As businesses continue to grow in influence and impact, a new movement is emerging that emphasizes the importance of social and environmental responsibility. Two corporate structures that have emerged as leaders in this movement are Public Benefit Corporations (PBCs) and B-Corps. While these two structures share many similarities, some key differences set them apart. This article discusses how public benefit corporations are different from B-Corps.
Legal Status
PBCs are a specific type of corporation that is recognized in certain states in the US. To become a PBC, a business must meet specific legal requirements that vary by state. For example, in Delaware, PBCs need to have a specific purpose of positively impacting society and the environment. They must also file an annual report detailing their social and environmental performance with the state.
B-Corps, on the other hand, are not legal entities. Instead, they are a certification awarded by the nonprofit organization B Lab. To become a B-Corp, a business must meet specific performance standards related to social and environmental impact.
These standards evaluate using the B Impact Assessment, which looks at a company’s governance, workers, environment, and customers. B-Corps must also meet specific transparency requirements, such as making their B Impact Assessment publicly available.
Corporate Purpose
Corporate purpose also illustrates how public benefit corporations are different from B-Corps. PBCs needed by law to pursue a public benefit and generate profits. This means that PBCs must have a specific purpose beyond maximizing shareholder value. For example, a PBC might aim to reduce carbon emissions, promote fair labor practices, or support underserved communities.
B-Corps, on the other hand, not legally need to pursue a public benefit. However, they must meet specific social and environmental performance standards to become certified. This means that while B-Corps don’t need to have a particular purpose beyond making a profit, they incentivize to prioritize social and environmental impact.
Transparency
Transparency is yet another factor that explains how public benefit corporations are different from B-Corps. PBCs and B-Corps must be transparent about their social and environmental performance. However, the nature of this transparency is slightly different for each structure.
PBCs must file an annual report detailing their social and environmental performance with the state. This report must be publicly available and include information such as the company’s mission and purpose, its pursuit of a public benefit, and its social and environmental metrics tracking.
On the other hand, B-Corps must make their B Impact Assessment publicly available on the B Lab website. This assessment comprehensively evaluates a company’s social and environmental performance. It includes a breakdown of the company’s score in each of the five categories assessed by the evaluation.
Summary
Public Benefit Corporations and B-Corps are two corporate structures that prioritize social and environmental responsibility alongside financial goals. While both structures share similarities in transparency and stakeholder primacy, they differ in legal status, corporate purpose, and transparency requirements.
PBCs are legal entities popular in certain states in the US and require by law to pursue a public benefit. On the other hand, B-Corps is a certification awarded by the nonprofit organization B Lab and must meet specific social and environmental performance standards.