The Benefit Corporation

Business is adapting to a more sustainable society, causing some old tried-and-true business models to radically adjust their common practices. Here's a peek into a new model that addresses this paradigm shift: the Benefit corporation.

In legal-speak, there are a variety of organizations that exist: S, LLC, or C corporations. Now a new variety has emerged and is gaining notoriety within the United States: the Benefit Corporation (a.k.a the B corp). In 2011, over 400 B Corporations existed, from consultants to tea suppliers, and the number is still growing. So what exactly does a B corp do? To put it simply, a B corporation exists to not only provide benefits for its shareholders, but for the rest of society as well. Maryland, the first state to have passed legislation for this model, outlined a list of these in its Benefit Corporation Act. Currently, B corp status is only available in California, Hawaii, New York, Vermont, New Jersey, Maryland, and Virginia. Despite a few differences in state regulations, to properly be chartered as a B corp, a qualifying company should:

  1. meet transparent and comprehensive standards of social and environmental performance;
  2. legally expand their corporate responsibilities to include consideration of stakeholder interests; and
  3. amplify the voice of sustainable business and for-profit social enterprise through the power of the unifying B Corporation brand.

In addition to meeting governmental standards, a business may choose to obtain third-party certification. At the moment, B-Lab is the main provider of this service for B corporations. Within the B-Lab framework, an interested company must earn a score of 80 on an impact assessment test which includes environmental performance, adopt the B Corporation Legal Framework, and sign a Term Sheet and “Declaration of Interdependence” to be fully certified.

Looking past the regulation hurdles and new nature of the model, the heart of the B corporation lies not in profits but in social benefits. Because it interweaves the impacts of its actions into its formal structure, this model has adopted a largely sustainably focused mode of operation. And light of the increase in sustainable activities in business, the B corp might be ahead of the curve.

Is your business a B corp? Or are you considering becoming one? What are the benefits you hope to gain? Are there any unexpected challenges? Let us know in the comments below.

Read the rest of our series on sustainable business models in The Social Enterprise Way and CICs: Companies adding value to society. And see what the future holds for sustainability in A Vision for Sustainable Consumption.