As more and more people become increasingly conscious of businesses’ social and environmental impact, there has been a growing interest in socially responsible consumption and investing. Many individuals seek to support companies prioritizing social and environmental responsibility alongside financial profitability.
Two business structures, B Corps and Public Benefit Corporations, have emerged in this trend. While both aim to promote a positive impact in the world, they have distinct differences.
Understanding the differences between B Corps and Public Benefit Corporations plus B Corp’s advantages is crucial for investors looking to support socially responsible yet profitable companies. Let’s explore these differences and B Corp’s advantages.
B Corp And B Corp’s Advantages
B Corps are for-profit businesses certified by the nonprofit organization B Lab for attaining rigorous social and environmental performance standards, accountability, and transparency. A B Corp symbol is a crucial marketing tool for companies marketing to consumers and investors.
One of B Corp’s advantages is that investors gain confidence that B Corp is genuinely committed to making a positive impact in the world. B Corps must consider their decisions’ impact on all stakeholders, not just shareholders. This can lead to more long-term thinking and a more sustainable approach to business.
Additionally, B Corps must report on their social and environmental performance and get assessed against a third-party standard, helping investors evaluate its impact.
The fact that any business, regardless of its corporate structure, state, or county of incorporation, is eligible to become a B Corp is an advantage. This means investors have a wider range of businesses to choose from when looking for socially responsible yet profitable firms.
Public Benefit Corporation
Public Benefit Corporations (PBCs) are a legal structure recognized in some states in the United States. PBCs are for-profit corporations required to pursue a public benefit and include one or more public benefits in their statement of purpose.
Public Benefit Corporations must balance the interests of their shareholders with the public benefit they are pursuing, ensuring that they are not sacrificing social or environmental impact for the sake of short-term financial gains.
What Are the Key Differences?
Here are some key differences between B Corps and Public Benefits Corporations.
- While PBCs are a legal structure, B Corps are not. Therefore, any for-profit business can apply for certification while continuing operations.
- B Corps must report on their social and environmental performance through a third-party such as B Impact Assessment. PBCs, on the other hand, must report on their public benefit activities publicly against a third-party standard, except for Delaware PBCs.
- Obtaining B Corp certification is optional and can be relinquished at any point, but becoming a Public Benefit Corporation entails permanent alterations to the company’s framework.
Differentiating B Corps and Public Benefits Corporations
Understanding the differences between B Corps and Public Benefit Corporations is crucial for investors looking to support socially responsible yet profitable firms that align with their values.
While both B Corps and PBCs are structures that prioritize social and environmental responsibility in addition to financial profitability, any for-profit business can apply for a B Corps certification after meeting the certification standards and focusing on all its stakeholders in a bid to increase trust and loyalty. Public Benefit Corporations, on the other hand, are legal structures that require companies to prioritize the public good as a fiduciary duty but do not have the same certification standards as B Corps.
