate you from other competitive products and help solidify your business’s brand.
- Competitive advantage for hiring: Along with customers’ preferences for more conscious companies, employees have these preferences, too. They prefer working for ethical companies and will even take a pay cut to do so, according to some studies. As a certified B Corporation, you can become more attractive to candidates, which is especially beneficial in a competitive hiring environment.
- Potential for more investment: Companies that are certified as B Corporations have a competitive advantage for fundraising since investors can be confident that they have a strong sense of ethics and will be appealing to a growing customer base concerned with ethics.
- Cost of updates: To meet B Lab standards for certification, you might have to make some updates to the way you do business. This may include workflow, supply chain, or other components of your business that make a higher impact than is allowed by the B Lab.
- Increased paperwork: There is a substantial amount of paperwork that’s involved in becoming and maintaining your status as a B Corp. Among this, you’ll have to create an annual report that details your commitment to ethical missions and the values that enable you to be marked as a B Corporation. This is a document that is available to both shareholders and the public.
- Cut into profits: With the dedication to a distinctive mission, you may need to outlay capital to accomplish your goals and maintain your B Corp status. This can potentially cut into profits, which may be a difficult conversation with shareholders if you have them.
The Bottom Line
If you’re considering forming a B Corporation, you should at least look into the requirements. It’s a decision that’s not only good for your bottom line but also great for the planet and community. The requirements are stringent, it’s true, and it’s possible that you might not meet them out of the gate. It’s incumbent on you, then, to figure out if it makes sense with where your company is to put in the effort—and potentially capital—to make the changes you need to make.
Also, remember that you don’t have to be a B Corporation right this second. You can develop your company over time so that you’re best positioned for approval when the time comes to apply or reapply.
Sally Lauckner is the editor-in-chief of JustBusiness and the editorial director at Fundera.
Sally joined Fundera in 2018 and has almost 15 years of experience in print and online journalism. Previously she was the senior editor at SmartAsset—a Y Combinator-backed fintech startup that provides personal finance advice. There, she edited articles and data reports on topics including taxes, mortgages, banking, credit cards, investing, insurance, and retirement planning. She has also held various editorial roles at AOL.com, Huffington Post, and Glamour magazine. Her work has also appeared in Marie Claire, Teen Vogue, Cosmopolitan, and ColoradoBiz magazines, as well as Yelp, SmallBizClub, and BizCrat.