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Benefit Corporation Versus B Corp

There are two related terms for coporations that are seeking to do good in addition to doing well. Both terms often apply to such corporations but this isn’t always the case. As such, it is useful to distinguish between them. So lets look at Benefit Corporation Versus B Corp.

B Corp

A B Corp is a company that has got itself certified by B Lab, using the B Impact Assessment. B Lab is a private entity which sets its own rules about what it thinks is good business practice. A key point is that this is not a government-run entity so it does not have any legal powers.

The B Impact Assessment is a rigorous examination that looks at the firm’s performance with respect to a number of areas important to non-shareholder stakeholders. I.e., can the firm show that it is doing well by people other than its owners? The assessment is in the process of changing but the general idea is that a B Corp should be able to say it is treating its workers well, it is not recklessly polluting the environment, it provides a positive experience for customers, or (hopefully and) is an asset for the local community.

B Corp certification isn’t easy. It can’t be easy and still be a meaningful certification so it shows that the firm is committed to better business practice. What is more re-certification happens every three years. The firm can’t stop the good work once it has become a B Corp.

(Public) Benefit Corporation

A public benefit corporation is a legal registration. The firm has made a decision to designate itself as a firm seeking to do more good than just help its owners. This typically involves letting whoever registers businesses know that the company is a benefit corporation and not a traditional company. In the US this would be the state.

The state of Georgia has its own benefit corporation law. This is contained in Title 14 of the Georgia Code (law). Chapter 2, article 18 deals with the topic. This is available online for anyone who wants to have a look. (As an aside, free online access to all laws seems an absolute must to me. If people are covered by laws it seems important to tell people what the laws are. Widespread knowledge of laws seems the point of them from the Code of Hammurabi).

To register as a benefit corporation there are requirements — basically the shareholders must agree. There is also an annual reporting requirement.

  1. A benefit corporation shall, no less than annually, provide to its shareholders of record, and to any other person who may request a copy in writing, a written report addressing the benefit corporation’s performance with respect to its pursuit of the public benefit or benefits specified in its articles of incorporation. The report shall include:
    1. The objectives the board of directors established in connection with the pursuit of such public benefit or benefits;
    2. The standard or standards the board of directors adopted to measure the benefit corporation’s progress in pursuing such public benefit or benefits;
    3. Factual information responsive to those standards regarding the benefit corporation’s success or failure in meeting the objectives for pursuing such public benefit or benefits; and
    4. An assessment of the benefit corporation’s success or failure in meeting the objectives and accomplishing such public benefit or benefits.
Georgia Code Title 14-2-1807

What Is A Public Benefit

To pursue a public benefit we need to know what that is. This is what the state of Georgia says.

  1. “Benefit corporation” means a corporation whose articles of incorporation contain a public benefit provision and a statement that the corporation is a benefit corporation.
  2. “Public benefit” means a positive effect, or reduction of negative effects, on society, on the environment, or on one or more communities or categories of persons, entities, or interests, other than shareholders in their capacity as shareholders, including effects of an artistic, charitable, cultural, economic, ecological, educational, environmental, literary, medical, religious, scientific, social, or technological nature.
  3. “Public benefit provision” means a provision stating that a purpose of the corporation is to pursue a public benefit or benefits.
Georgia Code Title 14-2-1802

Why Become A Public Benefit Corporation?

There is a healthy discussion over why firms would do this. One of the main reasons seems to be protection from shareholder lawsuits. If you register the company as doing good for the world beyond the shareholders, and the shareholders still invest in that company, they can’t really complain if the firm does good for the world. For example, the shareholders have less power to demand redundancies to give them more money at the expense of the employees after registering as a benefit corporation.

Benefit Corporation Versus B Corp

So a benefit corporation is a legal registration. it is sometimes relatively easy to obtain and often does not require too much in the way of checks. B Corp is a more involved process requiring in-depth reporting and auditing. Where benefit corporation status is available in a jurisdiction then B Corps are supposed to make that registration. As such, many B Corp are benefit corporations, but there are other B Corp which aren’t benefit corporations because that isn’t available in their location. It is also possible to register as a benefit corporation and never consider B Corp certification. So not all benefit corporations are B Corp and not all B Corp are benefit corporations. Still, many are both so, even though you shouldn’t, you wouldn’t be the first person to conflate the two.

Benefit Corporation Versus B Corp

For more on B Corp research see here and for more on the organization see here

Read: 2022 Georgia Code Title 14 – Corporations, Partnerships, and Associations Chapter 2 – Business Corporations, Article 18 – Benefit Corporations, click here

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