B Corp is a trending new concept that promotes more than profit and meeting shareholders’ expectations. It’s a private certification given to companies based on “social and environmental” performance. Ultimately, such companies earn the gold standard of better business practices and are considered the most socially responsible.
The “B” designation is a private entity gaining certification from the B Lab, a nonprofit, for voluntarily meeting higher standards.
Many companies, including corporations, partnerships, limited liability companies, and sole proprietorships can join the global movement of becoming B Corps.
A certified B corporation meets the highest performance, accountability, and transparency standards. These companies do more than focus on their bottom line; they’re looking to become a moral company that puts sustainable business practices in place to better their company culture and the world as a whole.
B Corps began in 2007 and now includes 4,000 companies in 150 industries. B Corps can be found in 70 countries.
Some familiar B Corps include Patagonia, Leesa, Prose, The Body Shop, Uncommon Goods, Bombas, and Frank and Oak.
Why B Corps matter
B Corp is an important certification for companies because it:
Sets a company apart
Companies that become a B Corp do it voluntarily. The company makes a plan to meet the high standards of private certification. Making this extra effort to meet exceptional social and environmental performance standards, legal accountability, and public transparency shows customers its discipline and aspirations to use the company to solve society’s problems.
Makes a difference in the world
B Corps set protocols and standards to help resolve several long-standing issues like environmental problems. B Corps lessen their environmental impact by doing things like providing efficient commuting options for employees and allowing remote work. They also focus on reducing the number of resources used while increasing productivity and becoming a more sustainable business.
Can help attract better employees
The B Corp status appeals to potential employees who want to work for a company with values that match theirs. Being a company with a B Corp certification shows recruits the company has values beyond profitability and could help attract loyal workers with high integrity.
B Corp Declaration
Companies seeking a B Corp certification must agree with the B Lab Declaration of Interdependence. The declaration, found on the bcorporation.net, says the vision is for companies to use business for the world’s good. Its goal is for the global economy to be led by B Corps that create benefits for “stakeholders” rather than just shareholders.
Stakeholders contribute to and benefit from the company in its direct business and are also part of the world it impacts. They could be employees, the local community, or those in parts of the world providing resources for its products.
B Lab believes B Corp leaders should take a front-and-center role in this emerging economy, including promoting and living by the following values listed in the declaration:
- To be the change we seek in the world.
- Business should be done while valuing all people and places.
- Businesses should aspire to benefit all and do no harm.
- We depend on each other and are responsible for each other and future generations.
How to become a B Corp
1. Become a pending B Corporation
This is where you express interest in becoming a B Corporation, download the materials to learn about the process, and start following information available at B Lab.
Different size companies have different preparation handbooks that detail specific requirements. Those with less than 50 employees and generating less than $5 million in revenue annually will get the Small Enterprise Guide.
Companies with 50 to 250 employees generating more than $5 million annually will need the Small-Medium Enterprise Guide. Those with more than 250 employees and generating $100 million or more a year will download the Medium Enterprise Guide.
Businesses that generate either $1 billion in annual revenue or $100 million yearly with ten or more subsidiaries in multiple countries will need the Large Enterprise Guide.
Companies earning more than $5 billion a year will need the Large Enterprise Guide and participate in the B Movement Builders program. All its subsidiaries must follow the Large Enterprise Guide regardless of size.
2. Get the free B Corp assessment
This confidential form guides what you need to do to implement global values into your company’s methods and procedures. You can use the legal requirement tool to help you. You must agree and meet the legal requirement to move forward in your application.
3. Do the risk review
At the beginning of the process, companies undergo a risk assessment. The assessments vary by industry, but it will look at your company’s negative impact on others and review your policies and practices.
4. Fill out B Impact Assessment
You will need this to take the B Impact Assessment online. This assessment is intense, and you’ll need to gather several official documents to complete it. The questionnaire assesses your company’s impact on its employees, community, industry, environment, and beyond. It asks about internal policies, business model, partnerships, environmental output, social contributions, and other positive impacts you make to the community at large.
It’s about a two-hour process.
