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. These companies balance purpose and profit, using the power of business to solve social and environmental problems.

5 Must Know Facts For Your Next Test

1. B Corporations are certified by the non-profit organization B Lab, which evaluates a company's social and environmental performance, accountability, and transparency.
2. To become a certified B Corporation, a company must amend its legal governing documents to require consideration of the interests of all stakeholders, not just shareholders.
3. B Corporations are required to report on their social and environmental impact, and they must recertify every three years to maintain their B Corp status.
4. B Corporations are part of a global movement to redefine business success and use the power of business to solve social and environmental problems.
5. Becoming a B Corporation can help companies attract and retain talent, increase customer loyalty, and differentiate themselves in the marketplace.

Review Questions

• Explain how B Corporations differ from traditional for-profit companies in terms of their legal obligations and decision-making processes.
  • Unlike traditional for-profit companies, B Corporations are legally required to consider the impact of their decisions on all stakeholders, including workers, customers, suppliers, the community, and the environment, not just their shareholders. This means that B Corps must balance purpose and profit, using the power of business to solve social and environmental problems, rather than solely focusing on maximizing shareholder value. To become a certified B Corporation, a company must amend its legal governing documents to enshrine this stakeholder-focused approach.
• Describe the role of B Lab, the non-profit organization that certifies B Corporations, and the process companies must go through to become certified.
  • B Lab is the non-profit organization that certifies B Corporations. To become a certified B Corporation, a company must undergo a rigorous assessment of its social and environmental performance, accountability, and transparency. This assessment evaluates the company's impact on its workers, customers, suppliers, community, and the environment. If the company meets B Lab's standards, it must then amend its legal governing documents to require consideration of all stakeholder interests, not just shareholders. B Corporations must also report on their social and environmental impact and recertify every three years to maintain their B Corp status.
• Analyze how the B Corporation model aligns with the concept of managing a socially responsible business, and explain the potential benefits for companies that choose to become B Corporations.
  • The B Corporation model aligns closely with the concept of managing a socially responsible business, as it requires companies to consider the impact of their decisions on all stakeholders, not just shareholders. By legally committing to balance purpose and profit, B Corporations are using the power of business to solve social and environmental problems, which is a key aspect of social responsibility. Becoming a B Corporation can provide several benefits for companies, including attracting and retaining talent, increasing customer loyalty, and differentiating themselves in the marketplace. Additionally, the requirement to report on social and environmental impact and regularly recertify helps to ensure that B Corporations are held accountable for their commitment to social responsibility.

Related terms

Corporate Social Responsibility (CSR): A business approach that considers the social, environmental, and economic impacts of a company's operations and integrates these concerns into the company's values, culture, decision-making, and strategy.

Stakeholder Theory:

A business management theory that suggests managers should make decisions that consider the interests of all the parties (stakeholders) that have a stake in the business, not just the shareholders.

Triple Bottom Line:

A framework that measures a company's success not just by its financial performance, but also by its social and environmental impact, considering people, planet, and profit.