What Is B Corp?
A B Corp, short for Certified B Corporation, is a for-profit business that has been certified by B Lab, a non-profit organization. This certification signifies that a company meets high standards of verified social and environmental performance, accountability, and transparency.59, 60 Unlike traditional businesses primarily focused on profit maximization for shareholders, B Corps operate within the broader financial category of corporate governance and are committed to balancing profit with purpose.58 They aim to create a positive impact on their workers, communities, customers, and the environment.57 The certification assesses a company's entire operation, covering areas like governance, workers, community, and the environment, as well as the product or service provided. Achieving B Corp status demonstrates a commitment to corporate social responsibility and the principles of environmental, social, and governance (ESG) criteria.
History and Origin
The concept of B Corp certification emerged from a desire to create a new kind of business that balanced profit with purpose. B Lab, the non-profit organization responsible for the certification, was founded in 2006 by Jay Coen Gilbert, Bart Houlahan, and Andrew Kassoy.56 Their motivation stemmed from experiences with companies that aimed for social good but lacked a standardized way to measure and verify their impact.55 The founders recognized a need for a system to identify and support businesses committed to social equity and environmental sustainability.54
The first group of 82 Certified B Corporations was announced in 2007, marking the official launch of the movement.52, 53 This initiative provided a rigorous framework for companies to assess their social and environmental performance, integrate stakeholder commitments into their governing documents, and meet specific transparency requirements.50, 51 B Lab's work has since fostered a global community of businesses striving to use business as a force for good.49
Key Takeaways
- Verified Performance: B Corp certification requires companies to achieve a minimum verified score on the B Impact Assessment (BIA), demonstrating high social and environmental performance across various operational areas.48
- Legal Accountability: Certified B Corps must amend their governing documents to legally commit to considering the impact of their decisions on all stakeholders, not just shareholders.46, 47
- Transparency: B Corps are required to publish a public profile in the B Corp Directory, including their B Impact Assessment score and impact report, ensuring transparency.44, 45
- Continuous Improvement: To maintain certification, B Corps must recertify every three years, updating their B Impact Assessment and verifying their updated score, which encourages ongoing improvement in their practices.42, 43
- Global Movement: The B Corp movement is a global initiative, with thousands of certified businesses across numerous countries and industries, aiming to redefine business success beyond purely financial metrics.41
Interpreting the B Corp
Interpreting B Corp certification involves understanding that it represents a holistic commitment to responsible business practices. Unlike certifications that focus on a single product or issue, B Corp certification applies to the entire company.40 A B Corp is a business that has voluntarily subjected itself to a comprehensive evaluation of its impact on various groups, including its workers, community, customers, and the environment.39
The certification process requires a company to achieve a minimum score of 80 out of 200 points on the B Impact Assessment (BIA). This score reflects a company's positive impact across five key areas: governance, workers, community, environment, and customers. A higher score indicates a greater positive social impact and adherence to B Lab's certification standards. This allows consumers, investors, and potential employees to evaluate a company's commitment to values beyond just financial returns.
Hypothetical Example
Consider "GreenHarvest Organics," a small hypothetical food company. Initially, GreenHarvest operates as a traditional corporation, focusing on maximizing shareholder value. However, the founders wish to formalize their commitment to sustainable farming and fair labor practices.
To pursue B Corp certification, GreenHarvest would undergo the B Impact Assessment. They would review their employee benefits, supply chain ethics, environmental footprint (such as energy usage and waste management), and engagement with local communities. If their existing practices, such as offering comprehensive health benefits and sourcing ingredients from local, ethical farms, result in a score of 80 or higher, they could proceed to verification. Upon successful verification by B Lab, GreenHarvest Organics would amend its articles of incorporation to reflect its commitment to considering all stakeholders, not just shareholders.38 This formalizes their dedication to a sustainable investing framework, aligning their business goals with broader societal and environmental well-being, differentiating them in the market.
Practical Applications
B Corp certification has several practical applications across various facets of the business world, influencing everything from consumer choices to capital markets.
- Consumer Engagement: For consumers, the B Corp logo serves as a clear signal that a business adheres to high standards of transparency and accountability in its social and environmental practices. This can influence purchasing decisions, as a growing segment of consumers prefers to support purpose-driven brands.37
- Talent Attraction and Retention: Companies with B Corp status often find it easier to attract and retain employees, particularly those seeking to work for organizations with a strong mission and positive impact.36 The commitment to fair labor practices and employee well-being can make a B Corp an attractive employer.
