Should You Register as a B-Corp?
With consumers increasingly seeking out companies that align with their values and have a positive effect on the world, more organizations are moving beyond traditional corporate structures that place profit above all else.
One of the emerging tools in this movement is benefit corporations, which are structured to consider society and the environment in addition to profits by adopting more sustainable and human-friendly practices.
“This is a market-driven thing,” says Liz Shephard, CEO of LifeCity in New Orleans, a consulting firm that works with regional businesses to help them eliminate waste, improve efficiency and have a more positive effect in their communities. “It’s not just something we’re doing out of the goodness of our heart. This is the market demanding this kind of philosophy and this way of doing business.”
The Basics on B Corporations
When people talk about benefit corporations, commonly referred to as B corps, they’re really talking about two separate but related options. First, benefit corporation status is a type of legal structure for businesses in states that have enacted benefit corporation legislation. Louisiana passed its B corporation law in 2012.
A benefit corporation law allows for the creation of a voluntary corporate entity that lets businesses consider profits as well as society and the environment. This form of incorporation allows a business to look beyond its fiduciary duty to shareholders and stakeholders, essentially preventing shareholders from suing over decisions that consider factors beyond profit.
The nonprofit B Lab and the New Orleans Business Alliance offer a guide on how to register as a B corporation in the state, although only a handful of Louisiana companies have taken the step so far.
The second option is to become a certified B corporation, a new kind of business that balances purpose and profit. To be certified, a company must meet high standards of performance, transparency and accountability as outlined by B Lab, including achieving a certain score on the B Impact Assessment, which measures a company’s effect on its workers, community and environment. Companies of any size, structure or location can be certified as B corporations.
Both business types require organizations to place an emphasis on the effects of their decisions on their workers, customers, suppliers, community and the environment. B Lab says either business type can help organizations attract talent and open up opportunities for capital.
Driven by Consumer Demand
Shephard, whose company is not affiliated with B Lab but which offers a certification process for community impact based on local and regional considerations, says the movement toward more responsible corporate structures is largely driven by consumer demand.
About 80 percent of consumers believe companies should be “doing well by doing good,” particularly millennials who make up the greatest percentage of purchasing power in our economy, she says. Data indicate consumers will also pay more for a more sustainable product or service — and companies have taken notice. For example, LifeCity is helping Folgers Coffee take its New Orleans-based manufacturing facility to a zero-waste model by 2020. “It’s good business,” she says.
That includes being fiscally prudent, Shephard says. “When you’re conscious of how you treat your team and your environmental resources, that level of intention can often allow you ways to save money,” she says. That could be through using more efficient materials or lighting, reusing products or closely looking at operational efficiencies, she says.
Focusing on impact can also have a positive effect on your workforce, she says. “When you are a value-driven business, studies show your team are more satisfied,” she says. “They’re more committed to the work, they’re more likely to stay in the job. Improving retention rates and employee productivity also improves your bottom line.”
Shephard says that while the benefit corporation model has elevated the awareness of values-driven businesses, the future of the movement lies beyond mere certifications and toward businesses of all types assessing their effects in a more intentional and personalized way.
“Having gone into company after company and measuring impact in those businesses, I find that impact is really dependent on where you stand,” she says. “It’s hard to make a cookie-cutter approach to it. I think it’s important to have players like B Lab setting a vision and a standard, but it’s also really important to realize that no two companies are alike and impact really changes based on where you are. What matters most is that companies take that next-best step that makes a little bit more of an impact.”