Public benefit corporations and B Corps are business entities prioritizing positive social and environmental impact and profits. While they share some similarities, there are also some critical differences. Public benefit corporations are legally recognized entities with a specific legal status under state law and must consider the interests of all stakeholders in their business decisions.
On the other hand, B Corps is any business that has undergone a third-party certification process to demonstrate its commitment to social and environmental performance. This article will explore the differences between public benefit corporations and B Corps in more detail, including their legal status, requirements, and certification processes.
The Legal Status of Each Type of Entity
A public benefit corporation is a type of corporation that has a specific legal status under state law. In other words, it is a legally recognized entity separate from its owners and can enter into contracts, own assets, and incur liabilities.
In contrast, B Corp certification is a third-party certification that any business can obtain, regardless of its legal structure. This means a company can be a sole proprietorship, partnership, corporation, or other entity type and still become a B Corp.
Differences in Terms of Specific Obligations to Operate
These requirements vary by state but generally include the need to consider the impact of their decisions on stakeholders (such as employees, customers, and the environment) and shareholders.
This means that public benefit corporations must consider the interests of all parties affected by their business decisions, not just the financial interests of shareholders. In contrast, B Corps are not legally required to consider stakeholder interests. However, they are expected to meet specific social and environmental performance standards as part of the certification process.
The Process for Becoming a Public Benefit Corporation and a B Corp.
A business must be incorporated under state law to become a public benefit corporation. This typically involves filing articles of incorporation with the state government and obtaining the necessary licenses and permits.
In contrast, to become a B Corp, a business must undergo a certification process that involves completing a detailed assessment of its social and environmental performance and meeting specific standards set by the B Lab. This non-profit organization administers the certification, which includes an in-depth review of the business’s operations, supply chain, employee practices, and environmental impact.
Summary
Both public benefit corporations and B Corps focus on creating positive social and environmental impacts. Still, they differ regarding their legal status and the specific requirements they must meet to operate as such. Public benefit corporations have an exact legal status under state law and must consider all stakeholders’ interests in their business decisions.
On the other hand, B Corps is any business that has undergone a third-party certification process to demonstrate its commitment to social and environmental performance. Both types of entities offer a way for companies to prioritize social and environmental impact in addition to profits, but the specific requirements and processes for becoming one vary.
