You’ve seen it on company websites, food packaging, and clothes—that B symbol with a circle around it. And it has probably made you wonder, “What does that B stand for?”
What the “B” really stands for is B Corp, and more specifically, a certified B Corp.
A certified B Corp is a for-profit business that has gone through a rigorous review process to ensure that it’s socially and environmentally responsible.
The B symbol you see tied to companies like Patagonia, King Arthur Flour, and Ben & Jerry’s is reserved only for certified B Corps. The symbol proves that they’re committed to using their businesses for good.
Curious about becoming a certified B Corp and impacting more than your bottom line? We’ve broken down the main pros and cons of B Corp Certification, along with the steps you need to take if you want to get B Corp Certified.
B corporation vs B Corp Certification
A benefit corporation and B Corporation are not the same thing (even though they sound exactly the same). The difference all lies in the capitalization.
|Term||What it is|
|Benefit corporation (aka B corporation)||A legal structure|
|B Corp (aka B Corporation)||A business that’s certified by B Lab as socially responsible|
A benefit corporation, also known as a B corporation, is a legal entity. While not every state recognizes B corporation status, as of October 2019, there are currently 36 states that recognize B corporations as business entities. However, on a federal level, B corporations don’t receive any special tax treatment.
On the other hand, a B Corp is not an entity status but rather a business that’s been certified by a third-party organization, B Lab. The certification is exactly like being fair trade certified, and ensures that a business meets a strict set of environmental and social standards.
While it does give your business clout, it isn’t a certification that’s recognized on a state or federal level.
And just to confuse you more, businesses that are B Corp Certified are referred to as “B Corps” while benefit corporations are referred to as “B corporations.” Notice the capitalization.
Any type of business can become B Corp Certified, even the small-but-mighty sole proprietor. You just need to be:
- A for-profit company
- In operation for at least one year
Beyond that, there’s no minimum or maximum size.
If you’re a startup that’s been running for less than a year, you can apply for Pending B Corp Status to show your commitment to investors and customers. The test remains the same, but you’ll estimate the answers and receive a special symbol that indicates your status as pending.
The benefits of B Corp Certification
1. It preserves your mission
If you started your business with a dream of making a difference, then B Corp Certification will hold you accountable to that dream.
The legal framework and governance structure of B Corps requires that companies shift their focus from benefiting shareholders (i.e. making them money), to benefiting its stakeholders, which can be employees, the local community, and/or the environment.
That means your business is legally required to consider its social and environmental impact and can make decisions based on this impact, not just increasing potential profits.
Also, once you become a B Corp, all future owners and shareholders are required to stick to those rules. Even if you no longer own your business, the social and environmental focus needs to be maintained if the company’s B Corp status is active.
2. It gives your business credibility
The B Corp Certification process is not an easy one. Not only do you have to be committed to seeing the process through, you also have to pass the B Impact Assessment.
The B Impact Assessment measures your company’s impact in the following areas:
You earn points for the positive impact you’re making in the areas above. You don’t lose points if you’re not making an impact in a certain area.
Many people look for companies that are environmentally and socially responsible. But, in the era of greenwashing, which is when companies claim to be “green” yet actually do very little for the environment, customers don’t always know which products and services to trust.
Being a certified B Corp shows your customers that you’re not just saying that you care about environmental and social issues—you’re actively making a positive impact in these areas.
3. It helps you attract and retain employees
For a potential employee, B Corp Certification signifies that the company is committed to maintaining a positive work environment and company culture.
According to the Deloitte Millennial Survey, millennials will make up 75 percent of the global workforce by 2025. And half of the millennials surveyed want to work for a business that has ethical practices.
B Corp Certification shows potential employees your commitment to having a positive impact on the world. The more aligned you are with their values, the more attractive you are as an employer.
Also, part of the Impact Assessment focuses on how well businesses treat their workers through compensation, employee benefits, training, and ownership opportunities. Some of the questions in the B Impact Assessment include:
- How does your company’s compensation structure compare to other businesses like yours?
