Desktop version

Home arrow Political science arrow Sustainability of Agro-Food and Natural Resource Systems in the Mediterranean Basin

Certified B Corps and Other Third-Party Certifications

B Lab encourages companies to seek benefit corporation status through its own third-party certification process. The nonprofit assesses interested businesses in terms of their companywide environmental, social, and governance practices, and designates those that meet its requirements as “Certified B Corporations,” or more informally as “B Corps.” The community of Certified B Corps represents a growing advocacy group for the benefit corporation movement.

B Lab requires a B Corp, within a certain period of time, to establish legally in its governing documents that the board and officers must consider the interests of all stakeholders—not just shareholders—when making decisions (provided the company is headquartered in a location where such a requirement is now legally available). This could be done by filing for benefit corporation status within four years after a benefit corporation law has been passed in the company's state of incorporation, or before the company's two-year certification needs to be renewed, whichever is later. Or it could be done by amending articles of incorporation under a constituency statute, if one exists, before the certification period ends.

In the United States, corporate codes in 30 of the 50 states include constituency statutes, which allow but do not require companies to consider the interests of other stakeholders besides shareholders in making decisions. But there is little case law to determine whether directors and officers who make decisions based on the interests of other stakeholders, such as workers or the local community, would be held liable if such decisions failed to maximize profits. In places where neither legal option exists (either filing as a benefit corporation or amending articles under a constituency statute), Certified B Corps comprise a natural constituency to advocate for a benefit corporation statute. That increases the potential for country-by-country advocacy for this new kind of company with a general purpose of positive social and environmental impact.

By October 2013, B Lab had certified 855 B Corps worldwide, up from 78 in 2007, the first year such certification was available. Annual gross revenues for all Certified B Corps in October 2013 were about $6.3 billion, and together these businesses employed some 33,000 people, according to B Lab. About half that number worked for the largest 25 Certified B Corps. Nearly 16,700 companies, interested in either becoming B Corps or getting a sense of their own impacts, had used B Lab's assessment tool.

Certified B Corps were present in 27 countries as of October 2013, with the majority of this activity in the United States, followed distantly by Canada and Chile. (See Table 19–2.) As the number of certified companies in a country begins to grow, B Lab plans to work with those companies that are interested in exploring the need and opportunities for revisions in their home countries' legal infrastructure. A few companies in Australia have expressed an interest in this.

Table 19–2. Global Reach of Certified B Corporations

B Lab reported in late 2013 that Ecover, the Belgian parent company of Method, was in the process of becoming a Certified B Corp itself and that B Lab expected a “B Lab Europe” to launch in 2014. There is interest in other parts of the world as well in building up a global community of B Corps that could build momentum for legislation similar to benefit corporation statutes in the United States, particularly in places where such legal encouragement for triple-bottom-line businesses is not yet in place.

In addition to B Lab, other major organizations are also promoting benefit corporation legislation in the United States. The new American Sustainable Business Council, which represents more than 73 business associations (which in turn represent more than 165,000 businesses) has established as a major public policy goal the promotion of the benefit corporation movement. The U.S. nonprofit Green America, which created the first U.S. green business network in 1983, also has advocated in support of benefit corporations. Green America has approved some 3,550 businesses for its Gold Green Business Certification, based on its assessment of their companywide environmental, social, and governance practices.

Both B Lab and Green America are dominant players in a notable trend related to the benefit corporation push. In the United States and elsewhere, businesses are increasingly aspiring to hold themselves to higher standards of overall social and environmental impact by trying to earn companywide certification from third-party organizations on a wide range of relevant criteria. Evaluating and comparing the rigor of third-party certifications is an area ripe for engagement by the nonprofit community of public interest advocates and environmental activists.

As with benefit corporations, most for-profits seeking companywide, third-party certifications are small to medium in size, although some companies with revenues in the hundreds of millions, such as Patagonia and Seventh Generation, are also included. Initially, such certifications were most often sought and won by small enterprises (often very small) that could be less constrained by outside investors' interest in maximizing profits. Over time, however, as the sustainability movement has expanded and as a much broader range of companies understands the advantages of public recognition for corporate social responsibility, larger companies are expressing interest as well.

Almost all companies certified by B Lab and Green America are privately held. But the movement for companywide certifications includes a few subsidiaries of major multinational corporations (see examples below). And at least one Certified B Corp—Rally Software Development—is now listed on the New York Stock Exchange. Rally had won B Lab's companywide, thirdparty certification before going public in 2013 with a successful initial public offering that sold 6.9 million shares.

 
Found a mistake? Please highlight the word and press Shift + Enter  
< Prev   CONTENTS   Next >

Related topics