Certified B Corps & Benefit Corporations

What is the difference between a Benefit Corporation and Certified B Corp? The simple answer is that a Benefit Corporation is a legal structure. A Certified B Corp has obtained a third-party certification through B Labs.  Benefit Corporations and Certified B Corps consider people, planet, and profit in their business decisions.

Certified B Corps

A Certified B Corp is a company that makes a true impact. Certified B Corps measure their impact through the B Impact Assessment, and must have a score of at least 80 out of 200. The Certified B Corp has also either formed or amended its company charter to include the specific “Benefit” language required by B Labs. In addition, it has paid its annual dues to the non-profit certifying body B Labs.

The Impact Assessment is a rigorous measurement of a company’s governance, employment, environmental, community and consumer practices.  Most companies on this planet will not qualify as a Certified B Corp. Therefore it is a true honor to obtain B Corp Certification.  As of 2017, there were over 2,200 Certified B Corporations in over 50 countries across 130 different industries.

Certified B Corps must incorporate benefit language into their incorporating documents. To incorporate the benefit language, a corporation will need to include the language in its Articles of Incorporation and Bylaws. Whereas, an LLC will need to include the benefit language in its Operating Agreement. The benefit language requires every business decision to consider the impacts on employees, the environment, community, consumers, and owners.

The B Labs annual dues are an important requirement and are based upon a company’s annual revenues.  A small company will have annual dues of $500, while a larger publicly traded company will have much larger annual dues.

Benefit Corporations

A Benefit Corporation is a legal structure available in 33 states including California. The Benefit Corporation legal structure is required for all Certified B Corps with a corporate structure in these states.  If a Certified B Corp is incorporated in one of the 17 states without a Benefit Corporation statute they do not need to convert to the Benefit Corporation Structure.  That is until all 50 states have this legal structure!

A Benefit Corporation must have a purpose to create a specific or general public benefit.  For example, in California, a general public benefit means that a company considers the impacts of its business decisions on employees, the environment, community, consumers, and shareholders.  A specific public benefit is one that an individual company can choose to incorporate as part of their purpose. For example, a specific public benefit could be ‘to benefit children in poverty’ or ‘to benefit ocean health.’

A California Benefit Corporation’s board of directors must prepare an annual benefit report and make it publicly available.  The annual benefit report must measure the company’s impact based upon a third-party standard.  The most common third-party standard used today is the B Labs Impact Assessment.  However, a Benefit Corporation can use the B Labs Impact Assessment without becoming certified. However, most of our Benefit Corporation clients choose to obtain Certified B Corp status through B Labs.

Is B Corp Certification or a Benefit Corporation Right For You?

We often advise our clients that becoming a Benefit Corporation is much easier than becoming a Certified B Corp.  As a Certified B Corp ourselves, we know first hand how difficult it can be. It is not only challenging to get certified, but to stay certified.

Each year the Impact Assessment changes based upon community feedback on best practices. In addition, B Labs randomly selects a percentage of its certified companies to audit.  We were audited in 2015 SLG was audited, and we wrote about that experience in our blog article The B(est) Audit You’ll Ever Have.  Being a Certified B Corp requires time, infrastructure, money and  dedication to the Certified B Corp values.

However, maintaining our B Corp Certification has paid off for us.  We know the metrics behind our core values.  We know exactly what our impact is on our employees, the environment, community and our clients.  And, we have gained valuable insight on how to improve as a company. Finally, we are part of an amazing community of like-minded business leaders. We highly recommend that any company considering becoming a Certified B Corp or a Benefit Corporation talk with us before taking on this worthwhile journey.