Nowadays, most people understand the social pros and cons of the firms they support. They have learned how different people and communities suffer at the hands of companies that have foregone social costs to increase their returns. As a result, more investors and individuals have embraced companies that optimize returns and social impact. Firms that work hard to optimize social costs and profits are known as Benefit Corporations.
Companies are declared Benefit Corporations after receiving certification from non-profit B Lab or registering with the State Government. Certification by B Lab is popularly known as B Corps. At the same time, those registered with State Governments are named according to state law or the Public Benefits Corporations (PBCs). Read on to find out what Benefit Corporation is and how the certification is done.
What are Benefit Corporations?
Benefit Corporations also named the B Corporations, are firms that maximize both social impact and profits. They are designed as for-profit business entities that have put the community at the forefront plus the returns when making decisions. The Benefit Corporation differs from conventional corporations in their transparency, purpose, and accountability.
Most Benefit Corporations are formed to generate public benefit to bring a positive impact to the community and the setting. The board of directors for the Benefit Corporation has similar powers to that of the conventional corporation. However, the traditional corporation judges its performance based on its financial position, while the benefit corporation considers whether the company has positively impacted society.
What is B Corp Certification?
B Corp Certification is a third-party organization that assesses the impact of a company on its stakeholders. The verification is based on the company’s accountability, transparency, and performance. The B Corporation certification focuses on how firms must be mindful of how their behaviors affect society and the surrounding settings. The Certification of Benefit Corporation is done through the B Lab organization after the company has fully sustained all the social and environmental guidelines.
B Lab is normally a not-for-profit firm that helps B Corporations become certified. This is through offering required support, such as more access to certified logos and introducing newly licensed firms to communities and environments needing help. B Lab has been in operation for over 15 years awarding certificates to at least 4000 firms.
On the other hand, the Public Benefits Corporations (PBCs) are certified by the State Government following the guidelines provided by the State law. PBCs are profit-making business entities currently operating in over 30 countries. For effective operation, the PBCs need a clear charter showing the legal statement of purpose. This indicates that the organization has the liberty to make crucial business verdicts. In addition to positively changing the impact on society, PBCs operate by optimizing annual profits.
How B Corporation Certification is done
B Lab requires each B Corporation to adhere to transparency and rigorous environmental and social sustainability guidelines. The guidelines are generally accessible on the B impact assessment tool required during the certification process.
- For full certification, the B Corporation must prove that it has been running for one year. However, if the business is new, there are unique steps startups follow to receive the B Corp certifications, among them earning more than 80 points of the 200 required.
- The Impact Assessments are complex since they show the best practices that the B Corporations need to implement.
- Companies must also prove that they earn money while positively changing people’s lives. This means they reduce the negative environmental effect while enhancing efficiencies and optimizing social impact.
- B Corporations must also produce documentation verifying details in the assessment available on the internet. You are allowed to save and return your evaluation when ready.
- You will then wait for the evaluation review process that measures your company’s eligibility for certification.
- Proceed to the verification process, where an analyst will enquire about your suppliers and staff.
- Finally, publish your public profiles to satisfy all the B Corp certifications, including the company’s positions and reports. You are signing the required term sheet and paying the cost of licensing.
Conclusion
Establishing a benefit corporation assists a company in meeting its social purpose, considering the impact on society. Certification and guidelines policies enable the management to assess its progress and know whether it’s working towards achieving its objectives. With this guide, you are well-positioned with the steps to follow for certification.
