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B Corp certification strongly communicates a firm's focus on delivering value and accountability to all stakeholders, including the community.

You may not have heard the term "B Corp," but more and more companies are pursuing this designation. According to Harvard Business Review, the increased emphasis on the stakeholder perspective, especially environmental and social concerns, in the 21st century is the driver for this movement. If your firm is focused on this higher level of corporate governance and wants to convey this to customers, shareholders and the community at large, a B Corp certification may be an excellent means to do so.

What Is a B Corp?

Officially, a B Corp is a social enterprise that is verified and certified as a Certified B Corporation by B Lab, which is a nonprofit. This certification is based on how a firm creates value for its non-shareholder stakeholders, such as the environment, employees and a specific community. According to B Lab, "B Corps are for-profit companies certified by the nonprofit B Lab to meet rigorous standards of social and environmental performance, accountability, and transparency." B Lab's goal is to redefine success in business by using business as a force for good. Others apparently agree, as there are now more than 2,100 certified B corps across 130 industries and sub-industries in 50 countries.

Why Become a B-Corp?

Companies choose to become a B-corp for a variety of reasons that often involves a mixture of altruistic and capitalistic motives. Some firms want to differentiate themselves from "pretenders." In other words, many firms claim to engage in certain behaviors but provide little or no evidence of doing so, and firms that actually do it want this to be known. Some founders want to be out in front of the crowd and lead a movement that supports their beliefs.

Others want to generate press and impact their branding or to attract socially conscious investors. Furthermore, according to Entrepreneur, numerous studies have shown that consumers want to buy from socially-conscious companies. B Lab also has partnered with like-minded for-profit and nonprofit entities to provide additional benefits to decrease the expense and increase the business case for becoming a B Corp.

If your firm is already purpose-driven, has a social mission and has been promulgating that as a means to differentiate it, retain employees and generate profits, then a B Corp is a very viable option. There are a number of big names that are known for social and environmental consciousness that are certified B corps. These include Patagonia, Stonyfield Farms, Ben & Jerry's and Warby Parker, as Entrepreneur notes.

What Is Involved?

As with any certification, B Corp certification is a process. According to B Lab, a firm must obtain 80 of 200 points on the Impact Assessment, which is a 150-question survey taken online. Firms must then schedule and successfully complete an assessment review, which involves submitting supporting documentation for 6 to 8 questions that the firm answered yes to and responding to more detailed questions during a 60 to 90 minute phone call. Thereafter, the firm will be asked to submit additional documentation, typically regarding the business model. Certifying firms subsequently complete a disclosure questionnaire and the firm and its senior management are then subjected to background checks. Assuming everything is as it seems and any issues or concerns that are identified are promptly and satisfactorily explained or addressed, the firm will be designated a certified B corporation.

Each year, B Lab randomly selects 10 percent of the certified B corps for site reviews. The objective is to verify, virtually or in-person, the affirmative responses to the Impact Assessment. However, site reviews are mandatory for certified B corps that are publicly traded or that are subsidiaries of public companies. In addition, every two years, to retain the B Corp certification, companies must update their Impact Assessment, achieving a minimum of 80 out of 200. They must also, as with the initial certification, provide supporting documentation to support their affirmative answers.

What Are the Costs?

According to Entrepreneur, based on the size of the company, the certification costs can range from $500 to $25,000 annually. The smaller the firm, the easier the transparency and the lower the amount of documentation required. Therefore, it is recommended that interested firms complete the Impact Assessment and use the information on more than 150 best practices to help them shape and build a business that will pass certification as early as possible. Not only will the business be as mission-driven as desired from the beginning, it will be much easier to institutionalize this mission within the company before all the processes and procedures are installed than it would be to reverse engineer the business to make it compliant.

If you have a socially-driven, for-profit firm that believes in transparency and accountability, then B Corp certification may be the right path for you. Fully understanding the requirements for obtaining and maintaining the certification will help you reap the intended rewards.

This material is presented for informational purposes only and should not be construed as individual tax or financial advice. KeyBank does not provide legal advice.

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