B Corps and benefit corporations are often used interchangeably when referring to for-profit companies with a social mission. However, there are some important differences between these two types of organizations that can make a big impact on your business.
In this post, we’ll explore the basics of both B Corps and benefit corporations so you can decide which one might be right for your company.
What Is a B Corp?
A B Corp is a for-profit company certified by the nonprofit B Lab to meet rigorous social and environmental performance standards, accountability, and transparency. As such, it must adhere to higher standards than required by law. Benefits include:
- A global community of 1 million+ people who support your mission
- Access to all of the tools and resources needed to achieve your goals through a global network of B Corps
- Access to special financing programs at no cost
What Is a Benefit Corporation?
A benefit corporation is a legal status for a for-profit company in which the company’s directors or managers must consider how their decisions affect shareholders and other stakeholders. A benefit corporation has a legal obligation to consider the interests of all stakeholders, including employees, communities, the environment, and shareholders.
The Difference Between B Corp and Benefit Corporation
While both B Corps and Benefit Corporations have similar missions (i.e., social and environmental impact), there are differences in how each organization operates. In general:
- A benefit corporation must report on its social and environmental performancein its annual report
- B Corps are not required by law to report on their social or environmental impact
- B Corps can focus on any number of different ways that they wish to further their mission
- Benefit corporations must focus on specific areas, such as workers’ rights or community development projects, whereas B Corps do not have these restrictions.
B Corps are Already Benefit Corporations
Benefit corporation status is self-declared and self-monitored, while B Corp certification is granted by an independent third party (B Lab) through assessment. Benefit corporation status can be revoked if a company does not meet the standards for benefit corporations, but B Corps are already legally certified by an independent third party (B Lab) through assessment and held to high standards of transparency.
The mission of the Benefit Corporation movement is to expand the social purpose clause in corporate law to allow companies to pursue non-financial goals and profits. Unlike a traditional corporation, this form requires directors committed to generating both public benefits and returns for investors.
While there is some overlap between the purpose of benefit corporations and B Corps, they have different goals. B Corps are focused on environmental and social impact, while benefit corporations focus on stakeholder value.
Benefit corporations have higher transparency standards than B Corps because they must publish annual reports detailing their performance in meeting their stated mission statement.
As we’ve seen, a B Corp and a benefit corporation are similar in many ways. However, they do differ in some significant ways. Most importantly, while benefit corporations are legally required to incorporate social and environmental values into their corporate structure, B Corps can choose not to emphasize these values if they so choose.
B Corps can be an excellent fit for companies that want to include social and environmental values in their business practices but don’t want to make it a legal requirement.