The Rise of the B Corp

Emily Holbrook


September 1, 2010

When Raphael Bemporad and Mitch Baranowski met in 1990, they knew they wanted to create a company that was not only financially successful, but also socially and environmentally responsible. So in 2003, they launched BBMG, a branding and marketing firm. Though they were eventually successful in their mission-driven business plans, they wanted more. They wanted to be recognized as a beneficial company -- one that stood out from the many greed-driven corporations of modern business.

Enter B Lab, an organization that supports "benefit corporations" by certifying such corporations, developing their legal framework, recruiting likeminded companies and helping them access "purpose-driven" capital markets. BBMG, along with more than 300 other companies, is now a certified B corporation, meaning it is not only an environmental steward engaged with its community, but it also has responsibilities that include the interests of employees, suppliers, consumers and the environment.

And B corporations (also known as "triple bottom line" businesses for their consideration of people, planet and profit) are now legal entities in some states, giving them greater protection against shareholder lawsuits. In April, Maryland Governor Martin O'Malley became the first to sign legislation to recognize this new type of corporation. Vermont's Governor James Douglas followed suit, signing into law Act 113, also known as the Vermont Benefit Corporations Act. Other states working to pass similar legislation include Colorado, New York, North Carolina, Oregon, Pennsylvania and Washington.

Andrew Kassoy, co-founder of B Lab, claims if BP were a benefit corporation, it is unlikely the Gulf oil disaster would have occurred. "If BP were a B corp, they would have looked beyond short-term profit and considered the environmental and community impact of their decisions," he said. "Instead of cutting corners, they would have evaluated the risks and consequences of a spill and decided to invest in better safety and extraction methods. It was the constant pressure to generate revenue, at all costs, that ultimately led to the Gulf oil spill."

Not everyone is onboard with B corps, however. Corporate governance experts worry about the rights of shareholders, while some investors feel reluctant to put money into something if a portion of the returns will go somewhere else, no matter if it is for a good cause.

In the aftermath of recent corporate debacles (AIG, Lehman Brothers, BP and Toyota to name a few), money-hungry actions on the part of these blue-chip corporations were unearthed, turning the stomach of the everyday American worker in the process. As a result, many have abandoned the cutthroat ways of these market share mongers, choosing instead to spend their money at socially responsible companies whenever possible. Though some criticize this movement, many consumers feel drawn towards the "do-good" companies. And, as evidenced by the actions of several states, some legislators seem to feel the same.

Years ago, when Ben & Jerry's decided to donate 7.5% of pretax profit to community projects, capitalists thought it was crazy. Looking back, it now seems the ice cream maker was just ahead of its time.
Emily Holbrook is the founder of Red Label Writing, LLC, a writing, editing and content strategy firm catering to insurance and risk management businesses and publications, and a former editor of Risk Management.