Two Years In, B Corps Gain Currency

Two Years In, B Corps Gain Currency

The ranks of companies certified to the sustainable business standards developed by the nonprofit B Lab has swelled over the last year, despite a recession that has made it more difficult for corporate commitments.

The number of U.S. companies certified as B Corporations has soared some 80 percent, representing $1.1 billion in revenue and 54 industries, B Lab revealed in its first annual report. Policymaker and investor interest in the certification has never been higher, largely due to the collapse of the financial markets.

"At a time when public trust in business leaders is at a all-time low, the examples set by companies voluntarily meeting this new set of standards of transparency and accountability is really attractive to folks," Jay Coen Gilbert, co-founder of B Lab, told GreenBiz.com during an interview this week to discuss the state and future of the B Corps movement.

The B stands for public benefit, and unlike public companies, B Corps have a legal structure that enables them to consider environmental and social factors when making business decisions. "Large public companies are legally obligated to maximize shareholder value, even if it’s at the expense of the environment," Gilbert said.

The ranks of certified B Corps include well-known brands such as Method, Seventh Generation, Numi Organic Tea and New Leaf Paper. Two years after its launch, more than 1,000 others use the free B Impact Rating System to benchmark their performance.

The second iteration of its standards will debut in the coming months, marking the beginning of a transition where the 80 founding B Corps must get re-certified against the tougher standards. The certification lasts two years.

Investor interest in the standards has been a surprise development over the last year, Gilbert said. The Global Impact Investing Network, whose roster includes big-name institutional investors such as Prudential and JPMorgan Chase, has enlisted B Lab to create the Global Impact Investing Rating System (GIIRS) to help funnel investment dollars to high impact companies. The rating system will debut in late 2010.

One of B Lab's goals involves recognition for B Corps as a legally recognized corporate form; Gilbert expects legislation will be introduced over the next year in California, in addition to movement in Vermont, Colorado, North Carolina and Pennsylvania. The second part of the goal is the advancement of incentives for sustainable businesses, such as a tax advantage. Nonprofits aren't taxed, traditional for-profits are taxed at 40 percent, Gilbert said, while B Corps could one day be taxed somewhere in the middle. Other potential incentives could include investment credits or government procurement preferences.

Gilbert finds the growth rate of certified B Corps is encouraging, considering the recession has made it harder for companies to make the commitment. “Even if the company is completely aligned, it's still seen as a discretionary expense,” Gilbert said.

Certification fees cost companies one-tenth of 1 percent of net sales for organizations with revenue under $10 million. For larger companies, the certification fee is 1/20 of 1 percent of sales. At least 15 B Corporations are actually making money from the certification, meaning the discounts they receive exceed the certification fee.

For example, Salesforce.com offers B Corps a 75 percent discount, which is the same deal they give to nonprofits, Gilbert said, while the Yale School of Management also forgives business school loans for people who work at B Corps.

Looking back over the last two years, Gilbert said if he were to have done anything differently, he would have invested more heavily in the technology, such as the web or social media, to deliver value to and build the voice for the B Corps community.

Awareness of the certification is probably higher in the sustainable business arena, but Gilbert believes it's “much too early in the lifecycle of this certification for it to be expected to have any critical mass of awareness."

The community nevertheless seems to be faring well on its own, in terms of exposure, despite the lack of significant outreach. In addition to press coverage in the New York Times, Wall Street Journal, Business Week placed B Corporations in three of the top five spots on its list of "Most Promising Social Entrpreneurs."

The 2009 B Corporation Annual Report will be available for download at Sustainable Industries.

Image CC-licensed by Flickr user werkunz1.