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Corporations

What’s the Difference Between B corporations and Public Benefit Corporations?

The rise of ethical investing has significantly increased the number of companies incorporating values into their corporate culture. As a result, a category of companies has risen that want to do good to society and the environment, like nonprofits, while still making profits like for-profit companies.

Therefore, a company can advance its focus on the public good through environmental sustainability, inclusivity, or social justice, while still making profits from its products and services. This has caused the emergence of two companies: public benefit corporation and B corporations.

Although the two categories have similarities, they have profound differences. Read on to find out the differences.

1. Difference by Definition

B corporations are legal incorporations that support the bottom line of the planet, people, and profits. These businesses focus on meeting environmental and social performance standards, legal accountability, and public transparency to balance purpose and profit.

Public benefit corporations are companies whose business revolves around positively impacting or benefitting society and shareholders. Such companies adopt a legally recognized form and are ideal for social entrepreneurs.

2. Difference by Purpose

The purpose of B corporations is to redefine business success while building an economy that supports inclusivity and sustainability. Ideally, they use business as a vehicle to do good, hence the willingness to have their business practices thoroughly vetted by third parties to enhance transparency.

The purpose of public benefit corporations is to increase accountability and transparency on their environmental and social impact. These companies state this information in their formation documents and are required to provide annual benefit reports to the public, state and shareholders, detailing their environmental and social performance.

3. Difference in Formation

B corporations require a thorough certification process to attain the B Corp. status. The process requires the companies to complete and pass the B Impact Assessment created by the nonprofit B Lab. In addition, these companies undergo rigorous auditing by third parties to ensure they achieve high scores for balancing purpose and profit.

Public benefit corporations adopt the legally recognized corporate form but with an added requirement to consider the effect of their decisions on customers, employees, community, and local and global environment, instead of shareholders only.

4. Difference in Legal Framework

Public benefit corporation standing is a legal status that can be conferred in only 35 states, with each state detailing its legal requirement. On the other hand, B corporations have no legal framework. They only require certification that should be re-issued after three years.

5. Difference by Benefits Enjoyable

B corporations enjoy pro-bono services and discounts from B Lab’s partners. Public benefit corporations enjoy the lack of legislation requiring auditing or certification by third-party standards, although certification requirements differ between states. However, the corporation can use third-party standards to measure its own performance. In addition, public benefit corporations enjoy incentives like protection from being sued by third parties without the consent of shareholders.

Conclusion

You can transition into a public benefit corporation or B corporation, depending on your business goals. Both categories have society and environmental sustainability at heart and are excellent corporate social responsible vehicles.

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