- Investor Relations: While not a guarantee of financial returns, B Corp certification can appeal to impact investing funds and socially conscious investors. Some research suggests that B Corps may even outperform conventional businesses in certain metrics like revenue growth and talent acquisition.34, 35 A 2024 Forbes article highlighted that the number of B Corp certified companies has increased one hundredfold since 2008, signaling a growing investor interest in purpose-driven organizations.33
- Supply Chain Development: B Corps often prioritize ethical and sustainable supply chain practices, fostering relationships with suppliers who also meet certain social and environmental standards. This can lead to more resilient and responsible supply networks.
Limitations and Criticisms
While B Corp certification offers numerous benefits, it also faces limitations and criticisms. One significant concern revolves around the potential for "greenwashing," where companies might use the certification primarily for marketing purposes without truly embedding deep-seated ethical or sustainable practices across all operations.32 Critics argue that some certified companies may tout their B Corp status while continuing practices that are less than ideal in other areas.31
Another critique centers on the certification's rigorousness. While the B Impact Assessment is comprehensive, some argue that the minimum score of 80 points out of 200 may be too low, potentially allowing companies with significant negative impacts in certain areas to still achieve certification.29, 30 Furthermore, the certification process can be time-consuming and costly, potentially creating barriers for smaller businesses.27, 28 The self-assessment component of the initial application also raises questions about the overall due diligence and independent verification.26 Despite these criticisms, B Lab has stated its commitment to continuously evolving its standards to address such concerns, including plans for new minimum standards and greater transparency around company scores.24, 25
B Corp vs. Public Benefit Corporation
The terms "B Corp" and "Public Benefit Corporation" (often shortened to "Benefit Corporation") are frequently confused but represent distinct concepts.
A B Corp is a certification granted by the non-profit organization B Lab to for-profit companies.23 It signifies that a company has met rigorous standards of social and environmental performance, accountability, and transparency as assessed by B Lab's proprietary framework, the B Impact Assessment.21, 22 The certification is voluntary and does not change a company's legal legal entity structure itself, though B Lab often requires certified companies to adopt a benefit corporation structure where legally available.19, 20
In contrast, a Public Benefit Corporation is a specific legal corporate structure recognized by state law in the United States and other jurisdictions.17, 18 A Public Benefit Corporation legally bakes a "public benefit" into its corporate charter, meaning its directors are legally obligated to consider the impact of their decisions not only on shareholders but also on a broader range of stakeholders, including employees, the community, and the environment.15, 16 This legal status provides a framework for long-term mission alignment and protects the company's social and environmental commitments even through changes in ownership or leadership.14
While a company can be a Public Benefit Corporation without being a Certified B Corp, B Lab often requires companies in jurisdictions where it's available to convert to a Public Benefit Corporation structure as part of the B Corp certification process, aiming to align legal structure with certified purpose.12, 13 The key difference lies in B Corp being a third-party certification and Public Benefit Corporation being a legal designation.
FAQs
What kind of companies can become a B Corp?
Any for-profit company, regardless of its legal structure, size, or industry, can pursue B Corp certification. This includes small businesses, startups, and even large multinational corporations, provided they meet the B Lab's rigorous standards.10, 11
How does a company get B Corp certified?
To get B Corp certified, a company must first complete the comprehensive B Impact Assessment (BIA) and achieve a minimum verified score of 80 points.9 After passing the assessment and a risk review, the company must meet specific legal requirements, which often involve amending its governing documents to embed a commitment to all stakeholders. Finally, the company signs the B Corp Agreement and pays an annual certification fee.7, 8
What are the benefits of being a B Corp?
Becoming a B Corp offers several benefits, including enhanced reputation and consumer trust, improved ability to attract and retain mission-aligned talent, access to a community of like-minded businesses for collaboration, and potential appeal to socially responsible investors.5, 6 It also provides a framework for continuous improvement in social and environmental performance.
Is B Corp certification a legal requirement?
No, B Corp certification is a voluntary third-party certification and is not a legal requirement for businesses.4 However, as part of the certification process, B Lab often requires companies to adopt a "benefit corporation" legal structure if it is available in their jurisdiction, which does carry legal obligations related to stakeholder consideration.3
How often does a B Corp need to be re-certified?
Certified B Corps must undergo a recertification process every three years to maintain their status. This involves updating their B Impact Assessment and verifying their updated score to ensure continued adherence to B Lab's evolving standards.1, 2