B-Corporations and Social Responsibility

Over the past few decades, social responsibility has become an increasingly important topic of discussion in all aspects of life in the United States. Although nearly everyone has an intuitive idea of what it means to be socially responsible, there is no hard and fast definition of this term.

Normally, people try to be socially responsible by doing what they think is the most beneficial to others in a given situation.

For an average individual, practicing social responsibility could mean recycling, picking up after your dog, driving a fuel efficient car or taking public transportation, or being honest with others. In most cases, the exact definition of social responsibility doesn't matter too much. In the business world, however, definitions can be more important.

Social responsibility extends beyond individuals to larger entities like businesses. Social responsibility is becoming more and more important in the business world these days, both because socially responsible actions are the right action and because businesspeople are finding that social responsibility is profitable.

In many cases, consumers and investors alike are more likely to support companies who have a reputation for being socially responsible. Thus, large companies who pursue socially responsible courses of action could end up on top in competitive markets. Until recently, however, this has just been one business theory, with no legal or organizational grounding.

In recent years, a few new business structures have come into being in the United States. These new structures are designed to provide an alternative to traditional understandings of business operations.

Traditionally, companies have been designated as 'S corporations', 'LLCs', and a few others, and the legal status of such business entities has been mostly independent of what the businesses actually do. Part of the reason for this is that it's difficult to define, legally, what is good and what is bad.

If certain activities are said to be socially responsible and others are not, trouble could arise when people disagree with these definitions. In 2006, however, the B Lab Company was founded in Pennsylvania to help determine what qualifies as socially responsible business practice.

The movement begun by B Lab to create a legal definition of corporate social responsibility was followed by the creation of the B-corporation corporate charter format.

A company designated as a B-corporation, or Benefit Corporation, is, according to the designation, a business that is legally required to adhere to standards of social responsibility.

Although there is still no widely accepted legal definition of social responsibility, the definition and standards created by B Lab are used to evaluate whether business qualify for B-corporation status. The standards, termed the B Ratings System, evaluate several measures of a business's social and environmental practices, including employment practices.

Because B-corporation business designations are so new, it may be several years or even decades before they become widely recognized and common. However, more and more companies are seeking B-corporation status in order to obtain benefits that are, increasingly, afforded to such business entities.

Not only does B-corporation status give a business a reputation of acting for the good of society, some U.S. states have begun to offer tax incentives to B-corporations in order to encourage businesses to seek recognition as socially responsible entities.

Investors looking to add socially responsible businesses to their portfolios can view B-corporation status as an objective assurance that the business is not merely claiming to be socially responsible. The B Lab Company has also striven to increase incentives for B-corporations through business partnerships.

Consumers who are interested in social responsibility can promote the B-corporation movement by supporting businesses that have attained the designation. Although the number of businesses designated as B-corporations is still relatively small, products from B-corporations are available in most areas of the United States.

By supporting B-corporations, consumers can help this movement grow and ensure that social responsibility becomes evermore profitable for small and large corporations alike.