B Corps

Definition

B Corps, or Benefit Corporations, are a type of for-profit entity 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. They represent a growing movement of businesses that seek to balance purpose and profit.

5 Must Know Facts For Your Next Test

1. B Corps are legally required to consider the impact of their decisions on all stakeholders, not just shareholders.
2. Becoming a Certified B Corporation involves a rigorous assessment and certification process by the non-profit B Lab.
3. B Corps are part of a growing movement of businesses that seek to use the power of business to solve social and environmental problems.
4. The B Corp model aligns with the stakeholder theory of business, which emphasizes creating value for all stakeholders, not just shareholders.
5. B Corps are required to amend their governing documents to reflect their commitment to balancing purpose and profit.

Review Questions

• Explain how the B Corp model differs from the traditional shareholder-focused approach to business.
  • The B Corp model differs from the traditional shareholder-focused approach in that it legally requires companies to consider the impact of their decisions on all stakeholders, including workers, customers, suppliers, the community, and the environment, in addition to shareholders. This aligns with the stakeholder theory of business, which suggests that a company's true purpose is to create value for all of its stakeholders, not just its shareholders. By considering the needs of all stakeholders, B Corps seek to balance purpose and profit, rather than solely maximizing shareholder value.
• Describe the process and requirements for a company to become a Certified B Corporation.
  • To become a Certified B Corporation, a company must undergo a rigorous assessment and certification process by the non-profit B Lab. This process involves evaluating the company's social and environmental performance, accountability, and transparency across a range of areas, such as governance, workers, community, environment, and customers. The company must also amend its governing documents to reflect its commitment to balancing purpose and profit, and to considering the impact of its decisions on all stakeholders. Once certified, the company can use the B Corp logo and must maintain its certification through regular reassessments and ongoing compliance with B Lab's standards.
• Analyze how the B Corp model aligns with the broader trends in entrepreneurship and small-business ownership, such as the growing emphasis on social responsibility and sustainability.
  • The B Corp model aligns with the broader trends in entrepreneurship and small-business ownership, particularly the growing emphasis on social responsibility and sustainability. As consumers and investors become increasingly conscious of the social and environmental impact of businesses, the B Corp model provides a way for companies to differentiate themselves and demonstrate their commitment to balancing purpose and profit. This aligns with the rise of the 'triple bottom line' approach, which measures a company's success not just by its financial performance, but also by its social and environmental impact. By legally requiring B Corps to consider the needs of all stakeholders, the model reflects the broader shift towards a more stakeholder-centric view of business, which is becoming increasingly important for entrepreneurs and small-business owners seeking to build sustainable and socially responsible enterprises.

Related terms

Certified B Corporation: A for-profit company that has been certified by the non-profit B Lab to have met rigorous standards of social and environmental performance, accountability, and transparency.

Stakeholder Theory: A business management theory that suggests that a company's true purpose is to create value for all of its stakeholders, not just its shareholders.

Triple Bottom Line: An accounting framework that measures a company's performance in terms of its social, environmental, and financial impact, rather than just its financial bottom line.