Game-Changing B Corps & Benefit Corporations
The great companies of our time were built by missionaries, not mercenaries. The two terms, B Corp and Benefit Corporation, are often confused, but they are not the same, though for both accountability is not solely fiduciary duty to shareholders but also to all of society and the environment.
In 2006, Jay Coen Gilbert, Bart Houlahan and Andrew Kassoy founded a game-changing, Philadelphia-based 501(c)3 organization called B Lab, with a mission to “redefine success in business.” Jay Coen Gilbert tells the story:
The B Corp preceded the Benefit Corporation. B Lab was founded in 2006, followed in 2007 by developing capacity to give B Corp certification.
B Corp Logo
In 2007 B Lab developed their tool to redefine success in business, which they called a B Impact Assessment viagra online italia. The B Impact Assessment was designed to serve as a standard for measuring a business’s social and environmental impact, and as a way to benchmark a company’s impact, compared with that of similar businesses. The assessment also includes interactive tools to help businesses improve their impact over time.
In 2008 B Lab began to certify social enterprises (mission-driven, for-profit companies) as “B Corps.” To become a B Corp, a business had to achieve a score of 80 or above (out of a possible 200) on the B Impact Assessment and change its governing documents to allow directors to consider other stakeholders besides shareholders when making decisions on behalf of the company. Since launching the B Corp certification program, B Lab has certified over 1,000 B Corps all over the world.
The B Corp was followed by another big step, developing and passing legislation to create a different kind of corporate enterprise, the Benefit Corporation. The “Model Act” was first passed in Maryland in 2010.
John Montgomery was co-chair of the legal working group behind Assembly Bill 361, which established benefit corporations in California in 2012. Visionary California businesses, such as Patagonia, can now incorporate in, or convert to, a new form of corporation, the benefit corporation, which not only optimizes profits for shareholders but also provides a material positive impact on society and the environment. Preliminary economic data indicates that corporations built to support sustainability out perform their conventional peers (The Impact of a Corporate Culture of Sustainability on Corporate Behavior and Performance, Robert Eccles, Ioannis Ioannnou and George Serafeim, Harvard Business School Working Paper, November 2011).
In 2008, John Montgomery founded StartWorks, a technology incubator, which produced StartWorks University, an educational program for entrepreneurs and evolved into content for Great from the Start; How Conscious Corporations Attract Success. In 2010, through StartWorks, he co-founded Chrysallis, a human development company. In 2014, John co-founded OneGlobal, an international management consultancy which applies the science of consciousness to businesses and leaders to optimize their performance for success. He tells an engaging story of how his eclectic background across arts and law drove him to “think different,” becoming a leader in developing California’s Benefit Corporation legislation.
Just as the GSA uses externally developed LEED standards, the government uses B Lab to certify B Corporations. A benefit corporation can be a certified B Corp, but this is a separate process of certification through B Lab. Likewise, a B Corp can be a benefit corporation, but it could also be an LLC, a regular corporation, a limited partnership or another type of legal business entity.
There are far more B Corporations, corporations that have become B Corporations by being certified by B Lab for their environmentally sound business practices, than there are new corporations that were formed as Benefit Corporations under the more recent legal statutes.
Today about 1500 corporations meet the requirements to be called B Corporations. B corps in the U.S. include Patagonia, Etsy, Seventh Generation, Freelancers Insurance Company for the independent workforce, and Cascade Engineering, which undertakes sustainable manufacturing for renewables. James Surowiecki, author of The Wisdom of Crowds, wrote about Companies with Benefits in The New Yorker: “B corporations are for-profit companies that pledge to achieve social goals as well as business ones. Their social and environmental performance must be regularly certified by a nonprofit called B Lab, much the way LEED buildings have to be certified by the U.S. Green Building Council. Many B corps are also committed to a specific social mission. Warby’s production and distribution is carbon-neutral, and, for every pair of glasses it sells, it distributes another in the developing world, in partnership with a nonprofit called VisionSpring.”
Benefit Corporations demonstrate that a healthy planet where companies produce products and services for the public good also makes good business sense. Both the the B Lab certification and Benefit Corporation legislation foster more transparent business operations and help to protect the nascent social enterprise sector from companies that “greenwash” – businesses that are not social enterprises but claim to be in order to increase their profits or generate some other self-serving benefit.
Within a decade, these game-changing innovations have fostered a new perspective on the problem of corporate personhood.
RESOURCES
Articles on B Corps and Benefit Corporations
How to Become a Benefit Corporation
Video Narrated by John Montgomery, Co-Founder of Montgomery & Hansen LLP
John Montgomery’s Law Firm LexUltima, focusing on Benefit Corporations
Zann Gill for earthDECKS