The Buzz About B-Corps: Triple Bottom Line Accountability

The Buzz About B-Corps: Triple Bottom Line Accountability

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For generations most companies have measured their success or failure by the amount of profits and losses they experience.  This is in part because financial gains and losses are easy to quanitfy, but also because legally a company owes a fiduciary duty of care to its stockholders, and must weigh stockholder impact when making corporate decisions.  That impact is generally measured in dollars and sometimes is taken to the extreme of “maximizing shareholder value” above all else.  Publicly held companies, companies that sell stock to the general public, are required to prepare annual reports that contain these gains and losses and file those reports with the U.S. Securities and Exchange Commission (SEC).  Most companies also issue a similar report for their stockholders and prospective investors. 

But business is changing, and more and more companies are seeking to measure their achievements in a manner that considers more than just how much money they make; they want to include their social and environmental impact as part of their success too.  In a business world where the common approach is to increase profit and maximize the benefit to your stockholders, and in some cases face stockholder lawsuits for NOT doing this, how can you find a way to include your social and environmental impacts as part of your bottom line reporting?

Enter the benefit corporation and Certified B-Corporations (often abbreviated to B-Corp).

Benefit Corporations and Certified B-Corps came into existence to help companies that want to take a triple bottom line approach to how they do business and how they report on their success.  Benefit Corporations and Certified B-Corps are often thought to be the same thing, but there are some important differences.

Benefit Corporation

A benefit corporation is a company that has legally incorporated as a benefit corporation in their state.  Currently 34 states allow for companies to file as benefit corporations; a few of these states allow for benefit LLCs as well.  If your state allows benefit corporations, you file to become one in the same way you file to become a traditional corporation.  But what exactly is the difference between a benefit corporation and a traditional corporation? 

When you file as a benefit corporation your legal obligations and duties are expanded to include the company’s impact on society and the environment.  It allows company decision makers to take actions that might create a greater benefit to society or lessen the company’s impact on the environment even if those actions reduce company profits or shareholder value.  Company decision makers are protected from potential shareholder claims when the company takes such actions.

Benefit corporations publish annual reports just as traditional corporations do, but they don’t just report on the financial bottom line, the company’s social and environmental impacts are reported as well. 

Certified B-Corp

You may have seen the Certified B-Corporation logo popping up on websites, product labels, and office front doors in the past few years.  The Certified B-Corporation came into existence to provide a way for those in states that do not currently have the option of incorporating as a benefit corporation to be able to “consider the impact of their decisions on their workers, customers, suppliers, community, and the environment” in addition to the financial impact.

The certification is issued by the non-profit B-Lab.  Companies who wish to become Certified B-Corporations must apply via the bcorporation.net website.  They undergo a review to assess the company’s impact on “its workers, customers, community, and environment.”  If the company scores high enough on its review, they must then agree to transparency by making the report available on the B-Corp website.  Finally, they must take the step of amending their bylaws, or other legal governing documents, to “require their board of directors to balance profit and purpose” when make decisions. 

The B-Corp website states that there are currently 2,500 Certified B-Corps around the world.  There are many companies that are both benefit corporations and Certified B-Corps.  Having the third-party B-Corp certification can demonstrate that a company is not just paying lip service to triple bottom line accounting, but is actually actively pursuing a more sustainable way of doing business.

Benefit corporations and B-Corp certification provide triple bottom line minded companies with a way of doing business that is in alignment with their purpose.  Putting society and the environment on par with profits creates new avenues for such organizations to measure their success.  The transparency required provides consumers and investors with the information they need to make decisions on which companies are in line with their personal values.  In the end, having more companies that take a triple bottom line approach to doing business benefits us all.

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