B Entities: What Are They?

Jeanne Lofgren Business Leave a Comment

B Entities are a relatively new business model. They represent a paradigm shift in for-profit business models, filling the expansive gap between nonprofit corporations and the traditional, profit-maximizing business. They’re really known as B Corporations or Benefit Corporations, but since certain of them can be limited liability companies, limited partnerships, sole proprietorships or corporations, I’ve taken to calling them B Entities.

B Entities create a material and positive impact on society and the environment by taking a triple bottom line approach to business: people, planet & profit. They are also held to a higher standard of accountability and transparency. B Entities are made accountable by including provisions in their corporate governance documents stating that the directors or managers must consider the effect of business action or inaction on all key stakeholder interests including: workers, society, owners, and the environment. B entities are made transparent by preparing a publicly available annual benefit report stating the extent to which their operations had a material and positive impact on society and the environment as assessed against a third party standard.

There are 2 types of B Entities: Benefit Corporations and Certified B Corps™. Benefit Corporations are statutory creatures. As of January 2016, there were approximately 3,000 such creatures, with 32 states having passed statutes authorizing the formation and election of Benefit Corporation status, including Pennsylvania. Benefit Corporations are not a misnomer. Only corporations can be Benefit Corporations (unless you’re in Maryland). They, however, need not be certified or audited in order to elect and maintain their status as Benefit Corporations.

B Corporations a/k/a Certified B Corps™ are a bit of misnomer because they can be LLCs, Partnerships, LPs, LLPs, Sole Proprietorships or Corporations and this form of B Entity must be certified. Certification is done through B Lab, the nonprofit organization that is the driving impetus behind the B Corporation concept.

The number of B Entities is growing with new companies either becoming certified or incorporating as (or electing to become) Benefit Corporations. Some of my favorite companies are B Entities: Dr. Hauschka Skin Care, Ben & Jerry’s, Etsy, Method, Patagonia, Better World Books.

B Entity status allows consumers to make informed decisions – free of greenwashing. Those consumers who care how their spending choices might drive human relations can take comfort that, for B Entities, not only are the products or services “good” and “green”, but so are the business practices.

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