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The New Face of Corporate Social Responsibility: Certified B Corporations & Benefit Corporations

August 23, 2018

In the past half century, three events have inflicted more harm to America’s modern political and financial institutions than perhaps any other: 1) the repeal of Glass-Steagall in 1999, which removed barriers between commercial and investment banking; 2) the Supreme Court’s decision in Citizens United v. Federal Election Commission, which effectively held that money is protected speech under the First Amendment and funneled billions of dollars into our election system; and finally 3) the rise of Milton Friedman’s brand of free market economics, which popularized a model of capitalism that revered shareholder profits to the detriment of workers, communities, and the environment.

Had these three things not occurred, our economy, environment, and democratic institutions would likely be in far better shape than they are today.

The repeal of Glass-Steagall gave way to a high-risk, high-reward financial climate. Federally insured bank deposits suddenly became the fodder of high-stakes bets, effectively letting bankers gamble with taxpayer dollars—which was on display in the 2008 bank bailouts. The 5-4 decision in Citizens United made it possible for businesses to pour billions of dollars into campaign coffers. An estimated $6.5 billion went into the 2016 presidential and congressional elections alone.

While Congressional action is needed to address the first two problems, the business community can address the third.

In 2006, the nonprofit organization B Lab launched a certification process aimed at putting profits, people, and the planet on a level playing field in corporate decision-making. Certified B Corporations (“B Corps”) offer consumers a way to distinguish the truly “good” companies from the ones that merely have good marketing departments. B certification created a standard vetting process for measuring social and environmental impact, while ensuring reporting compliance through stringent measures of accountability and corporate transparency.

In 2010, states started implementing statutes under which companies could incorporate as benefit corporations. A benefit corporation is an alternative to a C-Corp or LLC that builds the same values of Certified B Corporations into the company’s charter and articles of incorporation. Unlike traditional corporations, benefit corporations explicitly require corporate directors to consider the values of all stakeholders (shareholders, employees, community, and environment), rather than just shareholders, in company decisions. Benefit corporations ensure that companies give equal weight to stakeholder values in the board room. You may have heard of triple bottom line companies—same thing. To date, 34 states, Washington D.C., and Puerto Rico have passed legislation recognizing these new business entities.

One thing is clear: conscious capitalism is gaining ground. But don’t take it from me; take it from the CEO of the world’s largest investment firm, this Nobel Prize-winning economist, and Fortune 500 CEOs like Virgin’s Richard Branson, Panera’s Ron Shaich, and Whole Foods’ John Mackey.

Conscious capitalism is not just good for communities, workers, and the environment, it’s good for business. Milton Friedman’s brand of economics is flawed, and the rise and popularity of Certified B corporations and benefit corporations is largely a response to that realization.

In 2017, Patagonia and Yale published a guide for entrepreneurs to help budding businesses navigate Certified B Corporations and benefit corporations. This past month, Patagonia, Yale, and Vermont Law School published a guide on the same topic for a legislative audience.

Both guides are freely available here on Patagonia’s website.

These guides offer a roadmap for entrepreneurs, corporate executives, attorneys, legislators, and anyone interested in advancing business as a force for good. Businesses now have an opportunity to spearhead a new way—a better way—of doing business.

Abigail Barnes is an attorney, author, and entrepreneur. She is the Co-Founder & CEO of Allergy Amulet, a venture-backed start-up creating a paradigm shift in food safety with a consumer food allergen/ingredient detection device. She is the author of An Entrepreneur’s Guide to Certified B Corporations and Benefit Corporations and co-author of A Legislative Guide to Benefit Corporations: Create Jobs, Drive Social Impact, and Promote the Economic Health of Your State. She has been published in several well-known periodicals and journals, including the Atlantic and Forbes. She holds a law degree from Vermont Law School, a master’s degree from Yale University, and a bachelor’s degree from Kenyon College.