The ABCs of B Corps

If there’s a No. 1 criticism from consumers about corporations, it’s that they’re only looking out for their shareholders.

A small, but increasing number of designated Benefit Corporations, or B Corps, are looking to change that viewpoint by elevating their employees, customers and the environment to a status equal or superior to those shareholders.

Many outdoor companies long have endorsed the triple bottom line business strategy of “people, planet, profit.” Now, in seven states, they can gain legal backing to those decisions by registering as a B Corp. The designation provides companies with some legal protection against current and future shareholders who might try to fight a decision that hurts their profit at the benefit of people or the environment. It also gives shareholders legal leverage if their B Corp tries to stray from its original intentions.

In January, Patagonia registered itself as a B Corp in its home state of California. Two-thirds of the company’s shareholders had to agree to the designation, and the same amount is needed to reverse the decision.

The outdoor apparel brand took the extra step to voluntarily get B Corp Certification, which makes it subject to biannual reviews and rankings by B Lab, a Philadelphia-based nonprofit. B Corp Certification is similar to LEED Certification for green buildings, providing a set of standards and metrics to the designation.

Other outdoor brands, such as GoLite, United By Blue and Indigenous Designs, have gained B Corp Certification, although they are not yet registered B Corps. (Confused of the difference between registered B Corps and certified B Corps? Click here to find out more.

With B Corp Certification, “There’s value for a company in the ability to say, ‘We’re actually walking the talk,’” said B Lab Co-Founder Jay Coen Gilbert.

As part of the certification process, B Labs issues a comprehensive survey (it’s 48 pages long for the largest of companies), after which the nonprofit then verifies the responses through required documents and on-site audits. Companies are assessed on areas such as job creation, compensation, suppliers, environmental issues and transparency. The end result is a rating score (a company needs a minimum score of 80 out of 200 possible) to qualify as B Corp Certified.

Among the 503 companies with certification this year, the average score was 105, so it isn’t an easy test, Coen Gilbert said. Patagonia stands at 107. Other companies that are not B Corp Certified can take the survey for free — about 2,000 have, averaging a score of 84, according to B Lab’s annual report.

“We’re not in the business of scolding people or kicking them out; we’re about supporting them the best we can so they can achieve their goals,” Coen Gilbert said.

Companies pay for the certification and support services that B Lab provides — anywhere from $500 a year for businesses with less than $2 million in annual revenue, up to $25,000 a year for firms making $100 million or more. Those fees fund about 15 percent of B Labs costs, Coen Gilbert said. The rest is donation supported.

B Labs has averaged about 70 percent growth in B Corp Certified companies since its start in 2007. It’s also helping support B Corp legislation in more states. Coen Gilbert said the nonprofit has and will again be at Outdoor Retailer Summer Market, helping recruit more toward the cause.

“I think the outdoor industry is particularly important to this movement,” Coen Gilbert said. “They have been a pioneer in putting environmental interests at forefront of their businesses.”

“There are many company founders that ask themselves: ‘What will happen to the mission of my company as it grows? Will I sell my soul when I take on outside investors? B Corps shift the power in the board room dramatically.”

–David Clucas