What is the Real Difference Between Certified B Corps and Benefit Corps?
Certified B Corps vs. Public Benefit Corporations
Due to their similar names and origins, the Certified B Corp and the Public Benefit Corporation (PBC) are often confused, even within the social impact community. This article identifies the key differences between the two, in the hope to alleviate some of the confusion between these two important but distinct tools for social entrepreneurs.
What is Certified B Corp?
A Certified B Corp is a company that has gone through the nonprofit B Lab’s rigorous B Impact Assessment and scored over 80 points out of a possible 200 obtainable points to achieve B Lab’s third-party certification as a company that creates value for all of its stakeholders and uses business as a force for good.
The B Corp Certification and the Benefit Corporation are closely linked because the certification requires that, in addition to scoring over 80 points on the assessment, a firm must either become a Benefit Corp or amend their governing documents to have the same functionality as a Benefit Corp (with this functionality often called Mission Lock).
The certification also requires that the B Corp annually produce an audited social and environmental impact report to be publicized on the company’s website and on B Lab’s website.
Lastly, Certified B Corps are required to pay an annual fee to B Lab and recertify every three years to prove that they are continuing to maintain or improve their impact. One can certify their company as a B Corp in any state or country so long as they meet these aforementioned requirements.
What is the difference between a B Corp and a Benefit Corp?
Where the B Corp Certification is a third-party certification like Fair Trade or ISO, the Public Benefit Corp, on the other hand, is a legal corporate structure like an LLC or C Corp. Unlike Certified B Corps, one can only become a Public Benefit Corp in certain states and countries that have adopted Benefit Corp legislation. Benefit Corp has all of the same features and legal structure as a C Corp, with two notable exceptions.
Benefit Corporations are like C Corps: Exception #1
Firstly, Benefit Corps have the feature that we mentioned earlier: Mission Lock. Mission Lock is a clause within a company’s bylaws that institutionalizes a mission statement for the company and protects company management in the event that they make a decision that benefits another stakeholder over shareholders. The Mission Lock language in the company bylaws was originally designed to prevent companies from losing their positive stakeholder practices in the event of a change of ownership, such as an acquisition, an IPO, or raising investment capital, by immortalizing the company’s mission and protecting management in the event that these prioritize other stakeholders’ needs over their profit maximization for shareholders. One classic example of this kind of scenario would include laying off employees during tough economic times due to investor pressure, even when the company can afford to keep all of those employees employed.
Benefit Corporations are like C Corps: Exception #2
Secondly, Benefit Corporations, unlike C Corps, must produce an annual audited report on progress made towards advancing their stated company mission. Because the Benefit Corp structure was also created by B Lab, this feature is conveniently compatible with the requirement for Certified B Corps in which they must produce annual audited impact reports.
So, do I need to become a Benefit Corp to become a Certified B Corp?
While both the Benefit Corp and the Certified B Corp were created by B Lab to address important social impact infrastructure needs, there is a distinct difference between the two. A company does not necessarily have to be a Benefit Corp to become a Certified B Corp, but it does need to incorporate the same Mission Lock language into its governing documents. On the other hand, companies are welcome to become Benefit Corporations without certifying as a B Corp. Nonetheless, thousands of companies have decided to become both Public Benefit Corporations and Certified B Corps due to their inherent benefits.
For more information about Public Benefit Corporations, visit B Lab’s website. B Lab has also developed an incredibly helpful tool for companies attempting to become B Corp Certified who want to know how to incorporate Mission Lock into their company based on their current corporate structure and their state or country.
Interested in Becoming a Certified B Corp?
Torrey Project can help you through the whole B Corp certification process, from beginning the B Impact Assessment all the way to making the most of the certification once you achieve it! You can schedule a free consultation with one of our consultants by clicking the link below:
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