5. Get your impact score
To be eligible for a B Corp, you must score at least an 80. Those companies with a baseline score of less than 80 will need to reprioritize and look at areas for improvement before submitting your application. Those that surpass 80 can submit their application for review. You will pay the $150 fee when you submit your application.
6. Answer any evaluation questions
Those companies determined to be eligible will be under a strict evaluation from a B Lab Global analyst. There may be additional questions about any controversial issues about some industries and procedures.
7. Enter the verification phase
During this phase, you will need to answer questions about suppliers and employees. There will also be a phone call with an analyst to go through your verification report and provide documentation that backs up statements made in your assessment. B Lab will also do background checks.
8. Sign the B Corp agreement
Once you sign the agreement, you are officially B Corp certified. In addition, you will be required to publish your public profile in the B Corp directory, along with the company’s social impact score and the impact report.
Certification lasts for three years, and you will need to prepare for re-certification to maintain your good standing.
B Corp certification requirements
- Certifications are different depending on the company’s size, market, and sector.
- A B Corp is a legal structure.
- It includes transparency requirements.
- Requirements include submitting documents regarding processes, employees, and suppliers, among other things.
- A minimum score of 80 must be reached on your assessment to qualify.
Legal roadmap to becoming a B Corp
1. Find out if your state allows B Corps
Some states and countries don’t allow the B Corp designation, although it isn’t a problem for most.
2. Understand it offers no tax breaks
The federal government doesn’t have any incentives or tax breaks about becoming a B Corp. However, the cost of implementing some processes may be tax-deductible. Talk to your accountant.
3. The B Corp agreement is a legal agreement
You are responsible for implementing processes and changes agreed to when you sign the agreement. There is a legal agreement offered early on and the final B Corp agreement you sign once you are approved. There could also be goals set in the agreements to improve standards. Have your attorney look over the agreements and work with you throughout the certification process.
FAQs about becoming a B Corp
It will take several months. The longest period is after you’ve submitted your application and you are waiting on an evaluation. That can take one to three months.
It allows companies to pursue their moral missions while scaling their business. It does this, in part, by reducing the liability of directors so it can balance financial and non-financial missions in its decisions.
Companies’ requirements vary depending on the corporation’s size, industry, and market. However, all requirements focus on corporate social responsibility, transparency, and impact to stakeholders. All B Corp applicants must score at least 80 on their assessments to be eligible.
Companies that seek to become B Corps want to do more than make a product. They want to influence how the economy works. Many startups going this route help them set foundations early for its culture and values. Getting a B Corporation certification improves your status and draws excellent talent-seeking companies with higher standards.
The assessment questionnaire to become a B Corp is an extensive 200-question form. It includes questions about key indicators for meeting social standards, sustainability practices, secondary parental leave policies, and the percentage of the company’s facilities that meet the standards of an accredited green building program.
It can be challenging to work through the B Corp certification process. You have to answer all the assessment questions, fill out the disclosure form, and agree to meet extremely high standards. You must also provide documentation and may even need to schedule an onsite visit if you seek re-certification.
B Lab was created in 2006, and the first companies were certified in 2007.
Two of those who founded B Corp also founded the basketball and footwear company AND1. AND1 was sold when the decision to create B Lab was made. However, AND1 was the first company certified.
B Lab was created in 2006 by Jay Coen Gilbert, Bart Houlahan, and Andrew Cassoy in Berwyn, PA.
The U.S. Small Business Administration defines a B Corp as a for-profit corporation driven by both profit and mission. Shareholders and stakeholders hold the company accountable to produce some public good and profit.
Holding a B Corp certification doesn’t impact your tax filings. It’s not a business structure, it’s a certification program. Some of the charitable contributions made by the company may be a tax write-off, but the certification itself doesn’t alter your commitment to the IRS.
The initial application fee is $150, but there are yearly fees. Once approved, a B Corp will pay $500 a year to maintain your status if you have under $500,000 in revenue. Those companies who earn more than $500,000 and under $1.9 million will pay $1,000 a year to maintain their status.
There may be additional costs incurred to become a B Corp as well. For example, you may need to update internal practices or manufacturing processes to meet environmental standards. These can be costly changes.
