B Corp: Definition, Advantages, Disadvantages, and Examples (2024)

What Is a B Corp?

B corps are for-profit companies that have received certification from B Lab, a nonprofit organization that certifies businesses that meet certain social and environmental standards. B Lab reports there are 9,140 certified B corporations across 162 industries in 102 countries worldwide as of August 2024.

Key Takeaways

  • A B corp is a for-profit company that has received certification from B Lab, a nonprofit organization founded in 2006.
  • To be certified as a B corp, a company must meet certain social and environmental criteria.
  • A certified B corp is not the same as a benefit corporation, although the two may share many of the same goals.

How Does a Business Become a Certified B Corp?

To become a certified B corp, companies must apply to B Lab, providing documentation regarding their business practices.

To be approved, a company has to:

  1. Achieve a score of at least 80 on B Lab’s Impact Assessment, which measures social and environmental performance, and pass its risk review. There are baseline standards that multinational corporations must also meet.
  2. Be accountable to all stakeholders, not just shareholders, by making a legal commitment and changing its corporate governance structure. If available in its jurisdiction, a company must also have achieved benefit corporation status.
  3. Be transparent by agreeing to allow its performance on B Lab’s standards to be publicly available on its B corp profile on B Lab’s website.

In addition, companies must apply for recertification every three years or when there has been a change in ownership or they have made an initial public offering (IPO).

What Is B Lab?

B Lab, based in the United States, is an international organization founded in 2006. It describes itself as a “nonprofit network transforming the global economy to benefit all people, communities, and the planet.” B Lab certified its first 82 corporations in 2007.

B Lab is supported by a group of well-known foundations, corporations, and government agencies, including the Robert Wood Johnson Foundation, the Business Development Bank of Canada, the Bill and Melinda Gates Foundation, and Prudential.

In addition to its U.S. offices in Philadelphia and New York City, B Lab works with global regional affiliates in Amsterdam, London, Melbourne, and Sao Paulo. In Latin America, it partners with Sistema B, founded in 2011.

Advantages and Disadvantages of Becoming a B Corp

Companies go through the process of becoming B corps for a variety of reasons and can gain a number of advantages from doing so. At the same time, there may be a few potential drawbacks.

Advantages

According to B Lab, companies that receive B corp certification benefit because they:

  • Build trust with their consumers, communities, and suppliers
  • Are able to attract and retain employees
  • Tend to attract investors who back their mission

And because they must recertify every three years, their focus on improving over time can lead to long-term resiliency.

B Lab Europe puts it a little more simply: “For businesses, becoming a B Corp means attracting more employees, improving their company, and finding power as a community.”

A 2016 Harvard Business Review article that examined companies’ motivations for becomingB corps found “at least two major underlying reasons,” according to its authors.

One was “the increasing efforts of more conventional profit-driven companies to be seen as ‘green’ and ‘good.’” This, in turn, motivated smaller competitors (which many B corps are) to seek certification as a way to stand out as genuinely committed to social and environmental responsibility.

The second, closely related reason was an apparently sincere desire to “‘join the movement of creating a new economy with a new set of rules and ‘redefine the way people perceive success in the business world.’”

In another Harvard Business Review article, Richard Stammer, former president and CEO of Cabot Creamery Cooperative, which became certified as a B corp in 2012, wrote that the process “delivered value beyond our expectations. B Corp certification encouraged more ‘whole-systems thinking’ around our social and environmental practices, which led Cabot to develop even more robust customer and consumer programs, cut operating costs, and strengthenour brand reputation as a sustainability-minded company.”

Disadvantages

A largely positive report on B corps prepared by the Yale Center for Business and the Environment and Patagonia (a well-known B corp) mentioned a few potential drawbacks for companies weighing whether, as it said, “to B or not to B.”

Those included a higher level of scrutiny, in part because companies that make environmental and other claims are often targeted by activists checking to be sure that they live up to those claims.

In addition, the certification process itself can be laborious. “It can take months—and in some cases, years—to become a Certified B Corporation, and the amount of time hinges heavily on whether a company already had a system in place to measure its social and environmental impact,” the report noted, adding that, “It is important for a company to assess whether it has sufficient bandwidth to take on the additional work.”

Finally, the extra expenses associated with being a B corp (such as “paying your employees a living wage”) might result in higher costs to customers and reduced profits for shareholders, at least in the short term.

Which Companies Are Certified B Corps?

Many B corps are small and midsize companies not widely known outside of their countries or particular market niches. Among the larger and more famous U.S. brands on the list are Ben & Jerry’s (food products), Patagonia (apparel), and Seventh Generation (cleaning products).

B Corp Certification Categories

The assessment process used by B Lab looks at a company’s practices across five categories: governance, workers, community, environment, and customers. Its annual “Best for the World” lists recognize top performers in each category, in each region.

Benefit Corporation vs. B Corp

A benefit corporation, sometimes referred to as a B corporation, is a type of company, officially recognized in most states of the U.S., that operates for the benefit of stakeholders such as employees and the larger community rather than simply for its shareholders. In that way, it is similar to a B corp certified by B Lab, and for obvious reasons, the two are often confused.

Although B corps and benefit corporations have similar accountability and transparency requirements, the performance of a benefit corporation is self-reported, whereas a B corp must “pass” the B Lab Impact Assessment and recertify regularly, as noted above.

Filing fees for benefit corporations vary by state and province, but they tend to be lower than B Lab’s certification fees. Companies can only become benefit corporations in the U.S., the British Columbia province of Canada, and a few other countries, whereas any for-profit firm that has been in operation for a least a year can apply to be a B corp.

