Should Your Business Seek B Corp Certification?

Since 2007, the ability to become a Certified B Corporation (“B Corp”) has given companies a way to set themselves apart as being mission-oriented and focused on priorities beyond shareholder returns. As of October 2024, this global movement encompasses nearly 9,500 companies in more than 100 countries, spans 160 industries and includes many household brand names such as Athleta, allbirds, Ben & Jerry’s, Danone North America, Eileen Fisher, New Belgium Brewing Co., and Patagonia. Could B Corp certification be the right choice for your business?

What is a B Corp? A B Corp is a company that has been certified by B Lab, a private nonprofit organization, as having scored above a certain level on a comprehensive, multi-factor certification assessment scale designed to measure a company’s practices and impact related to governance, workers, community, the environment, and customers. Although, as explained below, part of the B Corp certification requirements may be satisfied by the use of a “benefit corporation” form of entity under applicable state law, a B Corp is not a form of entity (such as a corporation, limited liability company, or partnership), nor does it relate to any tax classification (such as a C corporation or S corporation). B Corp certification can be appealing, but it is important to weigh certain considerations when determining whether to seek certification.

What does the B Corp assessment and certification process involve? The assessment and certification process is typically intensive, time consuming and may be expensive. The process involves significant data gathering and analysis and often requires the assistance of a consultant.

The assessment is composed of a series of questions that are weighted based on multiple factors, including the company’s size, industry, sector, and location. Each company is classified as falling in one of five major sectors: manufacturing; wholesale/retail; services with minor environmental footprint; services with significant environmental footprint; or agricultural growers. Assessment questions are grouped into the following five primary “impact areas”:

Governance – questions evaluate the company’s mission and engagement concerning social and environmental impact, ethics, and transparency.
Workers – questions consider the welfare of the company’s employees, with attention to topics including compensation, wellness, career and workforce development, and health and safety.
Community – questions evaluate the company’s engagement with its community, including an assessment of matters such as diversity, job creation, charitable giving, and relations with service or product suppliers. This area recognizes companies with specific community-oriented business models.
Environment – questions assess a company’s environmental stewardship with consideration of resource use, emissions, company facilities, and supply chain and distribution. This area recognizes companies with missions focused on environmental solutions, such as renewable energy or land conservation.
Customers – questions evaluate the impact a company may have on its customers related to product quality, data privacy, and the ability to provide feedback. This area recognizes companies with products or services that are meant to have a positive impact on a social problem, such as health- or education-related businesses, or provide a benefit to underserved communities.

The relative importance of particular questions and impact areas may vary based on a company’s sector. For example, a clothing manufacturer may have increased weighting on its evaluation of factory conditions for its workers and environmental impacts of its supply chain, whereas a solar energy project developer may have more weight on the consideration of the carbon footprint of its office space. Scoring is customized based on a company’s sector, and most companies are eligible to earn up to 140 points.

B Lab awards points based on positive impacts on the company’s workers, community, and the environment, and a company must achieve a minimum of 80 points to become certified. Companies may not be successful on their first attempt to become certified, and the assessment can provide valuable feedback on areas where a company needs to make changes in order to achieve certification. A company can increase its score on the impact assessment by, for example, implementing a recycling program, reducing its resource consumption by investing in an upgraded heating and cooling system, establishing metrics against which to measure progress, increasing employee compensation to market rates, or expanding its paid vacation or family and medical leave benefits. While some changes may be easy to implement, others may be costly.

Once a company receives a passing score on the assessment, there is a one-time submission fee, which currently ranges from $150 to $900, and an annual fee to become and remain certified, which currently ranges from $2,000 to $50,000 or more, based on the income of the business. In addition, some applicants may be assessed certain other fees depending on their particular circumstances.

What is the “legal requirement” to become a certified B Corp? In addition to passing the impact assessment and paying the application and annual certification fees, companies seeking B Corp certification need to commit to change their corporate structure to consider the impact of all company decisions on their stakeholders, known as stakeholder governance. Companies organized in states that provide for “benefit corporations” or a comparable classification can satisfy the legal requirement by changing their legal form to that of a benefit corporation under applicable state law. Our companion blog post provides a detailed explanation of benefit corporations. Benefit corporation status often entails other obligations such as public release of periodic benefit reports assessing the company’s social and environmental performance.

Companies that are not organized as corporations (such as limited liability companies) or are located in states without a benefit corporation framework may instead amend their organizational documents or membership agreements to reflect the priorities and mission-oriented focus of the business. For example, B Lab has prescribed text that an LLC must incorporate into its organizational documents in order to satisfy the legal requirement, which includes an undertaking by the company to create “a material positive impact on society and the environment,” as well as a commitment by the directors or managers to consider various environmental and social impacts in their decision making. The B Lab website provides further information about the legal requirement and includes an interactive tool that helps applicants determine what will be required based on the applicant’s form of entity and jurisdiction of organization.

In situations where a company seeking certification has a parent, subsidiaries or other affiliates, particularly those that share a name with the company seeking certification, there may be a requirement under B Lab guidelines for the affiliate to obtain certification as well.

What is required to remain a certified B Corp? B Corp certification lasts for three years, which means that to retain B Corp certification a company needs to go through (and pass) the impact assessment process every three years. Starting with companies due for recertification in January 2025, the updated impact assessment must be submitted at least six months prior to the company’s recertification date. In addition, the results of each B Corp’s impact assessment process are available to the public on the B Lab website.

What are the benefits of receiving B Corp certification? The certification is a widely recognized symbol the business can use to set itself apart from competitors in a market space. Once established, the certification likely would make it harder for future owners of the business to derail the mission-oriented focus of the business, creating a form of protection for a founder’s vision. B Corp certification can also help to attract certain types of employees, investors, or even customers. In addition, B Corps are part of a community called the “B Hive,” which allows B Corps to share discounts to their products and services as well as ideas about best practices. The B Hive may also facilitate communications that can lead to valuable business relationships, creating a useful network for emerging businesses.

Companies should weigh these considerations when deciding to move forward with either the assessment process or the complete certification process. We are available to advise on whether becoming a B Corp might be right for your business and help walk you through the legal aspects of the certification process.

FURTHER INFORMATION

For further information about these matters, please contact Frans Wethly at fwethly@klavenslawgroup.com or 617-502-6285, Sam Rothberg at srothberg@klavenslawgroup.com or 617-502-6286, or Jonathan Klavens at jklavens@klavenslawgroup.com or 617-502-6281.

DISCLAIMER

This document, which may be considered advertising under the ethical rules of certain jurisdictions, is provided with the understanding that it does not constitute the rendering of legal advice or other professional advice by Klavens Law Group, P.C. or its attorneys. Please seek the services of a competent professional if you need legal or other professional assistance.