BUSINESS ENTITIES (CORP - CERTIFIED B)

Business Entities (Corporation – Certified-B)

The terms “Certified B Corp” and “Certified B Corporation” (it is important to note that the terms “Corp” and “Corporation” in the context of the name of such certification are meant to be generic, since many types of legal entities may be eligible receive B Lab certification, regardless of their particular country, district or state of location, as noted in the non-exhaustive list following) refer to any for-profit legal entity of any type (the important distinction on which to focus regarding the possibility of B Lab certification is that only for-profit private and publicly-traded legal entities may be eligible receive B Lab certification, regardless of their particular country, district or state of location – in all jurisdictions, governmental entities, not-for-profit entities and nonprofit entities are not eligible for B Lab certification) – including but not limited to, and regardless of their particular country, district or state of location, for example, a: C corporation (a generic standard corporation); cooperative; employee stock ownership plan (ESOP); limited liability company (LLC); low-profit limited-liability company (L3C); partnership; S corporation – as recognized in the United States (US) by the Internal Revenue Service (IRS); sole proprietorship; and the like – that may be located in any district or state of the US, or in any foreign country, that has completed the very-stringent, proprietary audit process established exclusively and solely by the US nonprofit entity B Lab, and that has achieved a minimum rating of eighty (80) points – out of a possible maximum of two hundred (200) points – as determined exclusively and solely by B Lab, after completing such very-stringent, proprietary audit process.

The B Lab certification terms “Certified B Corp” and “Certified B Corporation” have absolutely no association or connection with generic names of other legal entities that may be authorized by states or districts within the US, or may be authorized by foreign countries, such as “benefit corporation” – and any other similar-sounding terms such as: B corp; B corporation; benefit legal liability company (BLLC); general benefit corporation; low-profit limited-liability company (L3C); mutual benefit corporation; public benefit corporation; public benefit legal Liability company (PBLLC); social benefit corporation; special benefit corporation; and the like – which only refer to variations of the benefit corporation concept authorized by countries, districts or states.

Also, the B Lab certification terms “Certified B Corp” and “Certified B Corporation” have absolutely no association or connection with generic names of other certifications or designations issued by other industry-recognized, third-party, for-profit or not-for-profit, private, non-governmental entities, such as: “Benefit Corporation For Good”; Global Reporting Initiative (GRI); “Green America”; and the like.

However, depending on the particular requirements of the particular country, state or district in which the benefit corporation is located, certification or designation by some industry-recognized, third-party, for-profit or not-for-profit, private, non-governmental entity such as B Lab or an entity noted in the bullet point immediately-above or other similar certifying or designating entity, may actually be a prerequisite legal condition precedent for authorization by the particular country, state or district as a benefit corporation.

The B Lab certification as a “Certified B Corp” or “Certified B Corporation” is not exclusionary to other certifications or designations by any other certifying or designation entities.

Thus, (depending upon the laws of the particular country, district or state) it may be possible for a legal entity to be certified by a country, district or state as a “benefit corporation” without being certified by B Lab as a “Certified B Corp” or “Certified B Corporation”, and without being certified or designated by any other certifying or designation entity; or, (depending upon the laws of the particular country, district or state) it may be possible for a legal entity to be certified by a country, district or state as a “benefit corporation” as well as being certified simultaneously by B Lab as a “Certified B Corp” or “Certified B Corporation”, and also to be certified or designated simultaneously by any other certifying or designating entity or entities.

As a prerequisite to seeking B Lab certification directors and executives should engage in some deep soul-searching, to determine whether, at a minimum: they truly believe in the B Lab social philosophy and are willing to comply with B Lab legal and social requirements going forward; the business has enough revenue to justify the added costs of B Lab compliance; one executive can be tasked with the responsibility for overseeing B Lab compliance , or whether a B Lab compliance committee may be requires (thus consuming more corporate resources of money and time that originally-anticipated); the employees are on board with their expanded philanthropic, social and volunteer roles under the B Lab philosophy (and whether the business can absorb the missed hours of employee productivity, due to those expanded roles); and the like.

