The Rise of the “B Corp”
I need to start out by clarifying what “B Corp” means, as it is often confused with “Benefit Corporation”. In short, the term “B Corp” refers to a third-party certification (by a nonprofit called B Lab), while “Benefit Corporation” refers to a legal incorporating structure similar to an LLC or a C Corp. Many venture-backed “C Corps” are also technically “B Corps” — confusing, right? This article by UpCounsel provides some further clarity.
B Corp companies are verified (by B Lab) as meeting certain standards of social and environmental performance, accountability and transparency. They evaluate their impact on all stakeholders (employees, communities, environment, etc.), not just shareholders.
==> A common analogy is that B Corp certification is to business what Fair Trade certification is to coffee or LEED certification is to buildings.
How does a company become a “B Corp”?
It is certainly no small task to earn this designation, so companies must have the proper resources and eagerness to do this.
First, this certification is for for-profit businesses that are at least 12 months old.* A company needs to complete the B Impact Assessment, take part in an assessment phone call, provide documentation, amend articles of incorporation, and sign a “Declaration of Interdependence”. They then need to be reevaluated every two years. Companies pay fees of between $1,000 and $50,000 each year, depending on their revenues.
(*Note to early stage startups/investors: B Corp is making it easier for early-stage startups to get certified. “Pending B Corp” is open to businesses less than 12 months old.)
⇒ Fun fact #1: The founders of B Lab are also the founders of the basketball shoe company AND1. 🏀
Why do companies choose to become B Corps?
In the past decade or so, there has been increased emphasis on other stakeholder values, particularly social and environmental ones — and a B Corp certification is a way for a business to publicly claim its interest in both shareholder and stakeholder success. This trend of “triple-bottom line” thinking has proven to be good for business too. Evidence shows that purpose-led businesses:
Grow faster and witness higher market share gains
Excel at customer retention due to alignment with the brand
Are more resilient during economic downturns, including the pandemic
Achieve higher workforce satisfaction
Attract and retain top talent. In fact, there are even B Corp job boards now.
Although B Corp certification is a relatively new movement, with the first companies getting certified in 2007, there are now over 5,000 companies certified as a B Corp.
Some familiar names of companies that are B Corps:
Patagonia
Warby Parker
AllBirds
Cotopaxi
Coursera
Erewhon (shoutout to you LA folks)
Lemonade Insurance
Revolution Foods
Altschool
Ritual Vitamins
⇒ Fun fact #2: Most B Corps are private companies; there are less than twenty publicly traded B Corps in the US.
How do investors feel about B Corps?
For you venture investors reading this, “B Corp” status does not affect taxes in any way — and in fact, some of the largest B Corps are venture-backed. The biggest names in venture — including Benchmark Capital, Founders Fund, Andreessen Horowitz, Khosla Ventures, General Catalyst and Sequoia — have all backed B Corps, and are reaping the associated benefits of investing in companies with purpose beyond profits.
⇒ Fun Fact #3: There are 51 VCs that are technically “B Corps”, listed HERE.