Nereo Landini1

We can say that Benefit Corporations (BC) and B Corps are hybrid organizations which represent alternative to the for-profit and not-for-profit model.

Italy is the first country, apart from the USA, to pass Benefit Corporation legislation and to introduce the "Società Benefit" (Law No 208/2015), namely for profit companies formally allowed by law to pursue a CSR mission, intended to achieve general and/or specific public benefits.

Core attributes of a BC are: 1) a corporate purpose to create a material positive impact on society and the environment; 2) an expansion of the duties of directors to require consideration of non-financial stakeholders as well as the financial interests of shareholders; and 3) an obligation to report on its overall social and environmental performance using a comprehensive, credible, independent and transparent third-party standard.

It is worth pointing out that Benefit corporations and B Corps are not exactly the same thing, even if they are often complementary and designed to go together. A BC is an institutional form with a recognized legal structure. It is "legally a for-profit, socially obligated business, with all of the traditional corporate characteristics but with explicitly stated societal responsibilities" In other words, it is a for-profit entity that has voluntarily and formally committed to pursue a general or specific public benefit by creating social and environmental outcome, in addition to its responsibility to return profits to the shareholders. BC has the obligation to draw up an annual report to assess and communicate its financial, social and environmental performance.

By contrast, a B-Corp refers to a business of any legal form that has obtained a certification as to its level of responsible business conduct. A B-Corp is subject to a "B Impact Assessment" (BIA), that evaluates companies across five broad categories: environment, employees, customers, community, and governance. In order to become a certified B Corp, a company must meet the performance related to these features through scoring a minimum of 80 out of 200 points. B Corps are similar to traditional commercial businesses in that they sell a product or service in order to generate profits. However, the difference lies in the mission that is embedded in the B Corp model - placing central importance on the underlying sustainability or community-driven values or goals embedded within the organization. As a consequence, not all certified B Corps are also BC and vice versa: a company can decide to become a BC even without obtaining the B Lab's certification. In the same way, certified B Corps don't have to be BC. Therefore, the main difference is that BCs don't get their CSR performance controlled and certified every two years.

BCs are considered a key actor of a dynamic movement to redefine success in business, intended as "the best for the world", rather than "the best in the world". A movement that should be structure and mmanaged. Their purpose is to enhance CSR by providing legal protection to managers/entrepreneurs who voluntary want to change the societal form and the business model not only to make money but also to help alleviate poverty, build stronger communities, restore the environment and inspire people and organization to work for a higher purpose. This shift needs a responsible-oriented management aimed at pursuing the goals of accountability, transparency and stakeholders engagement while ensuring the health of the organization as an ongoing concern and contributing to the health of the local community, the environment and the community at large. The motivations that can lead companies to seek the B Corp certification can be highlighted as follows:

  • lead a movement: companies join the movement first of all because they believe in it and they want to "use business as a force for good";
  • partner with peers: Certified B Corps meet frequently and create a sense of community where opinions and experiences are shared, creating learning opportunities;
  • benchmark CSR performance: the certification is effective in showing how a company fares against other sustainable organizations, highlighting improvement areas;
  • save money and access services thanks to the network: B Lab gives the opportunity to get discounts on numerous business services. The savings coming from these relationships more than offset the certification fee;
  • protect mission: often companies' CSR efforts risk to be thrown away when management or ownership changes. The certification is a tool to reduce this risk by creating some legal and reputational constraints;
  • differentiate from braggarts: the certification is an official and public statement that recognizes B Corps as truly effective in being socially and environmentally responsible. The certification is a powerful tool to differentiate 'good' companies from the ones which are simply 'greenwashing';
  • attract investors: some investors are interested in companies that not only have a solid business, but also have a solid CSR approach. In this regard Socially Responsible Investing (SRI) is growing decisively. The certification signals investors that a corporation is worth of receiving SRI;
  • generate press: the movement is becoming more and more popular, finding coverage on important media outlets i.e. Bloomberg, providing free advertising to all B Corps;
  • attract and engage talent: most workers are attracted towards workplaces where they can have a positive impact, and are more motivated and engaged if that is the case.;
  • participate in a campaign: collective B Corp brand campaigns are being launched increasingly more frequently.

From an organizational perspective, there is no specific structure, industry or business model which is more prone to obtain the certification. The main distinguishing element is the entrepreneur/the managerial attitude and orientation. Where the entrepreneur/managerial team is deeply conscious of CSR themes, the certification is more likely to take place. Marazzi & Associati assists the companies animated by these values to achieve their goals.

Footnote

1 Senior Advisor, Marazzi & Associati.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.