Everything You Always Wanted to Know About B-Corporations (but Were Afraid to Ask)

In the stellar hour-long documentary in the video pane above, Not Business As Usual director Lawrence Le Lam and institute B profile a handful of registered Benefit corporations (or b-corporations/B-corps for short) in Vancouver to show how each one has thoughtfully integrated their profit-making business model with meaningful social and environmental benefits as part of their core operations.

They take us through a brief overview of capitalism and the history of the corporation, and how pioneering social enterprises like The Body Shop and Ben and Jerry’s proved that companies could move beyond a pure profit-making model and develop sustainable practices, while still being good for business (incidentally both of them had successful exits that stipulated the retention of their values).

At Third Wunder, it’s one of our goals this year to complete the certification process and join the 120 Canadian companies  currently operating as B-corps and over 900 companies worldwide (both as of January 2015). But in talking with many of our peers, clients and friends it’s clear many people don’t know what they are or how this new breed of business has emerged to narrow the gap between pure profiteering and responsible approaches to enterprise. So here’s our handy walk-through of everything you need to know about this alternative structure for registered companies…

What Does B-Corporation Mean?

Sustainability without Compromise
Photo Credit: Richard Eriksson

B-Corporation is short for “Benefit Corporation,” they rose to prominence in the 1990s with the idea being that corporations can bring far greater value to society than simply pursuing growth and profit. To better understand how the B-corporation designation fits into the business landscape, it’s easier to first define the two models we’re all already more familiar with:

  1. Traditional corporations are taxable and legally responsible for generating maximum revenue and profit for shareholders.
  2. Non-profits registered as charities are tax exempt and responsible for creating public benefits. They are prohibited from making a profit for members, however they can raise funds and use those towards operational costs and charitable programs.
  3. B-corporations can make profitcreate public benefits and are taxable, so it’s essentially a hybrid of standard corporations and non-profits.

This chart from Sustainable Prosperity‘s report on Benefit Corporations in Canada goes into more detail about the differences between the three structures:

Bcorps versus corp vs charity

Why B-Corporations?

In order to clarify their mandates and benefit from both models, many organizations have structured themselves around the for-profit and not-for-profit designations by creating one of each (Just For Laughs being a good example), but the rise of the B corporation gives entrepreneurs an alternative, allowing them to start businesses that have social as well as financial missions.

There are three main reasons why founders should consider b-corporation status:

1. Legal

A standard corporation essentially has the sole responsibility to make profit for shareholders. C-levels of major corporations who make decisions based on other criteria can theoretically be sued or ousted for not serving this primary goal. However a B-Corporation can list other social and environmental goals in the articles of incorporation that allow for an expanded benefit-oriented mission with actionable programs (such as carbon neutrality or fair trade) as well as securing profit and growth along the way.

2. Branding

Registering as a B-Corporation allows companies to embrace core values to the fullest with an accountable reporting structure that helps establish credibility with what Inc Magazine calls“the highest standard in socially responsible business.” The practice of “greenwashing” (superficially marketing products and organizations as sustainable when they are not) has made it difficult for consumers to identify truly conscious brands and registering for B-corporation status helps companies build trust in their brand. The aperture of b-corporation certification looks at the entire company and requires registrants to recertify every two years to ensure they remain committed to performance standards and sustainable practices.

3. Retention

Purpose-driven companies tend to attract more committed employees who retain longer. In addition, B-corporations often provide better benefits for employees overall as part of their mission.

Jay Coen Gilbert, co-founder of B-Labs, goes further to talk about how we need to go beyond storytelling to provide infrastructure so that standards, metrics and trust are all at the heart of new economies based on sustainable principles in his TEDx talk

Triple Bottom Line

This kind of full-circle thinking epitomizes the “Triple Bottom Line” commitment, where People, Planet and Profit are all factored into a company’s success.

1. People

People-oriented benefits could include social responsibility, equitable and equal opportunity employment, community involvement, special benefits for staff and families, equity-sharing, contributions in company time and capital to programs benefiting social good.

2. Planet

Planet-oriented benefits could include conservation and carbon neutrality programs, computer recycling initiatives, supply chain optimization, sustainably sourced materials and processes (e.g. recycled fabrics and non-toxic dyes), tree-planting and animal welfare initiatives.

3. Profit

Maximizing growth and creating new revenue streams to generate profits for shareholders and fund People/Planet missions.

B the Change

There’s a reason “Not Business as Usual” profiles Vancouver-based B-Corps: while any qualifying Canadian company can become certified as a B-corporation by going through the rigorous B Labs process, only BC-based companies can actually incorporate as a benefit corporation as well (in other provinces a standard incorporation with relevant articles to satisfy the B-Corporation requirements is the way to go).

Sustainable Business Corporations
Only BC-based companies can currently incorporate as Benefit Corporations, However businesses across Canada can go through the process to certify as B-Corporations | Source: Sustainable Prosperity & B Lab

This provincial support has led to a wealth of sustainable BC businesses like the ones profiled in the film, although across Canada many businesses are adopting the model and becoming certified. Notably, BDC became a B-Corporation in March 2014, becoming the first Canadian financial institution to do so.

Still curious about B-Corporations? Check out the Performance Requirements to see if the B-corp approach is right for your business!

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