Business

Public Benefit Corporations vs. B Corps: what’s the difference between the two?

Alternatives to conventional business structures, Public Benefit Corporations (PBCs) and B Corps, are becoming increasingly common. Often called “socially responsible” or “conscious” firms, these companies prioritize environmental and social objectives more than their financial success. They aim to improve society and the environment by using business as a force for good.

Businesses can legally integrate their dedication to social and environmental goals into their business model and operations using PBCs and B Corps business structures. These businesses intend to offer the best value for all their stakeholders, including staff members, clients, and the general public, in addition to financial gains.

Below are some of the differences between b corps and benefit corporations.

The Certification Process

B corps and benefit corporations have different certification procedures and legislative criteria. PBCs are expected to report their overall social and environmental performance to a third-party standard. They should include wording in their articles of incorporation stating their unique purpose to benefit the public.

Certification Process for Public Benefit Corporations

Public Benefit Corporations are recognized by state law as for-profit legal entities. They must specify their unique public benefit purpose in their articles of incorporation, which may include objectives like promoting the arts and culture, furthering education, protecting the environment, and more.

PBCs must consider how their choices will affect society, the environment, and their shareholders’ gains. PBCs must report on their overall social and environmental performance using a third-party standard to be held accountable for these requirements.

Certification Process for B Corp

Contrary to public benefit corporations, B Corps are accredited by the nonprofit B Lab. To become a B Corp, a business must adhere to social and environmental performance, accountability, and transparency requirements.

These requirements are described in the B Impact Assessment and the B Corp Declaration of Interdependence. The evaluation gauges how a business affects its community, environment, workers, and clients. Businesses that complete the test and receive the required rating are certified as B Corps.

Any company can become a B Corp because certification is not dependent on a particular legal form. However, many B Corps opt to establish as Benefit Corporations, a specific kind of PBC. This lets them formally incorporate their dedication to social and environmental objectives into their corporate framework.

Summary

Businesses prioritizing social and environmental objectives more than financial success are known as B Corps and Benefit Corporations. Due to their efforts to benefit society and the environment, these businesses are mostly called “socially responsible”  businesses. PBCs and B Corps both aspire to use business as a force for good. Still, there are differences between the two regarding the particular legislative requirements and certification procedure.

While B Corps are certified by B Lab based on their proven commitment to social and environmental performance, PBCs are recognized by state law. They are required to report on their performance using third-party criteria. Companies can prioritize social and environmental goals and be held accountable for their impact by joining PBCs or B Corps, both options.

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