Benefit Corporations and B Corps: Socially Responsible For-Profit Companies
If you consider yourself to be socially responsible, and you want an idea to help your business be successful and stand out from your competition, you should consider transforming your business into either a “benefit corporation” or a “B Corp” or both. As explained below, the two are different.
What is a Benefit Corporation?
Some states have changed their corporate laws to specifically allow a for-profit corporation (not a limited liability company, partnership, or cooperative) to be a public benefit corporation. In so doing, states relieve the directors and officers of the corporation from the obligation to maximize shareholder value and, instead, consider also the corporation’s effect on the community, employees, customers, the environment, and other socially-responsible matters.
Currently, 31 states have passed laws regarding benefit corporations and five are in the process of passing such laws. Minnesota is one of the most recent. It passed a public benefit corporation statute which allows corporations to be either a general benefit corporation (GBC) or specific benefit corporation (SBC) or both. Wisconsin does not have a public benefit corporation statute, but does provide in its business corporation law that directors and officers may, in addition to considering the effects of any action on shareholders, consider the effects on employees, suppliers, customers, communities in which the corporation operates, and any other factors that the director or officer considers pertinent.
What is a B Corp?
A B Corp is a for-profit business (including corporations, limited liability companies, partnerships, and cooperatives) that is certified as a B Corp by the nonprofit organization called B Lab. B Lab created a process by which a company that is chartered under the laws of any state (or any country) can obtain a B Lab certification. Inc. Magazine calls the B Lab certification “the highest standard in socially responsible business.”
Why become a Benefit Corporation or B Corp?
Becoming a benefit corporation or B Corp is a way for a business to set itself apart from its competition and not only maximize profits, but also provide benefit to the world, a community, or a species. Landor Associates, a global brand consulting firm, reported that about 77% of consumers say it is important for companies to be socially responsible.
In the society we live in today, consumers and employees have started to demand more from companies and their executives: corporate social responsibility. This philanthropic ideal has been around for decades, but did not really find traction until the twenty-first century when Millennials started to enter the business world. In fact, an article published in the Washington Post in December 2011 by Michelle Nunn illustrated that “Millennials are shifting the norms of corporate America’s conduct, ethical imperatives and purpose.” The article states that in order to attract top talent, employers must have a reputation for social responsibility and provide opportunities for their employees to make a positive impact on society. Equally, “Millennials, as consumers, are pushing companies to change the ways of doing business to align with the values of civic and global responsibility largely held by Millennials.” These ideals were reiterated in the recently published 2016 Deloitte Millennial Survey, which collected the view of nearly 7,700 Millennials representing 29 countries.
There are many social, marketing, business, and personal reasons why a company would want to be a B Corp. The following are some of the reasons why companies have chosen to become a B Corp:
- It allows a company to put a stamp on its name differentiating it from competitors and other businesses. It shows your company is serious when it comes to social responsibility; the “proof in the pudding” as you will.
- It can be a great way to attract investors who want to invest with a company living a socially responsible mission.
- The B Impact Assessment allows a company to benchmark its performance and mission and gives examples of areas to focus on. It can be a great housekeeping tool for executives to fine-tune the company and its processes.
- It’s no secret that the tides are turning in the business world and that businesses are being held to higher standards of accountability in the eyes of the public. As younger generations reach the top of each organization, the bottom line will begin to shift to share a focus with social responsibility.
- It has been reported that B Corps have provided discounts to other B Corps. It can possibly offset some costs generated by pursing social responsibility as the already large B Corp community continues to grow. Currently, there are 1,686 B Corps that span 48 countries in 130 different industries.
- It could help attract young, talented employees with a focus on working for a company and a mission they believe in.
- Allows you to participate in B Labs “B the Change” campaign, which includes: print ads reaching 5,000,000 conscious consumers inviting them to B the Change; special edition products from 16 B Corps spreading the word at retailers like Whole Foods, Target, Wegmans, The Container Store, and Barnes & Noble; in-store and online retail promotions in grocers around the country; monthly B Corp community-wide outreach activating 30,000+ employees and 24+ million friends and followers; and consumer-facing BtheChange.com inspiring individuals to join the movement and support their favorite B Corps.
For our own research, we met with Matt D’Amour, the CEO (Chief Energy Officer) at YumbutterTM, one of three B Corps incorporated in Wisconsin, to find out first-hand why companies are choosing to become B Corps. Matt said that “the old system is dead” and that companies can no longer get away with thinking only about the bottom line. Matt is in line with many of the studies and articles we read. Matt said that YumbutterTM became a B Corp because the certification is not just “greenwashing.” B Corps are held accountable under the B Labs stringent B Impact Assessment. YumbutterTM is walking the walk and talking the talk. YumbutterTM currently donates about $.17 per unit sold toward social good and that provides its customers with instant gratification knowing that they helped make the world a better place.
How does a Business become a B Corp and Maintain its Certification?
B Lab has four steps to obtaining certification as a B Corp:
- Complete the B Impact Assessment and earn a reviewed minimum score of 80 out of 200 points. This is an assessment that is done online.
- Form your company or, if it is already formed, determine whether the organizational documents need to be amended. This will include getting all requisite approvals, amending your articles, and filing your amended articles with the Wisconsin Department of Financial Institutions.
- Sign the B Corp “Declaration of Interdependence and Term Sheet.” Some of the items that the company must agree to in the term sheet include: meeting the certification performance requirement; meeting all legal requirements for the state the company is chartered in; and participating in a randomly-selected on-site review.
- Pay the annual certification fee. The fee is based on the company’s annual sales.
The certification has a term of two years. After the two-year term, the company needs to recertify.
For further information, contact your business attorney or visit the B Lab website at www.bcorporation.net. For further information on Benefit Corporations you can also visit benefitcorp.net.
About the Authors
Danielle is a member of our Business Practice Group and assists clients with matters related to business law, intellectual property law, real estate law, employment law and litigation. Specifically, Danielle advises business owners, companies, and families in a full range of business-related legal issues from negotiations to drafting contracts to business transactions. She is licensed to practice law in Wisconsin and Minnesota and enjoys working with clients in both states.
Contact Danielle by email or phone, 608.252.9287.
Brian is a versatile attorney, practicing in multiple areas of the law. One of his primary areas of practice is the Employee Retirement Income Security Act (ERISA), which was famously described by the U.S. Supreme Court as a “comprehensive and reticulated statute.” Another primary area of practice is tax law.
Contact Brian by email or phone, 608.252.9340.
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