B CORPORATIONS

What is a B corporation and what problem does it solve?

 In the simplest of terms, B Corporation is a corporation that has been given the ‘B Corporation’ certification by the B-Lab nonprofit organization.

What problem does it solve?

 Most corporations have a very simple goal: maximize shareholder value by maximizing profits. Indeed, under US corporate law, companies can be sued if they deviate from this goal. Due to the important role that business play in society, many people would like them to look at other things besides. This can take the form of ‘Corporate Social Responsibility’ or ‘triple bottom line’ type thinking. These approaches usually take the form of companies acting in a socially and environmentally responsible way, the triple bottom line is “social, environmental, and financial.”

Companies, realizing that consumers value purchasing responsible products have responded by marketing themselves as “Green” and “Socially Responsible.” The issue with this is when everyone is saying how responsible they are it is hard to tell who is being honest and who is just green washing.

The solution to is to provide some sort of certification process to verify which companies are actually acting in a responsible manner. There are already a number of certifications such as LEED Certified buildings, or fair trade certified coffee. However, these tend to be focused on a single issue. B-Lab tries to develop a broader certification that covers all aspects of responsible business.

In order to become a certified B-Corporation a company needs to do three things.

  • Change their company governing documents to include statements showing commitment to consider stakeholders[1] when making business decisions.
  • Have an Assessment done by B-Lab, to score the company. A company needs a score of 80 or greater to qualify to be a B-Corp.
  • Pay an annual fee ($500-$50,000+) depending on the size of the company.

The meat of this is the assessment. If the assessment gives a proper score that accurately reflects the true impact of the company then this could be a valuable tool, if it does not, it is no better than so much green packaging.

Not all companies are given the same assessment, instead assessments are varied depending on the type of industry, size of company, location of company and other factors.

I went ahead and filled out the basic survey for a company that I made up. Colorado based ABCcorp, which is in the hospitality business.  (I pretty much filled in the bubbles at random.) They asked questions about labor (how much people are paid, what benefits, how much more is the highest paid person paid, compared to the lowest. Community(questions about who the company works with, amount given to charity etc. Environmental( Questions about Recycling, Energy Use Emissions, Etc.)

At the end of this survey ABCcorp was given a score (it did above average on 12 things and below average on 26 things.)[2] If I wanted to actually get my company certified, I would have to engage in a longer assessment in which I would have to document everything I just said about ABCcorp. Presumably, the fact that my company does not exist would disqualify it. To complete the process, companies have to send documents to B-Lab and have to undergo a more detailed analysis. After they go through this process they are scored from 0-200, with a score of 80 being the minimum needed to obtain a certification as a B-Corp.

 

What does being a B-Certified company actually tell you about a company?

One thing it absolutely tells you is that this company wants to be a B-certified company. This means that they have an interest in being a socially and environmentally responsible company, or at least in looking like one, and they feel that it is worth putting some time and effort to do so. It also tells you that on a number of indicators related to various aspects of responsibility they perform well. For (some?) B-certified companies you can find reports that give more details on their scores. For Patagonia we see that they perform better than the Median company assessed by B-Lab on nearly every category.  Which is nice, but I couldn’t tell you exactly what that means.

Scoring companies on their social and environmental responsibility is always going to be really hard. All companies are different and have different strengths and weaknesses, different areas where they are impactful, and different problems. Any scoring system is a judgment call on how to value these things and will always be imperfect.

Ultimately, I think there is probably some value to something like B-Corps. If only that it tells consumers that these companies find it important to consider all stakeholders when making their decisions, and that another group of people seem to think that they are doing okay at actually carrying this out. I won’t be changing my shopping to purchase more B-company products, though. If you like the B-Corp produced flour you buy, I’d probably keep buying it.

 

 

[1] Stakeholders are all those involved in a business. It includes Customers, Workers, Owners, Suppliers, any anyone in the outside community that might be affected by the companies’ actions. Ex: people in the community who have to live with effects of pollution.

[2] Here at ABCcorp we are never average!

 

 

 

 

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