What is a certified B-corporation?

By Lauren DeMates-

A community of “certified B corporations” has emerged and could even be considered a movement. The basic premise is that these companies are committed to creating benefits for society and shareholders, not only maximizing profits. The company’s relationship with society is demonstrated through a public assessment of a variety of environmental and social indicators and also adjusted in legal documents (more on the steps to certification outlined below). Information about these certified businesses are to be used by consumers, investors, and companies to support and grow sustainable businesses. This is a shift in capitalism- a pretty big deal.

As described by B Lab, the non-profit who operates this framework, B corporation certification is to sustainable business what LEED certification is to green building or what Fair Trade is to coffee. There are over 900 certified B corporations in 60 industries and 29 countries covering a wide variety of products and services. Examples of a few certified B Corporations are Patagonia, Method Products, Comet Skateboards, Dansko, and Ben & Jerry’s (which is a subsidiary of Unilever).

B Lab provides the free B Impact Assessment using the self-developed Global Impact Rating System (GIIRS). GIIRS analytics rates company’s societal impact in the areas of accountability, employees, consumers, community, and environment. This assessment is the 1st step to becoming a certified B corporation. If companies receive a rating of 80/200 they can go forward in the certification process. Companies have within a year after certification to complete step 2 below, but can go forward with step 3 in the meantime.

The 2nd step is to meet the legal requirement, which is that the company’s governing documents allow social and environmental considerations as part of the decision-making process (not only the consideration of financial benefits to shareholders). B Lab provides reference on how to amend governing articles and general assistance, but with the disclaimer that it does not constitute legal advice. In 20 states legislation has been passed for the creation of a new type of legal entity: the benefit corporation. Benefit corporations, and also flexible purpose companies (FlexC) in California, have high standards of corporate purpose, accountability, and transparency already integrated into the legal structure, thus these types of entities automatically fulfill the legal requirement.

The 3rd step is that the company sign the B Corporation Declaration of Interdependence and Term Sheet. Certification is good for 2 years with a tiered annual fee structure. 10% of B corporations are reviewed each year through randomly selected on-site visits. B corporations have received favorable reviews by President Clinton, The New York Times, The Economist, Sierra Club, Inc magazine, entreprenuear.com, and Esquire.

For more on the big picture and inspiration behind B-corps here is a great TEDTalks of B-lab co-founder, Jay Coen Gilbert: http://www.youtube.com/watch?v=mGnz-w9p5FU

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