The Social Entrepreneurship Spectrum: B Corporations
BY Issie Lapowsky
A new type of organization that uses business to solve social problems
To become B Corps, businesses must prove that they care as much about society and the environment as they do about profits.
The Classic Example
Method, which makes eco-friendly home and personal care products and sells them in recyclable plastic packaging, became one of the first B Corporations, in 2007. Why go the extra mile? "Rather than just being a business that talks about 'people, planet, and profit,' we have put it into our corporate structure," says co-founder Adam Lowry. Sales haven't suffered: Method's revenue exceeds $100 million.
The Model Works Best When
1. A business has more than one social impact. B Lab, which created the B Corp standard, assesses businesses according to their impact on their communities, employees, and consumers and the environment. The more a business does to benefit each category, the more points it receives.
2. You want access to impact investors. B Lab's rating system quantifies social impact—something impact investors typically require.
Members of the B Corp network are good to one another. Many offer discounted services, including Web design and headhunting. Mainstream businesses are following suit: Intuit offers QuickBooks for free to B Corps; Salesforce.com gives them a nonprofit discount. The B Corp label is also an effective marketing tool; B Lab runs its own ad campaign on behalf of B Corps aimed at 17 million consumers.
The B Impact Rating System exam requires answers to up to 220 questions; since 2007, about 900 companies have failed to make the cut. Those that do must amend their corporate governing documents and file them with state authorities and pay a yearly fee of $500 to $25,000, depending on company size. Every two years, businesses need to recertify. Despite the strict regulations, the certification has no legal significance.
The Tax Implications
B Corps pay standard corporate income tax. So far, the only city that gives tax breaks to B Corps is Philadelphia, where up to 25 B Corps a year will be eligible for a $4,000 tax break starting in 2012.
Norwood Marble & Granite After failing at its first attempt to become a B Corp, this stone and tile fabrication and installation company targeted problem areas. For instance, the Brentwood, Maryland, company recycled only a fraction of the millions of gallons of water it uses. Now, the number is 98 percent. The change saves the company $10,500 a month in utilities. It also helped Norwood boost its score enough to achieve B Corp status last August.
Guayaki Sustainable Rainforest Products The Sebastopol, California, company, which sells yerba maté teas, has used its B Corp status to partner with fellow B Corps Numi Organic Tea and Traditional Medicinals. The three have co-sponsored events, shared buyer contacts, and even collaborated to create products.