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A better way of doing business is catching on, as more and more companies adopt a new corporate structure intended to create greater public good.
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While a publicly traded company may become certified or even legally restructure as a B Corp through shareholder vote, there are no public B Corps yet. At least 50 companies across the country have legally registered as benefit corporations, and more are expected now that New York’s legislation took effect in February. The exact number may be difficult to pin down in the short term, since most of the states where legislation has passed do not track B Corps separately.

Though born of idealism, the B Corps model is propelled by the limitations of current corporate law, which prioritizes the financial interests of shareholders over the interests of workers, communities, and the environment. While a conventional corporation can be sued by shareholders for decisions that dilute profits, a B Corp can’t be held liable for choosing to forego some profit for the greater good of the community or environment. A B Corp can, for example, choose to buy from local vendors at higher prices in an effort to reduce carbon emissions, and do so without the worry of lawsuits.

“If we are to succeed in building a new economy, we need to restore the public’s trust in business...Benefit Corporations are held to higher standards, and there is more transparency with their actions. They must provide information about all of their activities, not just revenue and profits,” Edlin says.

Adopting the B Corp framework is a double-edged sword for a company’s directors and officers—while it reduces their liability when considering profit scenarios, it also gives shareholders additional rights to hold them accountable for not acting in a socially responsible way or doing enough to meet their goals.

“Being a B Corp means making a serious commitment to your mission. Every action doesn’t necessarily have to create public benefit, but the overall impact should be positive for society and the environment,” Trojian says. 

B Lab’s certification comes at a cost. Annual fees range from $500 for small companies to $25,000 for companies with more than $100 million in annual sales. Taking advantage of special discounts, loan forgiveness programs, and service partnerships available through B Lab’s business network can help offset a portion of the cost.

The expense may deter some companies, but Amanda Bybee, co-owner and vice president of Namaste Solar in Boulder, Colorado, says the certification, including the $5,000 annual fee the company paid in 2011, is a worthwhile investment. “The program legitimizes what we’ve already been practicing for years. It helps us show that we walk our talk, and it gives credibility to our claims,” Bybee says.

For lack of other options, Namaste, like so many other companies, incorporated as a conventional C corporation in 2005 even though the profit maximization structure didn’t necessarily fit with its value-based business model. With the blessing of its 44 employee-owners, the company later attained B Corp certification and is awaiting the passage of legislation in Colorado to determine its next step. As part of its mission, the company commits 1% of its revenue to community and educational programs.

On its 2011 assessment, Namaste performed better than most, with 141.5 points. The company scored well for it environmental practices and its treatment of employees but needs improvement in other areas like workplace diversity. The company lost critical points for not having a formal written code of conduct policy for its suppliers and an annual external report that quantifies the social and environmental benefits of its business practices—two issues the company is actively working to address, Bybee says.

North Carolina solar installer Southern Energy Management (SEM) is a certified B Corp, and plans to incorporate as one when the law allows and the time is right, according to Maria Kingery, the company’s cofounder and president. SEM’s score has remained at about 110 points since its initial certification in 2009, and SEM consistently scores well in environment and employee sections. However, to address shortcomings in governance, for example, SEM recently implemented a formal open door policy and code of ethics for employees and the leadership team.

“Every year, we set a B Corp score improvement target to help guide us in our efforts to become more sustainable as a company,” she explains. “Already, some of our residential customers are telling us that they chose to work with us because we are a B Corp...They recognize that when they choose us over one of our noncertified competitors, they’re investing in more than just a solar system or an energy-efficiency upgrade—they’re investing in a new way of doing business.”

With more than 400 green certification programs vying for the attention of eco-conscious consumers, it is hard to know whether the B Corp certification alone will drive the creation of better business practices as B Lab hopes, but it seems to be a step in the right direction, and with legislation backing the idea, who knows—this just might be the start of a corporate revolution.

—Kelly Davidson

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