B Corporation

Definition

A B Corporation is a for-profit company that has been certified by the non-profit B Lab to meet rigorous standards of social and environmental performance, accountability, and transparency. B Corporations are committed to balancing profit with purpose and creating a positive impact on society and the environment.

5 Must Know Facts For Your Next Test

1. B Corporations are required to amend their legal governing documents to include consideration of the impact of their decisions on all stakeholders, not just shareholders.
2. To become a certified B Corporation, companies must score a minimum of 80 out of 200 points on the B Impact Assessment, which evaluates their social and environmental performance.
3. B Corporations are required to publicly report on their overall social and environmental performance using the B Impact Report.
4. The B Corp certification is awarded by the non-profit organization B Lab, which was founded in 2006 and has certified over 3,000 companies in more than 70 countries.
5. B Corporations are part of a growing movement of businesses that are using the power of the private sector to address social and environmental challenges.

Review Questions

• Explain how the B Corporation certification differs from traditional corporate structures.
  • The B Corporation certification differs from traditional corporate structures in several key ways. Unlike traditional for-profit companies that are primarily focused on maximizing shareholder value, B Corporations are required to consider the impact of their decisions on all stakeholders, including employees, customers, suppliers, the community, and the environment. They must also amend their legal governing documents to include this commitment to stakeholders, not just shareholders. Additionally, B Corporations must meet rigorous social and environmental performance standards, as measured by the B Impact Assessment, and publicly report on their overall impact. This certification represents a shift towards a more balanced and sustainable approach to business, where companies are held accountable for their social and environmental impact, in addition to their financial performance.
• Describe the role of the B Lab organization in the B Corporation movement.
  • The B Lab organization plays a crucial role in the B Corporation movement. B Lab is the non-profit organization that awards the B Corporation certification to for-profit companies that meet its rigorous standards of social and environmental performance, accountability, and transparency. To become a certified B Corporation, companies must score a minimum of 80 out of 200 points on the B Impact Assessment, which evaluates their impact on workers, customers, community, and the environment. B Lab also requires companies to amend their legal governing documents to include consideration of all stakeholders, not just shareholders. By setting these high standards and certifying companies that meet them, B Lab is helping to drive a broader shift towards a more sustainable and socially responsible model of capitalism.
• Analyze how the B Corporation movement relates to the concept of the 'triple bottom line' and stakeholder theory.
  • The B Corporation movement is closely aligned with the concept of the 'triple bottom line' and stakeholder theory. The triple bottom line framework considers a company's performance across three dimensions: social, environmental, and financial. Similarly, the B Corporation certification requires companies to meet rigorous standards in all three of these areas, not just financial performance. This aligns with stakeholder theory, which posits that businesses should consider the interests of all stakeholders, including employees, customers, suppliers, the community, and the environment, in addition to shareholders. By legally committing to considering the impact of their decisions on all stakeholders, B Corporations are embracing a more holistic and sustainable approach to business that goes beyond the traditional focus on shareholder value maximization. This represents a significant shift in the way companies are thinking about their role and responsibilities in society.

Related terms

Benefit Corporation:

A legal corporate structure that requires companies to consider the impact of their decisions on their workers, customers, suppliers, community, and the environment, in addition to their shareholders.

Triple Bottom Line:

An accounting framework that incorporates three dimensions of performance: social, environmental, and financial. It measures a company's degree of social and environmental responsibility, in addition to its financial performance.

Stakeholder Theory:

A theory of organizational management and business ethics that considers the interests of all stakeholders, including employees, customers, suppliers, and the local community, in addition to shareholders.