To B clear
Lately, the buzz around companies that account for environmental and social impacts on par with profits has been rising. Yet as the discussion has spread, so has the confusion over what constitutes a B Corp and how it’s different from a benefit corporation.
As a result, it’s fairly common to see a company that has registered as a benefit corporation declare that it’s a B Corp. Or, a corporation that has achieved Certified B Corp status will refer to itself as a benefit corporation.
Essentially, the terms are used interchangeably, and while that may suffice at some point in the future, it simply doesn’t fly today. For example, while there are more than 1,200 Certified B Corps around the world, only 26 states and the District of Columbia currently allow companies to incorporate as some kind of benefit corporation. In Colorado, the option to incorporate as a public benefit corporation (PBC) became effective on April 1, 2014.
Simply put, a benefit corporation is a legal entity and a B Corp Certification is a designation.
The intent behind both concepts is very similar, due largely to the fact that B Lab, the non-profit that oversees the B Corp Certification process, is the lead advocate for passing state-level benefit corporation legislation across the U.S. Furthermore, it mandates that Certified B Corps to take the legal step wherever it applies. But benefit corporations—including PBCs in Colorado—are not required to become Certified B Corps, and the difference can affect how a company maintains its impact credentials, as well as its ability to communicate its commitment to such non-financial principles.
To that end, this brief primer should help Colorado business owners distinguish between the two concepts.
A company incorporated as a PBC in Colorado must:
- Have the support of at least two-thirds of its shareholders to be a PBC, whether it’s a new entity or converting from another type of corporation.
- Indicate the purpose(s) for which the corporation was formed in the company’s articles of incorporation—or on the articles of amendment for existing companies that are converting. The stated purpose(s) must reflect the public benefit the company intends to provide.
- Replace Inc. or Corp. with some variation of PBC in the corporate name.
- Determine whether it must register under the Colorado Charitable Solicitations Act—a bureaucratic wrinkle that B Lab is working to smooth out.
- Pay the appropriate registration fee.
- Annually assess the company’s public benefit impact using a third-party standard. This step likely adds to some confusion, since many benefit corporations use the B Lab’s B Impact Assessment for this requirement, as it is a free, comprehensive web-based resource. But using the assessment does not automatically result in B Corp Certification.
- Publish an annual benefit report that includes the results of the annual assessment, distribute this to all shareholders and post it on the company’s public website.
A Certified B Corp in Colorado must:
- Score 80 out of a possible 200 points on the B Impact Assessment, which is an impressive accomplishment.
- Pursue PBC status as noted above within two years of certification.
- Pay an annual certification fee, which is based on annual sales.
- Recertify every two years.
Any Certified B Corp may also be subject to an on-site review by B Lab officials, who visit 10 percent of B Corps that are randomly selected each year. Once all of the requirements have been met, Certified B Corps may use the B-based logos developed by B Lab.
It’s easy to see how the line between benefit corporations and B Corps can blur, especially given the overlap between the two, but the landscape of corporate structures is historically one of quirks and potholes that lawyers love and business owners endure.
In the end, however, the differences provide options for business owners looking to pursue a business framework that ingrains impact and purpose in their business models. And that should allow for an even broader patchwork quilt of such companies in Colorado and across the U.S.