B Corporations

Definition

B Corporations, or Benefit Corporations, are for-profit companies that are legally required to consider the impact of their decisions on their workers, customers, suppliers, community, and the environment, in addition to their shareholders. This unique corporate structure aims to balance purpose and profit, making them a distinct type of business that prioritizes social and environmental impact alongside financial performance.

5 Must Know Facts For Your Next Test

1. B Corporations are required by law to consider the impact of their decisions on all stakeholders, not just shareholders.
2. To become a certified B Corporation, companies must meet rigorous standards of social and environmental performance, accountability, and transparency.
3. B Corporations are legally required to have a corporate purpose to create a material positive impact on society and the environment.
4. The B Corporation certification is granted by the non-profit B Lab, which evaluates a company's entire social and environmental performance.
5. B Corporations are part of a growing global movement to use business as a force for good and to redefine success in business beyond just profit.

Review Questions

• Explain how the values and principles of B Corporations differ from traditional for-profit corporations.
  • The key difference is that B Corporations are legally required to consider the impact of their decisions on all stakeholders, not just shareholders. While traditional for-profit corporations are primarily focused on maximizing shareholder value, B Corporations must balance purpose and profit, taking into account the needs of their workers, customers, suppliers, community, and the environment. This stakeholder-centric approach is a fundamental tenet of the B Corporation model, which aims to use business as a force for good and redefine success beyond just financial performance.
• Analyze how the B Corporation certification process and legal requirements help to ensure accountability and transparency.
  • To become a certified B Corporation, companies must undergo a rigorous assessment of their social and environmental performance by the non-profit B Lab. This evaluation examines the company's entire business model and operations, looking at metrics across areas like worker treatment, community involvement, environmental impact, and more. Companies must also legally amend their governing documents to require consideration of stakeholder interests, not just shareholder interests. This third-party certification and legal accountability helps ensure that B Corporations are truly walking the talk when it comes to their social and environmental commitments, rather than just greenwashing or engaging in superficial CSR efforts.
• Evaluate the role of B Corporations in the broader context of universal business ethics values, such as sustainability, social responsibility, and stakeholder theory.
  • B Corporations directly embody the universal business ethics values of sustainability, social responsibility, and stakeholder theory. By legally enshrining a commitment to consider the impact on all stakeholders, not just shareholders, B Corporations put these ethical principles into practice. Their focus on measuring and reporting on the triple bottom line of social, environmental, and financial performance aligns with the idea that businesses have a responsibility to society and the planet, not just their own profitability. Furthermore, the B Corporation movement is part of a broader shift towards redefining business success and using companies as a force for good, which speaks to the universal importance of ethical, sustainable, and socially-conscious business practices. Overall, B Corporations represent a leading-edge model for translating universal business ethics values into concrete corporate structures and accountability measures.

Related terms

Stakeholder Theory:

Stakeholder theory is the idea that a company should consider the needs and interests of all its stakeholders, not just its shareholders, when making decisions.

Triple Bottom Line:

The triple bottom line is an accounting framework that incorporates three dimensions of performance: social, environmental, and financial. B Corporations are expected to measure and report on all three aspects.

Corporate Social Responsibility (CSR): CSR refers to a company's initiatives to assess and take responsibility for the company's effects on environmental and social wellbeing. B Corporations integrate CSR into their core business model and decision-making.