In an era where corporate social responsibility is no longer an afterthought but a strategic imperative, the quest for businesses to make a positive impact has led many to consider either a Benefit Corporation or a B Corp status. However, before you embark on this journey, it's important to understand the distinctions between a Benefit Corporation and a B Corp. In this blog, we'll delve into the key differences, requirements, and implications for companies, particularly for those located outside the United States, such as in the UK and Europe.
The benefit corporation is a novel type of corporate structure available in 34 U.S. states. It aims to solidify a business's commitment to its social mission. Designed to facilitate the long-term preservation of this mission, the legal framework expands fiduciary duties to encompass stakeholder interests, a pivotal condition for certification. There are now over 3,000 benefit corporations in the U.S. This structure operates independently of a company's tax status, devoid of associated tax incentives.
Distinguished from traditional for-profit entities, both Benefit corporations and B Corps adhere to elevated standards of accountability and transparency. Notably, benefit corporations self-report performance, while B Corps undergo the B Impact Assessment for certification, requiring bi-annual evaluations to maintain their status. Intriguingly, a company can concurrently hold the Certified B Corp and benefit corporation designations.
The differences: Benefit Corporation vs. B Corp
- Legal structure
- The Benefit Corporation is a legal structure in the United States. It originally started in Delaware, but expanded to a large number of other states. Benefit corporations are for-profit entities with a particular social or environmental mission. They must meet specific standards but are not certified or assessed by any third-party entity.
- B Corp status, on the other hand, is an internationally recognised certification awarded by the non-profit B Lab after a company meets rigorous standards of social and environmental performance, accountability, and transparency.
- Requirements for Benefit Corporations
- Benefit Corporations are required to consider the impact of their decisions on all stakeholders, not just shareholders.
- A Benefit Corporation must produce an annual benefit report, outlining its social and environmental performance against a third-party standard.
- Requirements for B Corps
- B Corps must undergo a comprehensive assessment by B Lab, which includes an evaluation of the company's governance, workers, community impact, and environmental performance.
- Companies must achieve a minimum score on the B Impact Assessment to become certified as a B Corp.
- Regular recertification is required every three years.
- Global considerations
- Neither Benefit Corporations nor B Corps are exclusive to the United States. However, the certification process for B Corps is designed with a global perspective, making it more applicable to companies outside the U.S.
- B Lab has a global presence and recognises the diverse legal frameworks across countries, adapting its certification process accordingly.
- Implications for UK/European companies
- In the UK, Benefit Corporations are not recognised as a distinct legal entity. However, companies can still adopt a mission-driven approach without the legal structure.
- B Corp certification is increasingly recognised and valued in the UK and Europe, offering a globally recognized standard for companies committed to balancing purpose and profit.
- Benefits and considerations for UK/European companies
- B Corp certification can enhance a company's reputation, attract like-minded customers, and differentiate it in a competitive market.
- The B Impact Assessment provides a roadmap for improvement, helping companies continually enhance their positive impact.
- Benefit Corporations may face challenges in regions where the legal framework doesn't support this structure. B Corp certification, being adaptable to various legal structures, might be a more feasible option.
In the pursuit of sustainable and socially responsible business practices, both Benefit Corporations and B Corps offer viable options. For UK and European companies, the B Corp certification stands out as a practical and globally recognized choice. It not only aligns with the international push for responsible business but also provides a roadmap for continuous improvement.
Before making a decision, carefully assess your company's values, objectives, and the legal landscape in your region. Whichever path you choose, the commitment to balancing profit and purpose is a commendable step toward building a resilient and responsible business in today's ever-evolving landscape.
If you would like expert support on how to formulate a strategy to attain B Corp status, or need help crafting a compelling B Corp impact report, request a free 30-minute meeting and let’s have a chat about what you need!