What is a B Corp:
Understanding the Business Model Behind the Movement

by | Sep 11, 2020

Patagonia. Ben & Jerry’s. Allbirds. TOMS. All of these brands share one thing in common: they are some of our favorite brands that have thoroughly committed to using their business as a force for good. In other words, each of these companies are Certified B Corporations: the gold standard in better business.

And they aren’t alone! Although these companies make up some of the most recognizable B Corps, especially in the United States, they are joined by 3,522 other responsible businesses across 150 industries that spread over 74 countries.

You may be a consumer wondering what the B Certified logo truly means. You may be wondering whether your business should look into getting certified and how the process works. You may be thinking about your next career move. You may just be curious!

No matter your motivation, this article aims to provide a deeper understanding of Certified B Corporations. What really is a B Corp? Do they truly make the impact advertised? Who should pursue B Corp certification? Why should a business get certified?

If you follow our content, you may have noticed our minor obsession with B Corporations. We talk about them A LOT, whether with our Podcast guests, our Blog content, or in our weekly newsletter. We’re even pursuing the B Corporation certification ourselves! 

That’s because when you are looking at corporate do-goodery, third party certification comes with increased transparency and accountability. And in terms of third party certification, B Corp certification is no easy breezy task. This certification is the high water mark.

B corp

B Corps and Conflated Terms

Before we dive into how to define a B Corp, let’s make some important distinctions. There are a few terms that are similar and definitely related which can sometimes cause confusion: Certified B Corporation, benefit corporations, businesses with corporate social responsibility (CSR) initiatives, and mission-driven companies to name a few. 

While there certainly is some overlap between each of these terms, it’s worth the detour to get clear on what people mean when they use these words to make sure we are on the same page throughout the rest of the article.

B Corporations aka B Corps

We will get into the details of the B Corp certification below, but for the sake of distinguishing these terms, here is a brief description of the B Corps to get us started.

B Corp certification can be voluntarily pursued by any for-profit entity. The nonprofit B Lab is responsible for certifying B Corps. Companies who wish to be certified must go through B Lab’s extensive and thorough application process to demonstrate that their business is in fact a solution to global problems like wealth inequality, climate change, social unrest, and corporate transparency.

Although benefit corporation’s legal requirements hold more legal weight than that of B Corp Certification, the certification process comes with a stricter definition and rather stringent process for businesses (more on this process later).

Benefit Corporations

Benefit corporations and Certified B Corporations lie at the forefront of the movement to use business as a means for positive impact. Both require companies to be accountable and transparent with their socially-driven business practices. They share many similarities and there are a number of businesses that exist as B Corps and benefit corporations. However, there are some key differences.

Benefit Corporation: A benefit corporation is a legal structure for a business—the same way a company can register as an LLC, they can, in some states, register instead as a benefit corporation. Traditional corporations have a legal duty to maximize profits for their shareholders. Benefit corporations, on the other hand, are a type of legal entity that incorporate social good into their bottom line, receive legal protection for their social-good efforts, and are actually subject to legal accountability to work toward their social impact goals. 

Registering as a benefit corporation allows companies to prioritize their social or environmental performance without the fear of being sued by stakeholders for taking action toward social impact that may come at a cost to their profit. We should mention that the impact may be a cost in immediate profits, but ultimately the social good provides shareholder value in the long-term!

Currently, there are 36 states that have enacted benefit corporation legislation.

Simply put, forming a benefit corporation is to protect your social impact efforts as forming an LLC is to protect your personal assets.  

CSR, Mission-Driven Companies

Being a benefit corporation or a Certified B Corporation sends a strong message about a brand’s holistic commitment to social good and public transparency. Corporate social responsibility (CSR), conversely, typically does not incorporate as clearly or transparently a company’s core values or their impact.

CSR programs: Corporate social responsibility programs refer generally to businesses’ engagement in corporate philanthropy or impact campaigns. Unlike B Corp certification and benefit corporation status which both require third party accountability, CSR programs are internally managed and overseen. So, they vary widely in form, purpose, and efficacy. 

CSR strategies can expand to many parts of a company’s operations like their hiring practices, product development, philanthropy etc. They can also, unfortunately, be instead a one-off marketing campaign to boost PR. 

While these initiatives can be valuable and impactful, the existence of CSR programs does not necessarily mean that the company is a socially conscious or responsible brand. A company may advertise a line of sustainable products, yet the products may be manufactured in inhumane working conditions, for instance. Or, they may engage in a corporate giving program, but also be severely polluting the same community they are donating to.

In contrast, B Corp’s hold thorough and widespread impact as a primary target. Certified B Corporations’ social good programs permeate their entire business. 

