B Corporation (certification)
B Corporation (also B Lab or B Corp) certification of "social and environmental performance" is a private certification of for-profit companies, distinct from the legal designation as a Benefit corporation. B Corp certification is conferred by B Lab, a global nonprofit organization with offices in the United States, Europe, Canada, Australia and New Zealand, and a partnership in Latin America with Sistema B. To be granted and to maintain certification, companies must receive a minimum score from an assessment of "social and environmental performance", integrate B Corp commitments to stakeholders into company governing documents, and pay an annual fee based on annual sales. Companies must re-certify every three years to retain B Corporation status.
B Lab certification is a third-party standard requiring companies to meet social sustainability and environmental performance standards, meet accountability standards, and be transparent to the public according to the score they receive on the assessment. B Lab certification applies to the whole company across all product lines and issue areas.
An issue in deciding to be a Certified B Corporation would be the administrative and legal costs a corporation will face in changing their business model in accordance to B Labs regulations.
As a matter of law, in Massachusetts or States that recognize B Corporation Certification, it doesn't bring any legal significance to its shareholders, stakeholders or to its employees. However, the certification brings a multitude of branding tools to the corporation.
B Corp Certification will bring no legal liabilities to a C Corporation or any for profit business structures apart from its business model structure which should adhere to the B Labs. To add on, many C corporations usually adapt the B Corporation Certificate to gain goodwill.
- Similar to other business associations, certified B Corporations and their employees have access to a number of discounts from outside entities and fellow members.
- Academic contributions of loan forgiveness.
- A branding tool
- No legal liability
- B Lab certification has no legal status.
- In order to obtain and maintain a B Corporation certification, B Lab charges annual administrative and legal fee depending on the revenue generated by the respective companies.
Distinction from benefit corporation
- Benefit corporation is a legal status conferred by state law in the US; B Lab certification is issued by a non-profit organization and has no legislative framework.
- B Lab certification is not needed to obtain benefit corporation status.
- Legislation for the passage of this corporate legal status has been passed in 35 states, including Delaware, whereas B Lab certification is privately issued by an organisation run by people principally issued from the business community.
The company needs to adhere their corporate legal structure to B-Lab regulation in order to qualify for the certification process.
To obtain a B Corporation certification, a company first completes an online assessment. Companies that earn a minimum score of 80 out of 200 points undergo an assessment review process, essentially a conference call verifying the claims made in their assessment. Companies are required to provide supporting documentation before they are certified.
The assessment covers the company’s entire operation and measures the positive impact of the company in areas of governance, workers, community, the environment, as well as the product or service the company provides. Socially and environmentally-focused business model points ultimately are accrued in their relevant impact area (governance, workers, community or environment). Depending on a company's industry, geographic location, and number of employees, the online assessment adjusts the weightings of the question categories to increase its relevancy. For instance, companies with more employees will have a heavier weighting in the workers category, and companies in manufacturing will have a heavier weighting in the environment category.
To maintain credibility, the B Corporation certification standard operates under principles that are independent, comprehensive, comparable, dynamic, and transparent. B Lab has an established standards advisory council that can independently make decisions with or without the support of B Lab. As of May 2014, 28 of 30 members were listed by their business affiliation. The council recommends improvements to the B Corp assessment on a biennial basis. There is a 30-day public consultation period before releasing a new version of the B Corporation assessment.
Currently the B Corp assessment is its fifth version, with the sixth version scheduled to be released in January 2018.
Certification also requires companies to integrate their stakeholder commitments into the company governing documents. In the United States, the avenue for corporations making the legal amendment to certify will depend on the state they are incorporated in. Some states known as "constituency" states will allow for this change in the articles of incorporation, other states, known as "non-constituency states", will not; and many states now have the option of adopting the benefit corporation legal structure, which also meets B Lab's requirements for B Corp certification. Beyond the corporate model, other for-profit business entities make an amendment of the company by-laws or governing documents. These include:
- The establishment of clear wording to "consider stakeholder interests" in company articles of incorporation or company by-laws.
- Define "stakeholders" as the employees, the community, the environment, suppliers, customers, and shareholders.
- No prioritization of one stakeholder over another.
- Allowing for the company's values to exist under new management, investors, or ownership.
However, B Lab certification allows the company bylaws to remain secret.
Verification and transparency requirements
On completing the assessment, companies are required to meet certain transparency requirements and background checks to become Certified B Corp(s). These requirements are: an in-depth review of public record of the companies, employees, products and other relative topics and randomised site visits.
In June 2019, there were over 2,750 certified B Corporations across 150 industries in 64 countries, including Canada (78 companies), Australia, South Africa, and Afghanistan. The most active community outside of the United States is Sistema B. Since 2012, Sistema B has been the adaptation of the B Corps movement in Latin America, including in Argentina, Brazil, Chile, Uruguay and Colombia. This non-profit adapts proprietary certifications and evaluation metrics and modifies both to the context of each country. B Lab also assists Sistema B in incorporating a benefit corporation distinction into local legal systems.
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