Benefit Corporations – What Are They?
Benefit Corporations, or B Corporations, are a fairly recent form of corporate structure. These corporations are designed for for-profit organizations that wish to take into account the environment and society along with profitability in their strategy and decision making process. The novel corporate approach allows the higher management to see beyond the interests of shareholders and consider the effect of their decisions on the employees, community and environment at large.
The aim of this new form of corporation is to create a positive impact on the environment and society and reach higher benchmarks of accountability, performance and transparency. Today, there is a thriving community of over 950 certified benefit corporations across 32 countries and 60 industries working in harmonization to achieve one unifying goal – redefining success in business.
Requirements to Become a Benefit Corporation
- Strive to create a material positive impact on the society and the environment
- Contribute to specific public benefit purposes, like 100% local sourcing, 50% profits to charity and others.
- Higher level management (directors and officers) will consider the impact of their decisions on shareholders and other stakeholders like employees, customers, suppliers, society and environment.
- have an independent benefit director responsible for preparing a statement in the yearly benefit report to summarize if the board was able to act consistently to create a general or specific public benefit
- publish a public report that evaluates their social and environmental performance on the whole against a third party standard.
- make the annual benefit report public via company website and share with all shareholders
Right of Action
- Directors and shareholders have a right of action
- no third party right of action
- in case of the benefit corporation being a subsidiary, owners with an interest greater than 5% have a right of action
Change of Structure
- will require 2/3 super-majority vote
- dissenters rights applicable in states in which they already exist
Benefit Corp vs. Certified B Corp
Due to the similarity in terms, Benefit corporations and Certified B Corporations are often confused to be the same.
The concept of Certified Benefit Corporation emerged from a nonprofit called B Lab.
Benefit corporations need NOT be certified. They only achieve the legal status administered by the state they are located in.
Accountability– Directors of both corporations are expected to the take into consideration the impact of their decision on shareholders, as well as other stakeholders like employees, community and the environment.
Transparency – Both corporations are required to publish a public report that evaluates their social and environmental performance on the whole against a third party standard.
B Lab – the non-profit organization helped to draft the benefit corporation Model Legislation
Performance – To qualify as a Certified B Corporation, every corporation has to achieve a established minimum score on the B Impact Assessment. Benefit corporations are required to publish a public report that evaluates their social and environmental performance on the whole against a third party standard, but the report does not need to be verified or certified by any third party standard organization.
Support – Certified B Corporations receive support from B Lab for a portfolio of services like sales, marketing, raising and saving money and business strategies to deal with other Certified B Corps.
Availability – the corporate status as a Benefit Corporation is legally recognized by 20 states and the District of Columbia since of 2013. On the other hand, Certified B Corporation is a certification available to corporations in all 50 states of US and around the world.