What Is a B Corp? Why Certified B Corporations Are the Future

Today’s companies are paying close attention to the things that really matter. That’s why more executives than ever are asking the question: What is a B corp? Sure, every company wants to make a profit, even the nonprofit companies. But many leaders realize that true sustainability has to do with the actions they take now to secure the future. That is: How do we continue to prosper despite the competitive, societal and environmental challenges? 

Companies must ensure that they are operating in a healthy and robust macroeconomy. That’s where certified B corporations come in.

What Is a B Corporation?

A certified B corporation is a company that has been verified by B Lab. B Lab is a nonprofit company founded in Pennsylvania in 2006. It verifies for-profit companies as certified B corporations. This certification is based on how the company creates value, not for shareholders, but rather for its non-shareholding stakeholders. This includes employees, the local community, and the environment.  

B corporation companies like Ben & Jerry’s and Patogonia are leading the way toward the creation of businesses that have implemented the practices that will allow them to thrive in the future. The B corporation status certifies that the company has demonstrated its ability to meet the high standards established for everything from supply chain practices to employee benefits and more.

How Is a B Corporation Certified?

To become certified, the company must achieve a minimum 80% impact assessment score and pass the B Lab risk review. Multinational companies must also meet certain baseline requirements. 

In addition to performance, B Lab looks for accountability and transparency in the company’s dealings. Companies based in jurisdictions that permit changes to the corporate governance structure are required to make a legal commitment to be accountable to all stakeholders, not just those who have invested money in the company. All companies allow B Lab to publish their metrics (i.e., how they have performed against the certification standards) on its website.

Why would they do this?

The Upside Potential

Benefits accrue to companies that go through the B corporation certification process. They not only position themselves as leaders for systemic change, they also build goodwill among customers, communities and partners. Plus, they attract great talent. Gen Zers and millennials aren’t simply looking for socially conscious companies to do business with; they want to work with companies they trust, as well. 

Companies have a lot of work to do, however, to earn this trust. In a 2021 Deloitte survey, only 47% of millennials believe that companies are forces for good. That’s down from 73% in 2017. However, it’s not all bad news. The number of millennials who believe that businesses “focus on their own agendas rather than considering the wider society” actually declined from 77% in 2019 to 73% in 2021. 

Sentiment is trending in the right direction and the consultants hypothesize that efforts toward “stakeholder capitalism,” as they call it, are making inroads. Clearly, there is plenty of room for forward-thinking companies to formulate their stakeholder strategies. They may, indeed, be rewarded in the future when it comes to attracting the best and brightest. Duke Fuqua School of Business is one of several university programs offering loan assistance or forgiveness for alumni who work with B corporations.

It’s Official: Shareholder Value Isn’t Everything

What’s happened in the business environment that has given rise to an exponentially greater number of B corporations in recent years? Probably the biggest thing is that the environment has shifted from one that focuses on maximizing shareholder value alone to creating value for all stakeholders.

Although the story made big headlines in the New York Times, perhaps the biggest defining moment for business in 2019 — maybe in 50 years — wasn’t that much of a revelation. The tide had been turning for a long time. The article, along with several others published during that time period, announced that shareholder value isn’t everything. Say what? It’s true.

It all started because the Business Roundtable, a group of well over 200 of the most prominent business people in the country,  drafted a statement on the purpose of a corporation, something they have periodically revisited since 1977. This time was different, however. The group acknowledged that although they are in service to shareholders, there’s more to a long-term winning strategy than just providing capital gains to the equity owners. They are also committed to the creation of long-term value for all stakeholders. This means taking the following steps:

• Delivering value to customers;
• Investing in employees;
• Dealing ethically with suppliers;
• Supporting their communities; as well as, of course,
• Generating long-term value for shareholders.

These CEOs, presidents, chairs, and managing partners recognize that their companies must make a fundamental commitment to all stakeholders to ensure the economic well-being of our society. It’s just that simple. But, of course, real commitment takes deliberate and consistent action.

B Corps are Distinct from Other Corporations

There are four main types of corporations in the U.S., including C, S, LLC, and nonprofit. B corps are not the same as other types of corporations because they have no legal status or legislative framework. B certification is issued from a private company, as mentioned, and is a designation recognized within the business community. Any company, whether C, S or LLC, that sets out to make a profit can also be a B corporation. Currently, most B corporations are small- to medium-sized companies. 

B corps are also not the same as benefit corps. Benefit corporations have a legal status in 35 states, including Delaware and California. Because they are established under state statute, they are able to adopt the statutory requirements within their formation documents and charter. This allows them to include employees, suppliers and local communities, for example, within their fiduciary responsibilities. They may also consider local and global environmental impact. 

Some benefit corporations also seek the independent accreditation of B certification. It not only provides them access to best practices of the growing community of B corporations, it also is a very visible demonstration of the company’s commitment to stakeholder success, making the company more attractive to investors and future employees.

How Does Working with a B Corp like Y Scouts Affect Your Executive Search?

Whether you are currently part of a B corporation or plan to be one in the future, you can benefit from the search methodology of Y Scouts. Y Scouts is a certified B corporation search firm. When you have an executive role to fill, not just any person will do. That’s true for any position, but it’s particularly true when you’re adding to the leadership ranks of a B corp. 

At Y Scouts, we understand that finding a good match is essential. Using our organization DNA assessment, a radical alignment process, and our proprietary leadership model, we work with you to identify the right fit for your leadership role. For more information, contact Y Scouts.