What is a B Corporation? 9 Defining Features
A B Corporation, often referred to as a “B Corp,” is a type of for-profit business entity legally required to meet specific social and environmental standards and pursue profits. The primary goal of a B Corporation is to balance profit generation with creating a positive impact on society and the environment. Becoming a B corporation is a great way to demonstrate that you value the environment and society. It also helps you attract customers, employees, and investors who want to make a positive impact.
The process involves changing your articles of incorporation to enshrine your company’s social mission. This change is not easy, but it is worth the effort.
B Corps are certified by a nonprofit organisation called B Lab.
Key Characteristics of a B Corp
- Triple Bottom Line: B Corps is committed to the “triple bottom line” approach, which means they aim to measure their success by financial performance (profit) and their positive impact on people and the planet. The three bottom lines are profit, people (social impact), and planet (environmental impact).
- Legal Structure: B Corps can take various legal forms, including corporations, LLCs (Limited Liability Companies), and more. They are legally structured to consider stakeholders’ interests beyond just shareholders, such as employees, communities, and the environment.
- Certification: To become a certified B Corporation, a company must undergo a rigorous assessment of its social and environmental practices, governance, and transparency. This assessment evaluates various factors, including worker treatment, environmental impact, and community engagement.
- Transparency: B Corps are required to meet high standards of transparency and accountability. They are expected to publish an annual report that outlines their social and environmental performance, providing stakeholders with insight into their impact.
- Mission-Driven: B Corps have a clear mission statement that reflects their commitment to creating positive social and environmental change. They are expected to embed this mission into their core business activities.
- Legal Protection: In some jurisdictions, B Corps have legal protections that allow them to prioritise their social and environmental goals alongside financial interests, even if it means not maximising shareholder profits in the short term.
- Impact Assessment: B Corps must periodically reassess their impact and make continuous efforts to improve their performance in sustainability, social responsibility, and ethical business practices.
- Community and Stakeholder Engagement: B Corps often actively engage with their communities, employees, customers, and suppliers to foster positive relationships and further their social and environmental goals.
- Global Movement: B Corps are part of a global movement of businesses striving for social and environmental responsibility. This movement seeks to redefine success in business by emphasising more than just financial performance.
A B Corp is a Socially Responsible Business
A B corporation is a for-profit business that aims to create a positive impact on its employees, customers, and the environment. Unlike traditional businesses, B corporations consider all stakeholders, not just shareholders, when making decisions. They also make sustainable decisions, such as using renewable energy and recycling. They are a leading force in a global movement to use business as a tool for good.
A company must meet rigorous social and environmental standards to become a certified B Corporation. These standards include legal accountability and transparency and are verified by a third-party, independent organisation. The certification also requires the company to publish a public report of its social and environmental performance. In addition, a company must be willing to change its practices to meet these standards.
B corporations are a growing part of the economy. Many investors understand these companies’ social and environmental benefits and are more likely to invest in them. They also recognise that these companies will be more profitable in the long run than those focusing only on profits.
Moreover, companies committed to sustainable practices will attract more customers and employees. A recent study by LinkedIn revealed that purpose-oriented workers are 88% more engaged at work than non-purpose-oriented employees. Furthermore, 73% of consumers are willing to pay more for products from a responsible company.
B-Corps Have a Social Mission
Many modern business owners believe that the purpose of a business is not to make money but to create sound. They want to help people, improve their local communities, and protect the environment. They can only do that if they focus on profits. So they’re choosing to be a Certified B Corporation (B Corp). This new type of for-profit business focuses on the needs of the company’s stakeholders, including employees, customers, and community members. They also commit to pursuing higher management goals.
Becoming a B Corp requires the business to assess its social and environmental impact thoroughly. This is overseen by a nonprofit governing body called B Lab. Its mission is to help businesses change how they do business for the better. To become a B Corp, a company must commit to improving its workers’ lives, the community, and the environment, and it must make this commitment publicly available.
This makes it easier for consumers to know if a business is being responsible. It also encourages like-minded employees, which helps attract and retain top talent. B corporations tend to have a lower cost of capital and pay the same taxes as other for-profit businesses. B Corps are an excellent option for companies that want to do more good in the world.
B Corps Have a Purpose
Companies that are certified B Corporations have met high standards, and the designation is a way to let consumers know that they care about their social impact. This is not a legal requirement but can help businesses attract customers and retain employees. In addition, certification allows companies to use the B Corporation logo and participate in the B Corp community. The process can take up to 10 months and cost a business thousands of dollars.
However, it is worth the investment, as a recent study showed that 74% of employees are more likely to stay with a company that values its purpose.
In addition to attracting and keeping employees, a business with a purpose can also improve its performance. It can do this by setting long-term goals and measuring its progress against them. It can also focus on its core values and create shareholder value. This strategy can also address complex issues like global challenges and industry disruptions.
Patagonia, a clothing and equipment company, is one example of a business with a purpose. It was the first business in California to become a B corporation, and its founder, Yvon Chouinard, describes its purpose as “to make the best products, cause no unnecessary harm, and use profits to save our home planet.” Its purpose is clear and inspiring and inspires employees to work harder.
B Corps Have a Social Impact
A business with a social impact focuses on the well-being of the community, employees, environment, and customers. This is different from traditional businesses, which focus solely on profit and neglect the interests of their stakeholders.
This change in attitude has created the B Corporation movement, which aims to prove that businesses can make money and still use their profits to benefit society. To become a B Corp, a company must complete a B impact assessment that evaluates the company’s actions on all stakeholders. A third-party nonprofit organisation, B Lab, conducts this assessment. Companies that pass the assessment must also disclose their results publicly. To qualify for this distinction, companies must meet stringent requirements and pay a fee based on revenue.
Over 3,500 Certified B Corporations are in more than 70 countries, ranging from large multinational corporations to small local businesses. They are a diverse group of for-profit companies that balance profit and purpose. While regular businesses focus on shareholders, B Corps considers all the people and communities they touch as part of their mission.
Becoming a B Corp has many benefits, including attracting like-minded talent and encouraging employees to think about the impact of their work. Preparing the team for this process is essential to building strong leadership teams, preparing a timeline, and making necessary changes to the company’s articles of incorporation. The process can take a year for companies with 49 or fewer employees.
B Corporation – Other useful links from our Knowledge Centre:
How to Manage Business Finances Correctly and Efficiently
Unlocking Business Potential: Strategies for Long-term Success
The Impact of Sustainability on Ecommerce Businesses
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