Long story short, companies with a smattering of CSR pillars can do some good, but most often do not embody impact like B Corps, nor do they have the external accountability to make sure their efforts are consistent and diligent. 

Mission-driven company: Lastly, “mission-driven company.” The broadness of this term makes it difficult to define, and consequently easy for companies to use without promising much. Generally, a company that describes itself as “mission-driven” exists with some goal for social impact. 

All B Corps are mission-driven companies, but not all mission-driven companies do enough to qualify for B Corp certification. 

Mission-driven companies incorporate a social purpose into their stated business objectives, but they are not held accountable by any third-party organizations to stay transparent and follow through on their promised initiatives. 

So, like we mentioned, this term can be used rather loosely because what company isn’t driven by its own mission? The critical next step that is missing from the “mission-driven” description is how is a “mission-driven company” taking comprehensive action to achieve that mission.

What is a B Corp?

Now the moment you’ve all been waiting for… let’s talk about what defines a B Corp. 

As you probably already sense, positive impact is at the core of this kind of company and resonates through all of their operations. B Corporation Certification represents a holistic embrace of corporate good, and that’s why it is the gold standard of socially and environmentally responsible business. B Corps are companies that are really driving the corporate responsibility movement forward.

people profit planet

Conventionally, socially responsible companies, and even traditional corporations that want to show off their corporate social responsibility, will reference the “triple bottom line” framework to measure their impact. We all know that when people talk about the bottom line, they mean profit. Well, the term “triple bottom line” was coined in 1994 by John Elkington based on the belief that companies should balance social and environmental concerns with financial interest—so, the triple bottom line is People, Planet, Profit. 

B Lab, the nonprofit organization that certifies B Corps that we touched on earlier, uses the idea of a triple bottom line for their B Impact Assessment that companies complete to certify. Because of this framework being baked into the certification process, Certified B Corporations need to effectively balance profit with tangible positive treatment of people and the planet affected by their business.

Really, B Corp’s take the triple bottom line one step further. In addition to the three “P’s” of people, planet, and profit, B Corps embody a fourth “P”: purpose. This “quadruple bottom line” pushes B Corp’s to not only think of the current needs of their business, their people, and the environment, but to think about the needs of their community and world going forward. B Corps work toward a better future and a sustainable economy by using their purpose to power meaningful change both locally and globally.

It’s important to keep in mind that these aren’t just theoretical ideals for B Corps, but benchmarks that must be demonstrated. If a business doesn’t meet the highest standards of social and environmental performance and doesn’t have purpose ingrained in their policies, they will not be certified. Plus, with re-certification needing to happen every three years, B Corps are held accountable for their socially and environmentally responsible actions.

environmentally friendly

Why Certify?

You may be wondering what the big deal is about being a B Corp. What does a company gain by becoming B Corp certified as opposed to just showcasing their dedication to the triple bottom line? Knowing what the certification offers to participating companies will lead to a fuller understanding of the B Corp movement.

Consumer Preferences

Obviously, consumer and employee motivation and, ultimately, profit are consequential factors for any for-profit business, so let’s start there.

To put it plainly, corporate good is in these days. Consumers and investors increasingly care about a business’ positive impact and will make decisions according to brand perceptions. In a 2019 CSR Survey conducted by Aflac, 77% of consumers felt motivated to make purchasing decisions from companies committed to making the world a better place. 73% of investors viewed these efforts as contributors to return on investment, and, in turn, often look favorably on companies with conscious social and environmental impact.  

This seems to be a growing trend. The 2020 Deloitte Global Millennial Survey found that COVID-19 and the world’s response to the pandemic has only strengthened resolve for companies to take action for a positive impact. They’ve seen how rapidly businesses can adapt their practices to offer aid. As a result, it seems that wanting corporate good and striving for conscious consumerism will only strengthen going forward. Woo!

Because of these changing consumer preferences, the moral responsibility companies have to improve the world and the belief in the power of business aren’t the only motivators to be socially responsible. Yes, the perception of this responsibility can be faked (think: greenwashing). But, perhaps because of this ability to skirt true responsibility, many consumers are wary of business’ claims towards better business practices.

If a company is B Corp Certified, consumers, and potential employees or investors know that the brand authentically cares for the world and the community around them and is committed to using their business as a force for good. The certification offers credibility, accountability, and transparency. 

Community

Just as important, becoming B Corp certified allows companies to gauge and improve their level of impact. The B Corp community as a whole provides a lot of this feedback.

Once certified, businesses find themselves in the company of a large group of other do-gooders that come from a variety of different industries with a variety of different expertise. B Corp certification can provide a global network of like-minded business leaders who push for for-profit businesses to make the world better. This opens up a wealth of resources and knowledge for newly certified companies on global, national, and local community levels.