- What is the minimum number of PTO and paid holidays offered annually to full-time workers?
- Do you have a committee that helps monitor Occupational Safety and Health Administration (OSHA) requirements and programs?
4. It helps you connect with like-minded businesses and investors
When you’re a certified B Corp, you join a network of over 2,600 businesses all over the world who share your values.
B Lab also hosts networking opportunities for B Corps, including in-person and online events. This can be extremely helpful if you’ve just started your business and need advice, potential collaborators, suppliers, or anything else.
Not to mention, many investors are attracted to businesses that are socially responsible. While investors still want you to have a profitable business model, some may also want to put their money into something that will benefit the world. Your B Corp Certification could be the thing that makes you stand out.
The drawbacks of B Corp Certification
1. There are no tax breaks
For both benefit corporations and certified B Corps, there are no federal tax breaks. If you’re B Corp certified and a benefit corporation, you will choose to be taxed like an S corp or C corp. Since a benefit corporation is a corporation, these are the only two tax structures available to you.
If you’re another entity and B Corp certified, your tax structure will remain the same.
2. You need to consider the non-financial impact of your actions
As a certified B Corp, you’re legally required to consider the impact your actions will have on your stakeholders.
Let’s say you could change your packaging material to a cheaper substitute. However, the substitute is not environmentally friendly and the production would expose your employees to toxic chemicals. Legally, as a certified B Corp, you’re required to not pursue that opportunity.
What happens if you don’t? Employees and shareholders can sue you and your directors for not upholding the social mission of your business.
3. You’re open to ongoing scrutiny
Once you’re a certified B Corp, you’ll have a public profile listed with your company’s impact score on B Lab’s website. This is part of B Lab’s public transparency requirement.
Here’s what Patagonia’s B Impact Report looks like:
For each area of the Impact Assessment, your score will be listed as well as the details about how you scored in the sub-topic areas. For example, under your overall community score, viewers can see how you measure up in the following areas:
- Job creation
- Diversity and inclusion
- Civic engagement and giving
- Local involvement
- Suppliers, distributors, and product
If you’re doing well in these areas, then this is great marketing for your company. But, if you’re falling short, it could be a drawback.
How to become B Corp certified
Spoiler alert—you’re not going to become B Corp Certified overnight.
Becoming a Certified B Corp is a rigorous and lengthy process. Here are the three main steps you’ll need to take.
1. Take the B Impact Assessment
The first step is to complete the B Impact Assessment online.
Your score consists of two ratings, one for your Operational Impact (how your business runs day to day) and another for your Impact Business Model (how your business earns money). To pass, you need to score 80 or above (out of 200 points) and submit supporting documentation.
Most businesses take the assessment for the first time and realize that they need to make significant changes in their operations and business model and formalize their policies. That’s okay. You don’t have to submit the test if you’re not ready.
Even if you do pass the assessment, it will teach you about the areas of your business that need improvement so you can work toward them on an ongoing basis.
2. Meet the Legal Requirement
If you pass, you’ll go through a series of assessment calls with the B Lab team.
For the legal requirement, you’ll be required to change your legal structure to a B corporation, amend your Articles of Incorporation, or make other structural changes.
B Lab will also run a background check.
3. Pay the annual fee and get recertified every two years
After you pass, you’ll pay an annual fee for the business certification. The annual fee can range from $500 to $50,000, depending on your sales revenue.
The certification lasts for two years. After that time, you’ll have to take the Assessment again to get recertified. If the owner who took the test leaves the company, you’ll also have to get recertified.
Yes, the B symbol is pretty cool. But given the length and depth of the B Corp certification process, it’s important to carefully weigh the pros and cons so you can be totally sure that it’s right for your business.
And if you do become a certified B Corp, then you’ll have permission to use the exclusive B symbol, just like so many businesses you admire.
Inline image source: Flickr user @mgifford