DailyDime

I recently invested in a buddy’s startup, and while browsing their website, I noticed they were listed as a B Corp. Given that I receive a K-1 each year indicating they are set up as an LLC, I was curious about what being a B Corp actually entails. Like many of you, I initially assumed it was some sort of ESG tax play. It turns out, it’s not related to taxes at all. The B Corp designation is issued by a non-profit organization called B Lab.

What is B Lab?

B Lab was founded in 2006 to measure and reward companies based on their social and environmental impact. The “B” stands for “beneficial,” emphasizing the positive impact these businesses strive to create.

Criteria for Becoming a B Corp

To become a B Corp, a company must meet rigorous standards across three main criteria:

1. High Social and Environmental Performance: Companies must demonstrate exceptional performance in areas like social responsibility, environmental sustainability, and ethical governance.
2. Legal Commitment: Businesses must amend their corporate governance structure to be accountable to all stakeholders, not just shareholders.
3. Transparency: Companies must publicly share information about their performance against B Lab’s standards on their B Corp profile.

While the process involves more detailed requirements, a company that is progressive in its hiring practices, environmentally conscious, and stakeholder-focused is generally eligible for B Corp certification.

Guide to B Corp Certification for Small Businesses

Cost of Certification

B Lab charges both a submission fee and an annual fee for B Corp certification, which vary based on the size of the business. For a startup with less than $500k in revenue, the submission fee is $250, and the annual fee is $2,000. As the business grows, these fees increase proportionately, which seems fair given the scale and impact of larger businesses.

How to Calculate Your Costs

To find out how much B Corp certification will cost your business, you can check out the detailed fee structure on B Lab’s website.

Summary

B Corp certification isn’t about tax benefits or changing your organizational structure. Instead, it serves as a positive signal to investors and customers that your business is committed to doing the right things. If your company values diversity, environmental sustainability, and stakeholder engagement, and you want a badge to differentiate your brand, it might be worth the investment.

Think of B Corp certification as similar to industry-specific designations like BBB, NSF, or CFA—a third-party stamp of approval that can enhance your business’s credibility.

Is B Corp Certification Worth It?

When I asked my friend John if the B Corp certification was worth it, he candidly replied, “Short answer, hells no.” While it may not have been the right fit for his business, the decision ultimately depends on whether the benefits of enhanced credibility and public trust outweigh the costs and effort for your company.

In conclusion, whether B Corp certification is worth the time and money is up to you. Consider your business’s values, goals, and resources before making the investment.