B Corps and benefit corporations: clearing up the confusion
Recently, we’ve had conversations with businesses about the concepts of “benefit corporations” and “B Corps” and realized there are many questions and varying opinions about the concepts. We thought it would be helpful to clear up some confusion about the differences and provide some “pro tips” from our friends at Preserve, a company that is a certified “B Corp”.
While a benefit corporation and a B Corporation sound similar and both provide opportunities for companies to formally demonstrate their commitment to social and environmental sustainability, there are some differences. A company can legally register as a benefit corporation in the state in which it operates so that the company’s Board of Directors has legal protection to consider environmental and social factors when making decisions beyond the short-term financial obligations to which boards are typically beholden. Legislation codifying the concept of a benefit corporation now exists in 36 states in the U.S., with 5 additional states currently working on passing legislation. State-by-state instructions on how businesses can register as a benefit corporation can be found here.
A Certified B Corporation (or a “B Corp”) is a company that has received a certification from the third-party nonprofit B Lab. There are over 3,000 Certified B Corporations across 71 countries, spanning 150 industries (1,220 of them are based in the United States). To become certified, companies must fill out the B Impact Assessment and receive a minimum score. The assessment leads companies through an array of questions on workers, community, environment, and customers. Even if a company doesn’t plan to get certified, the assessment is a free tool that all businesses can use as a guide to assess themselves on sustainability issues.
It is important to note that a company can be a benefit corporation without being a B Corp, or vice versa, or they can be both. You can learn more about the differences between the two types of entities here.
To get a practical view on the opportunities and challenges associated with the B Corp certification, we caught up with Deana Becker, Director of Stakeholder Operations at Preserve, a Massachusetts-based company that creates household and food service products out of recycled plastic and compostable materials. Preserve was founded with the mission to mitigate the impacts of the industrial age and to offer creative and innovative solutions to consumers and for the earth. It has been a certified B Corporation since 2011. Here’s our Q&A with Deana.
Q: What are the benefits of going through the B Corp certification process?
A: The certification process has helped Preserve to create policies and pushed us to create a handbook to document things that we were already doing but that weren’t necessarily formalized. In addition, being part of a network of certified companies has provided us with access to a community of companies and people with shared values. For example, there is an annual B Corp Champions retreat as well as local gatherings that help connect B Corps. There is also an online social platform called the B Hive. Through the network of B Corps, we have connected with a 401K provider, sought advice on software systems, and shared advice on how we created leave policies.
Being part of the B Corp community also allows us to stand up publicly with a group of like-minded companies on issues we believe in. For example, we’ve stood up for a more inclusive economy, for the Paris Climate Accords, and much more. We have also collaborated on marketing initiatives with like-minded companies. Lastly, certification helps us with talent recruitment because it signals to potential employees the values that are important to our company.
Q: What are some of the challenges you have experienced with obtaining or maintaining certification?
A: As a small business, it can be difficult to devote the time needed for gathering or developing all the relevant information needed to complete the assessment. Logistically, the process necessitates good project management, especially because some parts of the assessment require backup documentation which means lots of coordination and cooperation from many people all around our company. While time consuming, the process has been a great way to look holistically at all of the departments of our company. I get to have conversations about aspects of some of our departments which I might not otherwise have - and this has been both fun and enlightening for me personally.
Q: Do you have any advice for companies thinking about becoming certified by B Corp?
A: It’s important to make sure that the management team is all in. Becoming a B Corp is a big undertaking and there needs to be buy in from the top as it can require changes in how some activities are conducted. Fortunately, since Preserve already operated as a mission-driven company, many of the changes we needed to make were minor.
Beyond that, and getting into logistics of the assessment itself, it’s important to think about the different types of documentation that you’ll need to provide from the beginning. This is because it is a rigorous certification and every claim needs to be truly backed up. After submitting the assessment, there is a one-hour call with B Lab to review your answers as well as the possibility of an on-site audit. Having all the backup information gathered from the beginning makes it much easier to provide the necessary documentation when it is needed. As mentioned earlier, I would also encourage folks to get involved in regional B Corp networks and attend events to learn more about your local B Corp community. It is a great way to test the water even if you’re not sure about your plans to get certified at the moment.
SustainabilityNext congratulates Preserve on its efforts and we are ready to help your business consider the pros and cons of becoming a benefit corporation or Certified B Corporation. Please reach out to us if you would like assistance with managing a certification project.