Ethics and business make great partners

What’s expected from business has changed; consumers are increasingly attracted to businesses they perceive as ethical, with quantifiable commitments to social and environmental responsibility. Concepts such as fair trade, environmental sustainability, impact investing, fair wages, and good treatment of workers are becoming inextricably woven into corporate success. This is true especially among Millennials, now old enough to be major players in consumer and corporate cultures.

Enter the B Corp, or the benefit corporation — similar in concept, but not the same. More on that in moment.

What they have in common: In both cases B stands for benefit, but it could also stand for bigger — as in bigger than ourselves. Nothing wrong with making money, but the idea here is that a for-profit entity can and should benefit not only itself and its shareholders, but also society in general to the extent possible. This is no pie-in-the-sky idealism; businesses are finding they can make money and make a positive impact on the world, beyond simply filling coffers and providing employment. And they’re finding that consumers increasingly expect, or at least prefer, just that.

Both B Corps and benefit corporations involve accountability and public transparency (a report detailing impacts, related actions, and philosophy). In both cases there is no tax status difference from other for-profit corporations; benefit and B corps are taxed the same as C or S/LLC entities.

Can a company be both a certified B-Corp and a benefit corporation (in states that have codified it, such as Idaho)? Yes — a company can be one or the other, both, or neither.

What’s different: While the basic principles of both are the same, the chief differences are methodology, perks, and cost. In the minority of states (15) which still don’t have benefit corporation statutes, the B Corp remains the only recognized option.

The B Corp came first in 2006. B Lab is an independent entity which certifies companies as B Corps using a scoring process, interviews, and a concrete commitment to social consciousness. Being B-certified gives the business a recognizable status and logo, proving to consumers that the business cares about others and makes a positive impact on its community. The B Lab also keeps statistics, provides support services, templates and ideas, as well as a network of like-minded companies. The B Corp option costs $500-$50,000 annually, based on revenues. Big names such as Ben & Jerry’s and outdoor outfitter Patagonia have taken the B Corp plunge.

The B Corp “Declaration of Interdependence” states in part:

“We must be the change we seek in the world… All business should be conducted as if people and place matter.”

Benefit corporations are formed under one of 35 state statutes (including Idaho in 2015) since the first was codified in Maryland in 2010. Owners have the option to form (or convert) a business as a “public benefit corporation,” requiring owners and officers to consider the well-being of employees, community, and the environment when making decisions and judging performance, rather than solely the profit motive. The cost is much cheaper than a B Corp, essentially just the initial state filing fee of a few hundred dollars, but without all the B Lab extras and logo.

While state laws vary and oversight is uncommon (many don’t really keep track once a company is formed), a benefit corporation does generally have reporting standards similar to a B Corp (typically not audited externally in the case of a benefit corporation, but used as a rubric by the company) such as:

Purpose: Includes some public benefit, such as a percentage of profits to charity.

Accountability: Directors’ duties specifically include considering broader impacts on the community and/or the environment as “stakeholders.”

Transparency: Annual benefit reports accessible by the public, e.g. on the company web site.

Right of Action: Enabling shareholders and directors to legally enforce the duty to pursue the named benefit.

Change of purpose/structure: For existing companies, evidence of change to benefit status (this is not the same as nonprofit; benefit corporations remain for-profit).

It’s not only traditional businesses which are shifting to the benefit model. As local news outlets — who are already involved in their communities and charities — struggle to survive, some are considering the B Corp or benefit model.

This article merely highlights both entities. For much more information see Bcorporation.net and Benefitcorp.net.

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Sholeh Patrick is a Hagadone News Network columnist. Email: [email protected]