Public Benefit Corporation versus B Corp Certification Differences

But in 1916, Henry Ford announced that the company would stop paying special dividends. Instead, he said, the firm’s money would be devoted to expanding its business and lowering the price of its vehicles while improving their quality. Angered with no longer receiving the dividends they had grown used to, the Dodge brothers sued, asking the court to order Ford Motor to resume paying the special dividends and to enjoin the proposed expansion of the firm’s operations. What’s interesting about our seeming contradictions is that they actually work well together.

There are also fees involved and future audits to insure compliance with all of the standards. Make Policy Adjustments — Consider adjustments to existing city incentives that could encourage businesses to measure and manage their impact with the same rigor as B Corps do. Transforming the global economy to benefit all people, communities, and the planet. As long as it is certified by B Lab and the applicable fees are paid, any company that sets about to make a profit can become a B Corp. With a bright spotlight on environmental, LGBTQ+, and racial issues in the news and at the forefront of consumer’s minds, an increased number of companies are speaking out and stepping up as leaders in the fight to protect our planet and our people.

What are B Corps?

Still, the large number of businesses pursuing the B Corp certification has attracted scrutiny, with some critics accusing B Lab of greenwashing and of possibly substituting good governance for accreditation. B Lab charges B Corps an annual fee based on revenue, so it could be in their interest to overlook a B Corp not honoring its commitments, if it makes enough money doing so. B Lab took the criticisms to heart and enacted a myriad of reforms aimed at improving transparency and accountability.

• One way for B Corps to fulfill the legal accountability requirement of the certification is to become a benefit corporation.
• Companies must re-certify every three years to retain B Corporation status.
• In short, a PBC structure allows businesses to focus on both profits and benefits for society.
• As a matter of law, in Massachusetts or states that recognize B Corporation certification, it doesn’t bring any legal significance to its shareholders, stakeholders or to its employees.
• In contrast, this same level of thought over the company’s purpose is not required when incorporating a standard, for-profit Delaware corporation.

Other research promotes the synergy between a benefit corporation and employee ownership. Directors are required to consider the corporation’s actions on all stakeholders, but generally with an emphasis on a specific public benefit. Stakeholders can be defined differently by the various benefit corporation statutes that have been passed, but usually include employees, customers, the local community, the environment, and yes – shareholders.

Benefit Corporation (B Corp) FAQs

Since PBC includes the term “Public Benefit”, many people get confused and mistakenly think they are the same as non-profits. Additionally, B Lab requires that a Certified B Corp re-incorporate as a PBC within two to four years after going public. Further, B Corps can participate in dedicated B Corp advertising campaigns organized by B Lab. But beyond these dedicated campaigns, companies can include the B Corp certification on their products and in marketing materials, which informs consumers that they have met B Lab’s rigorous certification procedures. At risk of stating the blindingly obvious, all founders of for-profit companies want their businesses to be profitable. Bloomerang is the community-focused nonprofit donor management software built to deliver a better giving experience and help organizations thrive.

• They can’t just focus on making money while also exploiting people and harming the environment.
• The officers are charged with handling the day-to-day business of the company.
• If a company meets the 80 point threshold on the BIA, the B Lab staff will communicate with the company to review the BIA and the company will be asked to submit additional information.
• Typically, the purpose of a PBC is stated in the company’s formation documents, as the structure of PBCs is designed to increase transparency and accountability regarding their social and environmental impact.
• Designation as a benefit corporation grants a company some legal protection to pursue social or environmental good, rather than focusing solely on shareholder priorities.
• Public Benefit Corporations are corporate entities that are legally structured to take into account the interests of social good in addition to maximizing shareholder value.

B Corp Versus Public Benefit Corp Whats The Difference?s are slightly more complicated to incorporate as or convert into because a PBC must define its social purpose at the time it becomes a public benefit corporation. In contrast, this same level of thought over the company’s purpose is not required when incorporating a standard, for-profit Delaware corporation. A Benefit Corporation must assess its overall social and environmental performance on a yearly basis using an independent third-party standard, many of which are free to the public, such as the B Impact Assessment mentioned earlier.

What’s the Difference Between a Public Benefit Corporation and a B Corp Certification?

Shareholders saw Ford’s unilateral move as being a humanitarian effort and a breach of Ford’s duty to return maximum value on their investment. The Dodge brothers won the case and would later go on to start their own car company. Investors may also perceive businesses demonstrating sustainable business practices as having lower liability risk. This makes these companies more attractive long term investments, even if their near term profitability is not as high.

This is similar to a C Corporation or S Corporation with the key difference being the consideration of all stakeholders. B Corp certification may not provide an investor with all of the information they need to make investment decisions. B Corps are recognizable to the public as companies that are committed to balancing profit with a social and/or environmental purpose.

Related Business Initiatives

Think of it as the Good Housekeeping Seal of Approval for businesses voluntarily trying to do well by doing good. By contrast, a Benefit Corporation is a type of corporation currently recognized in 37 states with legally protected requirements of higher purpose, accountability, and transparency. A benefit corporation, also known as a “B Corp,” is a brand new type of business structure that empowers the corporation’s leadership to balance public benefits against shareholder profits. Unlike a traditional corporation which is operated solely to make money for those who invest in it, directors in a benefit corporation are required to balance shareholders’ interests, the public’s interest and the interests of other stakeholders . Designed and awarded by the nonprofit B Lab, this third-party certification differs from ESG ratings and reporting standards in its methodology. Instead, companies must score a minimum of 80 on the B Corp impact assessment, which comprises 200 questions about the company’s operations and business model over five categories — workers, community, environment, governance and customers.

Companies that obtain a B Corp certification must also re-certify every two years to ensure a continued commitment to these principles. To earn their status, Certified B Corps meet meet rigorous standards of social and environmental performance, legal accountability, and transparency; this achievement is verified and supported by B Lab, a non-profit organization. Most likely not.Becoming a public benefit corporation won’t hurt your control. It just means you have to weigh your social/environmental objectives alongside maximizing value for your shareholders.