Advantages generally-cited to justify completing the B Lab certification process may be considerations such as: to attract more investors, due to the international prestige of the B Lab certification; the B Lab certification process forces the entity requesting the B Lab certification to review all of its business practices, thus allowing the entity requesting B Lab certification the opportunity to eliminate any inherent inefficiencies in its business practices (thus differentiating the B Lab certification process from a standard Sarbanes-Oxley – SOx – analysis, in which all an entity’s business processes and personnel are merely catalogued and documented, without necessarily any consideration being given to improving such processes or the skills of such personnel); the B Lab brand is recognized and respected internationally, so the association of the entity requesting B Lab certification with the B Lab brand may improve the reputation of the entity requesting B Lab certification; by joining the B Lab community, the entity requesting B Lab certification may have access to other similarly-minded investors and entities; potential similarly-minded employees may enthusiastically embrace the possibility of working at a “Certified B Corp” or “Certified B Corporation”; shareholders feel that the value of their investment is enhanced by the “Certified B Corp” or “Certified B Corporation” branding.

The B Lab certification process – based on the proprietary B Lab B Impact Assessment – is extremely-detailed, and thus may take as long as nineteen (19) months to complete (depending upon the complexity and size of the entity requesting B Lab certification), in that the process includes extensive questions (all of which must be documented to the satisfaction of B Lab) regarding both the external and internal operations and practices of the entity requesting the B Lab certification, such as, at a minimum: balancing of bottom-line profitability against a demonstrable purpose to benefit the environment and people; demonstrable commitment to various global issues and practices endorsed by B Lab; employee relations; environmental issues; governance practices; legal accountability; programs to benefit the local and global communities; public transparency; purity and quality of materials; social practices; supply chain transparency; and the like.

In general, the lengthy B Lab certification process may follow several steps, such as: submission of the B Lab B Impact Assessment (BIA) – perhaps about two (2) months, in which the entity requesting B Lab certification completes the BIA and disclosure questionnaire, and provides all required supporting documentation therefore, and pays the initial fee (which may be about $150); waiting – perhaps about ten (10) months, waiting for B Lab to get to the initial materials provided; B Lab evaluation – perhaps about a month, when B Lab representatives do a deep dive into the initial materials provided, during which B Lab may request confidential corporate business information to substantiate all the initial materials provided; waiting – perhaps at least two (2) months, for verification by B Lab of the confidential information; verification – perhaps about two (2) months, going back-and-forth with B Lab representatives as required regarding all the materials provided thus far, and any other documentation they may require; final review by B Lab personnel – perhaps about a month; final acceptance, approval and certification – perhaps about a month, and may include an actual visit or visits by B Lab personnel to the site or some representative sample of sites of the entity requesting B Lab certification.

Assuming the entity requesting the B Lab certification is awarded a rating of 80 points or greater by B Lab at the conclusion of the B Lab certification process B Lab requires that the entity requesting the B Lab certification, at a minimum: amend all the governing documents of the entity requesting B Lab certification with particular language required by B Lab; enter into legally-binding documents – including a “Declaration of Interdependence” – with B Lab to adhere to all B Lab standards (or risk loss of the B Lab certification); pay the certification fee, which, depending on the revenues of the entity requesting B Lab certification, may be at least $50,000 (based on a sliding scale of the annual revenue claimed by the entity requesting B Lab certification); continuing compliance with all B Lab requirements and paying further fees each re-certification period.

Once B Lab awards the “Certified B Corp” or “Certified B Corporation” certification, B Lab does not take any actual participation in the day-to-day operations of the business; the only further contact with the business by B Lab is to monitor the compliance filings of the business filed by the business with B Lab through each recertification period, generally every two (2) years.

Some disadvantages of B Lab certification may be: any changes in existing business operations or practices required by B Lab may expensive, thus diminishing the bottom line, and angering shareholders and potential investors; some loss of control allowed to the officers and directors due to the changes required by B Lab to the language in the governing documents; since the B Lab philosophy is not necessarily purely profit-oriented or shareholder-centric, the addition of a vast class of “stakeholders” – including but not limited to: consumers; employees; neighbors; vendors; workers; and, many other types of third-parties who may not necessarily have any monetary interest in the entity – who may be granted explicit or implicit status as intended or unintended third-party beneficiaries due to the changes required by B Lab to the language in the governing documents, and who may become activists against the entity at some point in the future, due to some changed circumstances; increased administrative fees due to the necessity for compliance with all B Lab requirements during each re-certification period; the loss of prestige, access to the B Lab community of investor capital, loss of reputation, employee resignations, and the like, in the event that B Lab revokes its certification for any reason, at the sole discretion of B Lab.

Compiling information for, drafting, filing and negotiating all documents and forms – including all documents and forms to satisfy any requirement by B Lab – such as the preparation of the B Lab B Impact Assessment (BIA) (whether as an original Certified B corporation, or converting from standard corporation status to Certified B corporation status), such as the: annual benefit report; articles of incorporation; bylaws; mission statement; statement of purpose.

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