The B Corp network can also be incredibly motivating. Surrounded by other companies breaking the mould, who are deeply passionate and dedicated to going beyond their products and services, members of the community can’t help but to want to do more because they know more is possible.

Maybe we are a little biased, but I think our Founder, Cory Ames, put it best, when he wrote that being around B Corp leaders at the 2019 B Corp Champions retreat and at many other social impact conferences made the “desire to change the world delightfully contagious.” 

Accountability

Another way B Corps gauge their level of impact is through the scoring system the B Impact Assessment provides. Every company’s impact score is available to the public on the B Corp Directory

On one hand, being certified as a B Corp gives validation to a business that they live the ideals that they set out for themselves and display to the community. On the other hand, through the assessment, B Corps must commit to continuous improvements, especially in weaker areas of impact.

Greg Hemmings—the founder of Hemmings House, a Certified B Corporation who appeared on Grow Ensemble’s Social Entrepreneurship and Innovation podcast—described the B Corp certification as a “guiding star” and a “protection against [themselves].” In other words, being a B Corp inspires Hemmings House to strive to be better as a responsible business and prevents taking on any venture that stands in contrast to Hemmings House’s B Corp ideals.

B Corp Certification simply keeps a business honest towards their resolution to be a force for good. B Corps volunteer to be held accountable for their actions (and inaction) to the business community and to the public.

b impact assessment what is a b corp

B Impact Assessment

So why aren’t even more companies certifying as B Corps? Well, in large part, getting certified takes an incredible commitment.

Every B Corp has passed (and will continually have to re-pass) the B Impact Assessment—B Lab’s tool to assess whether or not companies measure up to the comprehensive impact standards required for every B Corp. The online assessment grades companies’ responsibility in five key areas: governance, workers, environment, customers and community. Learn more about the specifics of the B Impact Assessment process in our article detailing our own initial assessment.

Grow Ensemble’s journey to B Corp certification started with a score of 25.9 out 200 on the B Impact Assessment. To certify as a B Corp, you need to have a score of 80 out 200! I say that not to put down Grow Ensemble (we’re working on it!), but to emphasize just how high the standards are to become a B Corp and to put in perspective what scoring an 80 or higher means.

We partner with purpose-driven companies and social enterprises to grow awareness of the causes we and members of the community care about, and to grow the community of people engaging with the solutions to those issues. In our efforts toward this goal, we’ve encountered how focused these companies are on their impact. And, we have learned intimately what it means to join their ranks! 

The beauty of the impact assessment is that regardless of B Corp status, the assessment is valuable to any company that wants to monitor their progress in reaching their impact goals. In addition to receiving marks in each of the 5 impact areas, the process points out a company’s weaknesses and blind spots and offers a roadmap to achieve a more sustainable business model.

For instance, a company may have many of the needed values of a B Corp, but lack the governance  to affirm them. As David Kahl, the CEO of Certified B Corp Fully, said on our podcast: “If I were hit by a bus, would [our socially responsible business practices] continue?” This highlights the merit of creating infrastructure within your business to maintain impact no matter what happens to any specific individual within it. It also is an example of a valuable question that the assessment can elicit.  

Kahl goes on to encourage any business leader curious about B Corps to try out the assessment. If “it makes your heartbeat a little faster,” joining the B Corp movement very well may be something for you.

As of today, over 70,000 companies use the B Impact Assessment, as a means to become B Corp certified or to reliably assess their level of impact.

  CONSIDER

Last year, B Corps protected 8.8 hectares of land, offset 6.4 million tons of carbon, saved 335 million liters of water, and diverted 108 thousand metric tons of waste.

The Movement

The B Corp community continues to grow because, taking a step back, this isn’t about the companies, it’s a movement toward better-for-the-world living for individuals and the business communities that engage them. 

In August 2016, the number of B Corps was under 1,800 and spanned 50 countries. Now, as previously mentioned, there are over 3,500 B Corps in over 70 countries around the world. The companies span 150 industries and range in size from small business start-ups to large-scale companies. These numbers are evidence that the B Corp movement, and the effort to build a more sustainable economy, is a global and wide-reaching movement continuing to snowball.  

The B Corp movement epitomizes this shift in good-for-the-world business, and we hope you’re as excited as we are to support what it stands for!

Sam Shonfeld

Sam Shonfeld

Contributor

Sam Shonfeld is from Chicago, IL and is currently a senior at Washington University in St. Louis. He’s passionate about corporate impact, he loves backpacking and being active, and he strives to positively affect the people and the world around him.

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