Is a B Corportation actually better for planet and people?

Since its founding in 2006, B Lab and its environmental and social certification B Corporation have become recognizable amongst consumers and businesses. A decade and a half later and the certification seems to have failed to keep up with the changing definition of sustainability.

A B Corporation is meant to signify a company’s dedication to people, planet, and profit.

Also known as the Triple Bottom Line, people, planet, and profit are supposed to all be considered equally in a B Corporation. The B Corp certification is available to for-profit companies that apply through B Lab, the organization that created B Corp. Companies have to pay for the certification, costing anywhere from $500 and up depending on company revenue. It generally takes between four to eight weeks to get approved, mainly done over the phone, with only about 10% of companies screened further. All participating businesses must reapply every three years. But, if a company diverges from B Corp standards during the three years, there is no legally enforceable consequence. It is possible that during the next round of certification, a company could lose its B Corp status, but history has shown that is not always the case.

B Lab has certified some questionable companies in the past.

One such company is Etsy. In 2015 the online marketplace was accused of using an Irish subsidiary to avoid paying taxes in the U.S. At the time, Etsy was a B Corp company. The Americans for Tax Fairness led the charge of having Etsy removed from the B Corp list because it violated a guideline on tax minimization. However, Etsy remained a B Corp until the end of 2017, when it voluntarily removed itself so it could maintain its corporate structure. That is not the only instance of B Lab allowing a company that has violated its standards to maintain B Corp status. In 2017 New Seasons Market grocery store chain was accused of violating workers' rights by blocking a unionization effort. According to a report filed with B Lab by New Seasons Market employees, those who planned to unionize were stopped, and some even fired. New Seasons Market remains a certified B Corp in 2021. On top of that, B Lab has also been accused of certifying for-profit colleges and companies that work with prisons, both industries that some consumers find unethical.

B Corp status is no longer just for the small business.

In 2014 Brazilian beauty brand Natura became the first publicly listed company to be a B Corporation. Since then, other companies like TOMs and Guardian Media Group have joined, bringing a lot of money with them. Big brands end up paying tens of thousands of dollars annually for their certification, causing some questions to arise regarding the ethical nature of B Lab. An unverified accusation made by The Conversation stated that B Lab board members received roughly $6 million in salary and compensation in 2017. This despite that B Lab is listed as a non-profit organization. B Lab is also backed by what some might perceive as unethical investors, including The Rockefeller Foundation, which until the end of 2020, was also investing in the fossil fuel industry. Of course, B Lab, which was created by two businessmen and an investment banker, has a history of putting the profit sector of the Triple Bottom Line slightly ahead of people and planet.

Considering B Lab’s reputation and the cost of becoming a B Corporation, some brands are rethinking their need to be certified.

New certifications become available all the time, and many of them are more focused than the general B Corporation certification. For example, brands can now be certified carbon neutral, helping them appeal to more environmentally conscious consumers. Then there are the brands that are deciding not to get certified at all. A rise in transparency reporting on brand websites has reduced the need for third-party organizations to tell consumers what brands are good and which ones are not. Brands are also less likely to go through the paperwork to become certified by B Lab as the once elusive B Corp stamp becomes more popular. After all, if every company is a B Corporation, then it has no meaning anymore. Instead of private organizations set up by individuals regulating a company's social and environmental impact, governments and special regulatory bodies will provide more oversight to the sustainable business sector. In the future, B Corporation certification could be shunned by companies opting to work with more standardized and official regulators or with no regulator at all.

The Bottom Line:

The B Corporation and its parent company, B Lab, seem to be getting too big for their own good. Having experienced plenty of criticism and scandal, the B Corp status may soon be shunned for other forms of transparency and regulation that can better prove to consumers and shareholders how devoted a company is to planet, people, and profit.

Keep Reading:

B Corp certification won’t guarantee companies really care for people, planet, and profit (The Conversation)

New Seasons employees continue push to unionize, file complaint against the company (The Business Journals)

Etsy, B Corporations and Tax Avoidance (Business & Human Rights Resource Center)

Purpose over Profit: Are B Corps the future of sustainable business? (Reuters)