Certification options are sometimes confused with legal structures, which they are not.

Certifications often serve as a stamp of approval reflecting a company’s commitment to social and/or environmental impact, as verified by a third party.

The certifying agency assures that certified companies achieve a certain standard of behavior, as a result of practices and procedures. The third-party certifying entity conducts evaluations and monitors practices, and often provides marketing and other forms of support.

The most successful certification programs have been instrumental in heightening consumer awareness and directing buying power for social impact. Often, companies pay a fee to be certified or an ongoing license fee to display a certification mark.

B Corp

B Corp (also known as B Corporation) is not a legal form, but rather a private certification issued to for-profit companies by B Lab, a global nonprofit organization. To receive B Corp certification, B Lab reviews the legal mechanisms used to anchor the company’s social mission and conducts a detailed review of the company’s business practices. In order to obtain B Lab certification companies must meet standards for social and environmental sustainability performance, accountability, and transparency. B Lab has pioneered a holistic certification approach that applies to the whole company across all product lines and issue areas. In the past, for-profits of all legal business structures were eligible for certification, although B Lab has been narrowing the field of permissible legal structures in recent years.

Beginning in 2010, B Lab began pursuing legislative changes to state corporation laws in order to permit mission anchoring and broader stakeholder alignment, as a response to the traditional shareholder value primacy of many state statutes. The most prevalent of those forms is the “benefit corporation.” B Corp certification is not the same thing as a benefit corporation. A benefit corporation is a type of for-profit corporate entity, authorized by 33 U.S. states and the District of Columbia. B Lab certification is not needed to obtain benefit corporation status, although increasingly, B Lab seems to be favoring the benefit corporation as the only form for which they will certify a company as a B Corporation.

Unfortunately, whether a benefit corporation can attract traditional institutional capital as easily as other corporate forms that also provide mission anchoring and allow for multi-stakeholder considerations by the board, remains uncertain. Up until a couple of years ago, there were few examples of benefit corporations receiving such institutional funding. (Even though there were multiple B Corporations that had received such funding, most were traditional corporations that were required to become benefit corporations once their state adopted the new corporate form.) More recently, a number of benefit corporations (and B Corporations) have attracted institutional funding, but the data set remains small. As a result, entrepreneurs are often guided by counsel to consider carefully the benefits of B Corp certification, weighed against risks to obtaining institutional capital in their fundraising efforts.

Additional Resources

An Entrepreneur's Guide to Going "B"

Patagonia and the Yale Center for Business and the Environment published this guide on best practices and making informed decisions as to whether B certification or Benefit incorporation makes sense for your company.

The Revolution at Etsy

This November 2017 New York Times article addresses big transitions at Etsy, a certified B Corp "global marketplace for unique and creative goods," after they went public in 2015.  "After a few quarters of tepid results, investors grew impatient and a classic clash of corporate governance came into view -- how would a company like Etsy balance the short-term demands of its shareholders with its high-minded long-term mission?"

Can Corporations Inspire Social Good?

This Stanford Social Innovation Review article contends that a B Corp is a valuable template for moving beyond shareholder priorities, but that creating true social good requires deeper business and cultural transformations to help organizations effectively navigate market constraints.

Other Certification Programs

Numerous certification programs exist to signal a commitment to particular social or environmental goals. Each certification program has its own process for verifying and monitoring adherence. Like B Corp, these certification programs are not legal forms, but rather commitments that signal to stakeholders, including consumers, your company’s priorities and impact orientation. There are many certification programs, for example:

  • Food: Organic, Non-GMO, Fair Trade

  • Paper/wood products: Forest Stewardship Council, Rainforest Alliance
  • Textiles/apparel: Made in USA, Fair Trade, Goodweave, Fair Labor
  • Employee friendliness: Great Place to Work, Just Capital