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Business Case
2020 Begins the Decade of Benefit Corporations

What are the benefits of benefit corporations and certified B Corporations? Can they really help to lead toward meaningful change for society and the environment? We explored these questions with corporate sustainability expert Tim Greiner, Pure Strategies’ co-founder and Managing Director.

Tim, you said that 2020 will launch the decade of benefit corporations. Why?

Tim Greiner: I believe the companies that will thrive in the coming years will be the ones that have purpose integrated into their business. These are the companies that understand the importance of maintaining a balance between profitability and positive impact on the planet. They will help to solve important social and environmental problems — including climate change and inequity — through their business.

Benefit corporations have their purpose formally included in their organizations through their legal registration; certified B Corporations have gone through a rigorous third-party verification process. Companies that have this level of commitment to social and environmental benefit will stay the course and be rewarded for it.

Before we dive in further, can you explain the difference between benefit corporations and certified B Corporations?

TG: In the simplest of terms, a public benefit corporation (also referred to as benefit corporations) refers to a specific type of legal incorporation; while certified B Corporations (or B Corps) refers to a certification.

The benefit corporation has a legal standing recognized by the state that protects its mission and ensures that a company considers other public benefits in addition to profit. Transparency provisions require benefit corporations to publish annual reports of their social and environmental performance.

A certified B Corp is a for-profit business that has been assessed and verified by the independent nonprofit B Lab to have exceeded a threshold for positive impact on people and planet. This is a “seal of approval” kind of program, similar to Fair Trade or Organic. B Corp certification provides a clear path for businesses to follow that focuses on other public benefits in addition to profit, including the well-being of workers, community, customers, and the environment.

A nuance to this is that, in most states, you do not have to be a certified B Corp to be a benefit corporation and vice versa. There are companies, however — including Method, Plum Organics and King Arthur Flour — that are examples of certified B Corporations that met their requirement for certification by using the benefit corporation model. Other leading companies, including Patagonia and Cabot Creamery, are examples of existing benefit corporations that became Certified B corps because they felt the certification offered additional value.

Does being a benefit corporation help to find balance between profit and purpose?

TG: Companies that have genuine purpose, passion, accountability and transparency are the companies that will excel in 2020 and beyond. These are the companies that are asking; What world do we want to live in? What kind of economy do we want and how do we create that future?

Let’s face it — our day-to-day work can narrow our vision. We have so many details to manage, it is sometimes difficult to step back and consider where you are headed. Businesses that follow benefit corporation and B Corp ideals are better prepared to answer the bigger questions as to why we are in business, and how we want to impact our world. Benefit corporations are created with an express mandate to operate responsibly, and their directors are accountable for more than shareholder return. I think more and more companies will continue to follow this path; not only because it is the right thing to do, but also because there is business value to be gained.

What are some business benefits for these types of organizations?

TG: This approach to business can help companies gain desirable competitive advantages — including enhanced leadership status, ability to attract investors and top talent, and enhanced consumer loyalty. What’s more — companies with robust sustainability practices demonstrate better operational performance, which ultimately translates into better profitability.

B Corp certification claims are among the fastest growing claims on products. For good reason, since consumers are loyal to companies with social purpose. An article in Forbes notes, “Ben & Jerry's became a certified B Corp in 2012. … Their mission statement includes a social, economic, and product mission. Ben & Jerry's research shows consumers are two-and-a-half times more loyal to companies that have a social purpose and incorporate values-driven action authentically throughout their business.”

Whether it is millennials who want to make a positive difference in the world; or Gen Z, whose purchase decisions are influenced by the dedication of brands to social impact, the consumer data has become clear in the past few years. Consumers increasingly connect to companies with authentic purpose.

Can benefit corporations help to lead toward meaningful change for society and the environment?

TG: I see benefit corporations and certified B Corps as working in unison, packing a powerful 1-2 punch toward sustainable business. If there is still confusion as to how they work together, Patagonia offers a great resource: An Entrepreneur’s Guide to Certified B Corporations and Benefit Corporations.

In the guide, Vincent Stanley, Director of Philosophy at Patagonia, notes, “Every business should actively benefit its employees, customers and communities — and work effectively to minimize its adverse impact on nature. B certification and/or [benefit] incorporation gives us the common tools we need to assess the positive and negative impacts of our practices, make and measure improvements, and share what we learn.”

I recently heard B Lab founder Jay Coen Gilbert say that, “The economic system that got us into this mess is not the economic system that is going to get us out of it.” When I talk about this being the decade of benefit corporations, I am not hung up on the semantics of whether these companies are a legal benefit corporation or a certified B Corp; that’s not the point. What matters is companies in business to do the right thing — to create benefit for people and planet. They push the envelope. They define true leadership in a time of severe environmental and economic uncertainty.

This vanguard has moved a number of major business organizations. In recent years, the Business Roundtable, the World Economic Forum and the US Chamber of Commerce are starting to talk about purpose. Companies are not simply about making money; they need to embrace this broader sense of purpose.

As we launch a new decade, reaffirming the need to integrate purpose and values into the way businesses make profit comes at a perfect time. The work ahead for addressing critical environmental and social issues may be daunting and there is no quick or easy fix; but with more companies using the benefit corporation model, we will be closer to the right path toward meaningful change.