To B-Corp or not to B-Corp

Discover the difference between benefit corporations and B-Corps, and how they are connected to purpose-led businesses and sustainable brands. Get a sense of when it makes sense to make the serious step to become a B-Corp.

Did you know that you have another option to consider for your business structure? You can become a benefit corporation now, at least in some US states.

Contrary to what you might first expect, a benefit corporation is not designed for non-profits. Benefit corps do intend to make money – hopefully lots of it.

A benefit corporation is a legal structure that allows (or requires, depending on your perspective) the directors to consider the impact on all stakeholders – not just shareholders. So while a benefit corp can make money, that’s not the only measure of success.

The legal structure of a benefit corporation is important when following rules and regulations for businesses. The B-Lab helped develop the benefit corporation as well as the Certified B Corporation, or B-Corps.

I know, it gets confusing. It’ll become clearer.

A B-Corp is a business that meets “rigorous standards of social and environmental performance, accountability, and transparency.” However, it’s not a one-and-done label. If you want to be a B-Corp, you have to meet the performance goals every few years. These are managed by B Lab.

Both benefit corporations and B-Corps are often called purpose-led businesses or sustainable brands. But not all purpose-led businesses or sustainable brands are benefit corporations or B-Corps.

A purpose-led business or sustainable brand is not tied to a business structure or required to meet specific performance measures. It’s generally accepted that if you’re serious about being purpose-led or sustainable, you’ll use metrics and be transparent about them. However, you are in complete control of how you improve the world. You can change sourcing, strengthen the employee-employer relationship, aid the recycle/reuse results of your product, help fund innovative ideas or any number of other options.

What’s important in each of these is that you take clear, specific action and show social and environmental responsibility. Ideally, you’ll share your efforts and the results with the public through reports.

Now, if you achieve B-Corp status, you’ve met the B Impact Assessment, the third-party standard created by B Lab. Getting a qualifying score on this B Impact Assessment is not easy. In fact, businesses are warned about how hard it is. The first time I heard the term was when I heard someone complain about the challenges they experienced when earning B-Corp status.

You may be wondering why, if it’s so difficult, you would even consider becoming a B-Corp.

In a word, credibility.

Now, just because your business isn’t a B-Corp doesn’t mean you aren’t improving your world while making money. It’s just harder to demonstrate to the casual consumer. Being a B-Corp makes authenticity much, much easier to demonstrate.

To be considered a serious purpose-led business owner, you’ll look at your processes, materials, sourcing, and product afterlife. You’ll find ways to make each of these better. You will also take a look at your interactions with your employees and customers. After all, your goal is to make life better for people – in and out of your company. Sometimes you can directly improve your own community, and sometimes you’ll take a broader view.

Once you’re serious about being a sustainable brand, you can expect to see your revenues and client base increase while embracing the purpose of your business. Employees, customers, and shareholders want to get on board with socially responsible businesses. The Ernst and Young Winning with Purpose report showing how your clear, strong purpose will improve relationships. Facts like how employees are three-times as likely to stick around; how “72% of global consumers would recommend a company with a purpose”; and how “’Meaningful brands’ connected to human well-being outperformed the stock market by 120% in 2013.”

So with all this good that you can do without jumping through the hoops for the B-Corp certification, becoming a full B-Corp may not be the best choice for you to make right now. You’ll first want to make sure your business is truly a purpose-led business. Taking that last, serious step to earn B-Corp certification will demonstrate that you’re fully committed to your social and environmental responsibility.

To be clear, the requirements to be in the purpose-led business or sustainable brand world aren’t simple.

Your business must have a clear purpose statement that influences your operations. Check out this info graphic by EY, found on page twelve of their report.  You’ll notice that, ideally, your business’s purpose will also change your industry. This happened to the tea and coffee industry with the now-often seen fair trade options. And packaging created from recycled materials is another example. When you create (or define) your purpose, remember to look long-term and outside of yourself. Also remember to keep it relevant to your product or service. Oh, and while your purpose can include charitable giving, it’s best to keep that as an added action, not an only action.

Once your business’s purpose is defined, then you get to take action. This means you share it with everyone in your business and help them see how they can be a part of the purpose. Your employees’ interest in working and helping the business succeed will increase. “The sense of being part of something greater than yourself can lead to high levels of engagement, high levels of creativity, and the willingness to partner across functional and product boundaries within a company, which are hugely powerful,” said Rebecca Henderson. Ms. Henderson is the John and Natty McArthur University Professor at Harvard Business School. (EY’s Harvard Business Review: The business case for purpose, page 4.) She continues, “Once they’re past a certain financial threshold, many people are as motivated by intrinsic meaning and the sense that they are contributing to something worthwhile as much as they are by financial returns or status.” Most people want to do more than just make money. Give them that opportunity. It’s in your power to do so.

Once they’re past a certain financial threshold, many people are as motivated by intrinsic meaning and the sense that they are contributing to something worthwhile as much as they are by financial returns or status.

— Rebecca Henderson, John and Natty McArthur University Professor at Harvard Business School

Once you’ve gone public, you’ll probably learn of other ways to improve your business. Sometimes these new ideas will come from employees, but customers and suppliers might start making suggestions too. If you’ve been wanting to have more conversations with all stakeholders – not just shareholders – this is an excellent opportunity to get the conversation going.

After becoming a true purpose-led business or sustainable brand, your assessments can begin. You’ll track the metrics that you developed earlier. You’ll get the data for the public, and eventually you’ll have what you need to complete the B Impact Assessment.

Becoming a B-Corp is a clear signal that your business is taking definitive action. You’re demonstrably doing something. It sends a powerful message. It’s a serious step with positive results.

Even if you never go for your B-Corp, as a purpose-led business, you need transparency in how you’re improving the world socially and environmentally. If you don’t, you set yourself up for accusations of using this as a marketing ploy. And this is where the accountability of the B Impact Assessment really shines and why you may end up making that jump to a B-Corp.

The tough part of being a purpose-led business or sustainable brand?

Keeping consistent.

Truth in marketing is even more important now that you’ve told everyone about your business’s values. This is why I recommend that you create a messaging summary. If you have several major products, you’ll want one for each. These messaging summaries help everyone, from sales to support to management, remember key information and keep your real priorities in mind. You’ve worked hard at building your product or service, and at fine tuning your operations to be socially and environmentally responsible. Don’t lose that effort because of inconsistent messaging.

To B-Corp or not to B-Corp may be a question of where you are along this path of making a positive impact with your business.

This open letter to businesses from Ian Martin is a great read about why it’s difficult, what it takes, and how it improved their company. Spoiler alert – they consider the process well worth the benefits.

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