The B Corp Handbook: How to Use Business as a Force for Good
by Ryan Honeyman
What is a B Corp? B Corporations are for-profit organizations which serve a variety of stakeholders rather than to enrich shareholders exclusively. Stakeholders include employees, the community, the environment, as well as the firm’s owners. B stands for benefit.
The term applies in two contexts: Certified B Corps and a form of incorporation offered by several U.S. states. The majority of this book is about the former. The latter is addressed at the end of this summary.
B Lab and Certified B Corps
“The main focus of this book is the Certified B Corporation.” The certification process is administered by B Lab, “a nonprofit organization that serves a global movement to redefine success in business so that one day all companies will compete not only to be the best in the world, but the best for the world.”
“Any visitor to the B Lab website can view a simple report, similar to the nutritional label on a cereal box, that shows how each Certified B Corporation performed on the Workers, Community, Environment, and Governance sections of its assessment. This report makes it easy for consumers, investors, policy makers, and the media to tell the difference between good companies and just good marketing.”
“We feel that B Corp is a ‘No Bullshit’ stamp that proves we mean what we say and is a great way to start a conversation about how and why our business is different,” said Edward Perry, Co-founder and Managing Director of COOK Trading in the United Kingdom.
B Corp Assessment
“The B Impact Assessment, including access to the best practice guides, comparative data, and an individualized improvement report, is a free public service provided by B Lab. If you are interested in becoming a Certified B Corporation, there is an annual B Corp certification fee… You can use the assessment to measure your company’s social and environmental performance, gain valuable insights that can help spark new ideas, and motivate your company to reach for an improved score over time … Some B Corps, such as Ben & Jerry’s and Numi Organic Tea, are going further by using the B Impact Assessment to benchmark their key suppliers… An overall B Impact Score of 40 to 60 is average.” B Corp certification requires a minimum score of 80. “Regardless of your initial overall score, remember that this is a journey of continuous improvement.”
B Corps have an advantage in attracting investment capital. “Goldman Sachs found that there has been a dramatic increase in the number of investors seeking to incorporate sustainability and environmental, social, and governance factors into their portfolio construction… The Society of Human Resource Management found that the number of [socially responsible investment] funds is likely to double in the next few years to match the rapidly growing interest… All Certified B Corps receive a free Global Impact Investment Rating System (GIIRS) rating and a free listing on B Analytics, an investor-facing platform designed by B Lab.”
Employee Recruitment and Retention
“The B Impact Assessment asks you to think about how your company treats its workers in three major areas: compensation, benefits, and training.” John Replogle, CEO of Seventh Generation said, “Clearly identifying your purpose will attract the very best, brightest, and most passionate people.” Patagonia founder Yvon Chouinard explains why socially responsible policies are good for the bottom line: “It costs a company an average of $50,000 to replace an employee—from recruiting costs, training, and loss of productivity. Our child-care center helps us retain our skilled moms.”
B Corps benefit from media coverage. “Using the power of business to solve social and environmental problems is a positive, innovative, and compelling story that has generated, and continues to generate, a high level of media interest… B Lab nominates and acts as an advocate for B Corps to receive top honors, such as a listing among Bloomberg Businessweek’s Top Social Entrepreneurs.”
Honeyman asserts that B Corp certification will attract customers. “Transparency builds trust. B Corps are trusted by customers because they have met rigorous standards of social and environmental performance, accountability, and transparency.” This sounds aspirational rather than a present-day reality—I had no idea what a B Corp was before reading this book, so I question widespread consumer awareness. The author adds, “Goldman Sachs also reported that 52 percent of U.S. consumers claim that they actively seek information about companies’ corporate social responsibility record either ‘all of the time’ or ‘sometimes.’” Still, this is surveying what consumer say they’ll do versus measuring what they actually do.
“The B Impact Assessment measures your company’s community impact in five areas: job creation… diversity… engagement and giving… local involvement… suppliers, distributors, and product.”
“Environmental audits vary depending on the size of the business. A small business, for example, may concentrate primarily on paper, water, and energy use, whereas a large organization may also evaluate emissions, materials, hazardous waste, travel, commuting, and its corporate fleet… Many companies find that the majority of their carbon footprint can be traced back to their supply chains.”
Benefit corporations as legal entities
Aside from B Lab’s Certified B Corp program, more than 25 U.S. states have passed benefit corporation legislation. “By elevating your values to the status of law, your company will be able to maintain its mission through changes in management and ownership…. In the United States, becoming a benefit corporation will not affect your company’s tax status. Your company can still elect to be taxed as a C corp or S corp. Benefit corporation status affects only corporate purpose, accountability, and transparency requirements.” The Benefit Corp Information Center website contains more information including state-by-state legislative status.
The end of the book includes a list of ten TED Talks and other videos by B Corps, including On Better Business by B Lab co-founder Jay Coen Gilbert.
Honeyman, Ryan. The B Corp Handbook How to Use Business as a Force for Good. San Francisco: Berrett-Koehler, 2014. Buy from Amazon.com