What Is a Stakeholder?

A stakeholder is an individual or a group with a stake or personal interest in a business enterprise. A company’s stakeholders can include its shareholders, employees, customers, suppliers, and the surrounding community, among others.

What Is Shareholder Primacy?

Shareholder primacy is a theory that corporations should act primarily, if not entirely, in the interests of their shareholders. It conflicts with the belief, exemplified by benefit corporations and B corps, that they should also consider the interests of other stakeholders, such as their employees and customers.

Do B Corps Pay Taxes?

Yes. While B corps and benefit corporations may have a different societal mission than some corporations, they are still subject to the same tax laws as any other for-profit company.

The Bottom Line

B corps are part of a growing movement toward greater social and environmental responsibility by businesses around the world. Their proponents maintain that paying attention to those concerns (and not simply the interests of shareholders) is also good business that pays off in other ways.

B Corp: Definition, Advantages, Disadvantages, and Examples (2024)

FAQs

What are the disadvantages of B Corp? ›

The drawbacks of B Corp Certification
  • There are no tax breaks. For both benefit corporations and Certified B Corps, there are no federal tax breaks. ...
  • You need to consider the non-financial impact of your actions. ...
  • You're open to ongoing scrutiny.
Apr 15, 2024

What is an example of a B Corp? ›

B Corps are businesses graded on their efforts to create an inclusive, sustainable economy. These companies treat "good business" as an idea that includes both profit and purpose. Below, we rounded up the B Corps we love shopping at most, including Patagonia, Allbirds, and Prose.

What is the meaning of B Corp? ›

Certified B Corporations, or B Corps, are companies verified by B Lab to meet high standards of social and environmental performance, transparency, and accountability. B Corporation. 9.72K subscribers. B Corp Movement: Transforming the global economy to benefit all people, communities, and the planet.

What is the benefit of being a B Corp? ›

Being a B Corp means that prospective employees—just like consumers and business partners—will know you're honestly committed to creating real environmental and/or societal benefits. This can help you attract employees who are already committed to issues of sustainability and/or social change.

What are 3 advantages and 3 disadvantages of a corporation? ›

The pros of forming a corporation are that it offers limited liability for the shareholders, it is a separate legal entity, and it has perpetual existence. The cons are that it is more expensive to form and operate than an LLC, and it is subject to heavier government regulation.

Do B Corps get tax breaks? ›

B Corps, on the other hand, are subject to corporate income tax and must pay taxes on any profits they make. This means that while B Corps can use their profits to further their social mission, they must also be mindful of the tax implications of their activities.

What is the difference between a nonprofit and a B Corp? ›

The chief difference between a non-profit corporation and a benefit corporation—sometimes called a B Corporation—is the ownership factor. There are no owners or shareholders in a non-profit company. A benefit corporation, however, does have shareholders who own the company.

What are the 5 areas of B Corp? ›

The B Impact Assessment evaluates a company's practices and outputs across five categories: governance, workers, community, the environment, and customers.
  • Governance. ...
  • Workers. ...
  • Customers. ...
  • Environment. ...
  • Community.

What is the biggest B Corp company? ›

Top 10 most popular B Corp food and drink businesses
RankCompany NameAnnual search volume
1Ben & Jerry's10,281,000
2BrewDog4,688,000
3Thrive Market3,669,000
4ButcherBox2,737,000
6 more rows
Mar 10, 2022

How long does B Corp last? ›

In addition, B Corps must recertify every 3 years, completing the rigorous B Impact Assessment and third party verification process to ensure it is continuing to measure and manage its social and environmental performance and meeting the required standards.

Why companies are becoming B Corps? ›

For businesses, becoming a B Corp means attracting more employees, improving their company and finding power as a community.

Can small businesses be B Corps? ›

Startups can't earn B Corp status until they have been in business 12 months but they can apply for a certification-pending seal. If your startup plans to make social responsibility a core part of its business, it makes sense to begin the certification process early.

What are the cons of B Corp? ›

One of the major drawbacks of forming a B corp is that it takes a long time for your business to pass all the necessary qualifications and certifications to ensure that you're complying with all the necessary practices.

Why is B Corp the best? ›

According to B Lab, companies that receive B corp certification benefit because they: Build trust with their consumers, communities, and suppliers. Are able to attract and retain employees. Tend to attract investors who back their mission.

Why become a B corporation? ›

When your company becomes a Certified B Corp, you join a global community that is using business as a force for good. You meet, engage with, and collaborate with like-minded changemakers in your community and far beyond who share your vision and values. You share ideas and learn from each other.

What are the 5 impact areas of B Corp? ›

The B Impact Assessment is divided into five stakeholder-focused “Impact Areas” — Governance, Workers, Community, Environment, and Customers. Each impact area is organized by “Impact Topics” that describe the specific dimensions of impact relevant to that stakeholder.

Is B Corp really good? ›

THE PROS. Better Than Nothing - B-Corp certification is incredibly detailed, and while it is probably clear by now that I am critical of some of its standards, it is arguably the most comprehensive social and environmental business assessment in the world today.

Do customers care about B Corp? ›

In addition, consumers continue to view the standard as rigorous. Eighty percent of U.S. adults reported believing that the standards for obtaining B Corp Certification are somewhat, very, or extremely rigorous, and 81% have some, a lot, or very high trust in the certification.

Is it hard to get B Corp certified? ›

Yes, it is hard to get B Corp certification. A company must meet high standards for social and environmental performance, meet a legal requirement, and pass a rigorous review process.

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