Certifying as a “B Corporation”

There is some confusion as to what it actually means to be a B Corp (as opposed to a Benefit Corporation, discussed here. A B Corp is not a statutory business form. B Lab, a nonprofit organization, gives B Corp certification to qualifying businesses, the same way that Fair Trade USA certifies Fair Trade coffee or USGBC certifies LEED buildings. There are more than 558 B Corps as of July 2012 update. Although the term implies that only a corporation can be a B Corp, a sole proprietorship, partnership, LLC, cooperative, or any other type of business can be a B Corp.

A business can apply for B Corp certification by completing a questionnaire about its business practices related to the environment, public service, community support, treatment of employees, diversity, etc. If the business earns sufficient points on the questionnaire, it is then eligible to become a B Corp. With the exception discussed in the next paragraph, a business must then add the following B Corp language to its organizational documents:

In discharging his or her duties, and in determining what is in the best interests of the Company and its shareholders, a Director shall consider such factors as the Director deems relevant, including, but not limited to, the long-term prospects and interests of the Company and its shareholders, and the social, economic, legal, or other effects of any action on the current and retired employees, the suppliers and customers of the Company or its subsidiaries, and the communities and society in which the Company or its subsidiaries operate, (collectively, with the shareholders, the “Stakeholders”), together with the short-term, as well as long-term, interests of its shareholders and the effect of the Company’s operations (and its subsidiaries’ operations) on the environment and the economy of the state, the region and the nation.

Nothing in this Article express or implied, is intended to create or shall create or grant any right in or for any person or any cause of action by or for any person.

Notwithstanding the foregoing, any Director is entitled to rely upon the definition of “best interests” as set forth above in enforcing his or her rights hereunder and under state law, and such reliance shall not, absent another breach, be construed as a breach of a Director’s fiduciary duty of care, even in the context of a Change in Control Transaction where, as a result of weighing other Stakeholders’ interests, a Director determines to accept an offer, between two competing offers, with a lower price per share. ¹

B Lab, the nonprofit that created the B Corp certification, recognizes that adopting this language could be risky for a corporation organized in one of the approximately 20 states that do not have constituency statutes (as discussed in Part 2 of this chapter). Therefore, a corporation incorporated in one of those states is not required to add this language to its charter to become a B Corp. Instead, the corporation must sign an agreement that includes the following pledge:

To the extent possible within the corporate law of the Company’s state of incorporation, the Company shall consider the impact of its decisions not only on shareholders, but also on its employees, customers, suppliers, community, and the environment; and

The Company will support B Lab’s public policy objectives of passing legislation to create a new corporate form with higher standards of corporate purpose, accountability, and transparency, as well as incentives for certified sustainable businesses. ²

 A B Corp that is not a corporation, such as an LLC, can incorporate B Corp language into its founding documents (such as an operating agreement) regardless of what state it was formed in. B Corps must also pay an annual fee to B Lab.