B Corporation (certification)

In business, a B Corporation (also B Corp) is a for-profit corporation certified by B Lab for its social impact. B Corp certification is conferred by B Lab, a global non-profit organization. To be granted and to maintain certification, companies must receive a minimum score of 80 from an assessment of its 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.

As of February 2024^[update], there are 8,254 certified B Corporations across 162 industries in 96 countries.^[2]

Purpose

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]

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]

B Lab certification has no legal status^[5] and is lacking in mandatory due diligence mechanisms.^[7] B Lab has been criticized for framing private sector led multi-stakeholder governance as a substitute for public sector regulation.^[8]

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 which could result in a perverse incentive.^[9][10]

B Lab develops private standards which are non-consensus, and does not reference or adhere to international standards which are voluntary consensus-based. With potential for confusion and fragmentation in the marketplace for social responsibility.^[11] B Corporation has also been criticized for not being the "force for radical change" required to tackle the world's pressing problems.^[12]

B Lab certification is not accredited. The European Commission proposed directive will require mandatory accreditation of verifiers.^[13]

Private sector Multi-Stakeholder Initiatives (MSIs)^[14] may adopt weak or narrow standards that better serve corporate interests than rights holder interests.^[15]

Distinction from benefit corporation

In the United States, a benefit corporation is a legal status conferred by state law in the US. Legislation for the passage of benefit corporation legal status has been passed in 35 states, including Delaware.^[16]

B Lab certification is privately issued by a non-profit organization run by people principally from the business community. It has no legislative framework, and is not needed to obtain benefit corporation status.^[17]

Certification process

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

Online assessment

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.^[18] Socially and environmentally-focused business model points ultimately are accrued in their relevant impact area (governance, workers, community or environment).^[19] 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.^[20] B Lab has an established standards advisory council that can independently make decisions with or without the support of B Lab.^[19] As of May 2014, 28 of 30 members were listed by their business affiliation.^[21] 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.^[19]

Currently the B Corp Impact Assessment is its sixth version which released in January 2019.^[22]

Requirements

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.^[23] 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.^[23]
• Define "stakeholders" as their employees, the community, the environment, suppliers, customers, as well as existing shareholders.^[23][24]
• No prioritization of one stakeholder over another.^[25]
• Allowing for the company's values to exist under new management, investors, or ownership.^[23][26]

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

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.^[27]

Verification and transparency requirements

On completing the assessment, a company is required to meet certain transparency requirements and background checks to become a certified B Corp. These requirements are: an in-depth review of public record of the companies, employees, products and other relative topics and randomised site visits.^[28] Companies are required to re-certify every 3 years.

Notable B Corporations

Notable B Corporations include:

• Ben & Jerry's^[29]
• The Body Shop^[30]
• Coursera^[31]
• Danone North America^[32]
• Ethique^[33]
• Jeni's Ice Cream^[34]
• Laureate Education^[32]
• Meow Wolf^[35]
• Natura & Co^[32]
• New England Biolabs^[36]
• Patagonia, Inc.^[37]
• Seventh Generation Inc.^[38]
• Weleda^[39]

In 2021, BrewDog, a Fully Certified B Corp, was accused by former staff as having a "rotten culture".^[40] BrewDog's B Corp status was subsequently rescinded.^[41] In 2024, B Corp-certified bottled water brand Aqua topped the audit of Indonesia’s biggest plastic polluters.^[42]

In 2022, 30 Certified B Corps joined together with certification watchdog Fair World Project to petition against Nespresso's Certification as a B Corp,^[43] considering only 28% of their aluminum capsules are recycled.^[44] B Lab’s decision to certify corporations with single use products, effectively putting these companies into the category of good corporate citizens, has resulted in accusations of greenwashing.^[45][46][47] B-Corp is described as “capitalism through certification," with calls for more fundamental reforms that prioritize shared prosperity, democracy in the workplace, and sustainability.^[48]

International adoption

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.^[49] Since 2012, Sistema B has been the adaptation of the B Corps movement in Latin America, including in Argentina, Brazil, Chile, Uruguay and Colombia.^[50] 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.^[51]

See also

• List of benefit corporations
• Low-profit limited liability company
• Corporate governance
• Corporate social responsibility
• Multistakeholder governance
• Social purpose corporation
• Sustainable business

References

Further reading

• André, Rae (2012). "Assessing the Accountability of the Benefit Corporation: Will This New Gray Sector Organization Enhance Corporate Social Responsibility?". Journal of Business Ethics. 110 (1): 133–150. doi:10.1007/s10551-012-1254-1. S2CID 154440582.
• Boatright, John R. (2006). "What's Wrong—and What's Right—with Stakeholder Management" (PDF). Journal of Private Enterprise. 21 (2): 106–130. Archived from the original (PDF) on 2014-08-24. Retrieved 2013-08-26.
• Davis, Kevin E.; Fisher, Angelina; Kingsbury, Benedict; Merry, Sally Engle, eds. (2012). Governance by Indicators: Global Power through Classification and Rankings. Oxford University Press. ISBN 978-0-19-965824-4.
• Deskins, Michael R. (2011). "Benefit Corporation Legislation, Version 1.0—A Breakthrough in Stakeholder Rights?". Lewis and Clark Law Review. 15: 1047.
• Giridharadas, Anand (2018). Winners Take All: The Elite Charade of Changing the World. Knopf. ISBN 978-0451493248.
• Johnstone, Harvey; Lionais, Doug (2004). "Depleted communities and community business entrepreneurship: revaluing space through place". Entrepreneurship & Regional Development. 16 (3): 217–233. CiteSeerX 10.1.1.472.7844. doi:10.1080/0898562042000197117. S2CID 40006011.
• Lacovara, Christopher (2011). "Strange Creatures: A Hybrid Approach to Fiduciary Duty in Benefit Corporations". Columbia Business Law Review: 815–880. *
• Lencioni, Patrick M. (July 2002). "Make Your Values Mean Something" (PDF). Harvard Business Review. Archived from the original (PDF) on 2014-03-09.
• Reiser, Dana Brakman (2011). "Benefit Corporations—A Sustainable Form of Organization?". Wake Forest Law Review. 46: 591. Archived from the original on 2014-04-24.

External links

• Official website
• Benefit Corporation Information Center

This page was last edited on 23 April 2024, at 06:39