Distinctions Between a Benefit Corporation and a Certified B Corporation

What is the difference between a Benefit Corporation and Certified B Corporation (B Corp)? The short answer is that a Benefit Corporation is a legal structure while a Certified B Corporation has obtained a third-party certification through the non-profit B Labs. Both Benefit Corporations and Certified B Corps consider people, planet, and profit in their business decisions and are designed so that companies can be a “force for good”. The sections below provide a summary of each form.

Certified B Corporations

Certified B Corporations can take the form of any corporate structure (e.g. S Corp, LLC) including Benefit Corporation (the logical legal form when it is an option*). The certification by B Labs is like the USDA Organic or Fair Trade certification, except it applies to a company and not a specific product. Certification is contingent of scoring 80 or more points on the very rigorous B Impact Assessment, which objectively measures, using best practice benchmarks, how positively the company impacts People and Planet and how progressive its Governance and Business Models are. It “measures what matters”.

Why Become a Certified B Corporation

I think that a company must already practicing Conscious Business to become a Certified B Corp and that becoming a Certified B Corp is the best way to deepen their commitment and evolve to the next level. Here’s how I think it does that:

• Process for evolving a company’s purpose, aligning its workers, and building its culture
• Means for Continuous Improvement
• Involves them in a like-minded community (there are over 2,000 B Corps in over 50 countries) and a world movement to define success and the role of business to serve humanity.

It also has other benefits:

• Improves financial performance (e.g. from stakeholder engagement)
• Preserves a company’s mission (through governance changes)
• Market differentiation, brand preference
• Attracts and engages top Millennial talent

In my estimation, certification puts teeth to Conscious Business through its focus on “doing”. Again, the “being” must be there also.

*as some states have not passed legislation to enact Benefit Corporations

Benefit Corporations

A benefit corporation puts the legal teeth in Conscious Business. Under  existing corporate structures, a conscious business and its mission can be legally coopted by shareholders. For example, Conscious Business poster child Whole Foods was forced to sell to Amazon because of an “activist” private equity investor that thought the company was not fulfilling it fiduciary responsibility of maximizing shareholder value, put it to vote, and won. If Whole Foods was a Benefit Corporation, this would not have been possible. In the words of John Montgomery of Lex Ultima:

” A Benefit Corporation is a relatively form of for-profit corporate governance that endows the corporation with social and environmental conscience. In general, it differs from a traditional corporation in four aspects:

1. It must create general public benefit by providing material positive impact on society and the environment;
2. Such impact must be measured against a third-party standard such as the B Impact Assessment used to score and accredit Certified B Corporations;
3. Such impact must be reported to the shareholders and the public annually;and
4. The fiduciary duties of directors extend to all the corporation’s stakesholders, including employees, vendors and suppliers, the communities in which the corporation does business, society and the environment.

Under prevailing corporate law and custom, the sole legitimate purpose of the corporation is to maximize stockholder welfare. The doctrine is known as shareholder primacy and leads to sociopathic behavior. In short, shareholder primacy makes it difficult for corporations and their directors to do the right thing by society and the environment. The Benefit Corporation authorizes corporations to do the right thing for all of their stakesholders and transcend the constraints of shareholder primacy.