Earlier this month, Louisiana became the first state in the South -- and the eighth across the nation -- to pass legislation allowing companies to incorporate as B Corps, or benefit corporations. It's a legal structure where a company puts as much focus on "doing good" as on making money.
To be certified as a B Corp, an entrepreneur has to meet very high standards in three silos: how you treat employees, impact the environment, and benefit the community in which your business operates.
The business structure was created and promoted by a Berwyn, Penn.-based non-profit B Lab. In states where it has been legalized, entrepreneurs can amend their legal framework to declare they're both a for-profit and for-good company. As a result, a business protects itself from lawsuits by stakeholders that find the company is spending time and/or resources for anything other than solely maximizing profit. Also, in any state, regardless of whether it is legal to become a B Corp yet, a company can apply for certification, a status granted by B Lab.
I sat down with B Lab's co-founder Jay Coen Gilbert, who explains what entrepreneurs need to know about this unique legal structure. Edited excerpts of the interview follow.
Entrepreneur: Where did you get the idea for the B Corp?
Gilbert: The question for us was: How can we help companies that are truly leading around sustainability or community involvement? How do we deal with legacy issues so companies are built to last? That led us to design a legal structure to better meet the needs of these entrepreneurs who want to make money, but also make a difference. If you want to do both, unfortunately, current corporate law isn't super supportive of that double intention.
Entrepreneur: Is your background entrepreneurial, legal?
Gilbert: I am an entrepreneur by background. Along with one of the other founders of B-lab, we founded a company called "And1," a basketball footwear and apparel company. We bootstrapped it in the basement of a friend's house, and it became a quarter-billion dollar global brand. So, we come at this from a private sector mentality as entrepreneurs.
Entrepreneur: What are the benefits of becoming a B Corp?
Gilbert: It's a sales and marketing tool to use for attracting talent or capital, as well as competing for market share. Not only is there verified performance around your impact, but there is the legal structure so you and the investor know that it's being baked into the DNA of the business. Also, you can get technology platforms, software and other business resources 60 percent to 70 percent cheaper than a traditional company, simply because you are a certified B Corp.
Entrepreneur: What should a curious entrepreneur do first?
Gilbert: Go to Bcorporation.net, and click on the link to find the legal framework appropriate for your business structure. You'll learn how to amend your current governing documents, articles of incorporation, etc., to create the legal protection you'll need. Also, you can take a free "B impact assessment" on the site to determine your company's social and environmental impact.
Entrepreneur: What struggles have companies reported after being certified?
Gilbert: There is tremendous anxiety around: "What will my investors think? Will this somehow constrain my options for raising money or selling my business?" Those are exactly the right questions to be asking. An increasing number of investors are looking for companies that are not only high growth, but high impact. As a B-corp, you get a free GIIRS (Global Impact Investing Rating System) rating. Right now, GIIRS is the only analytics platform -- like S&P ratings for traditional companies -- that allows investors to look at a company's environmental and social impact. Companies can also later decide they don't want to be a B-corp anymore. They can opt in or opt out as they wish. It's not like an irrevocable trust.
Entrepreneur: How long will it be before the benefit corporations are legal in all 50 states?
Gilbert: The short answer is we will see. If we were placing bets, I'd say in the next 5 to 7 years.
Would you consider turning your company into a B Corp? Why or why not? Share your approach and respond to other readers in the comments below.