In 2006, the founders of the nonprofit B Lab decided to promote “a new type of corporation which uses the power of business to solve social and environmental problems.” Since then, B Lab has certified 285 companies from 54 industries and 30 US states as B Corporations (short for Benefit Corporations).

According to the B Corp website, B Corporations are unlike traditional responsible businesses because they:

  • Meet comprehensive and transparent social and environmental performance standards
  • Institutionalize stakeholder interests
  • Build collective voice through the power of a unifying brand

The point of B Corp and its rating system is to distinguish between the companies that say they’re doing good things, and the companies that can prove that they are.  B Lab embraces corporate values that include the interests of employees, community and the environment.

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On April 13th of 2010, the state of Maryland signed the nation’s first Benefit Corporation legislation.  This new law gives legal recognition to B Corporations and states that certified companies must prove that they are generating both financial and social benefits by publishing annual reports that comply with recognized third-party standards (such as the Global Reporting Initiative (GRI) or B Lab’s B Impact Assessment).

The goal is to create a real capital market for B Corporations, whose missions often do not fit into existing corporate law (which traditionally states that shareholder value is the only king).  B Corporations are not only required to generate material positive impacts, but they must also consider employees, the environment and the community in decision-making.  Additionally, directors of B Corps are held accountable for the company’s stated sustainability goals.

Ten other states—including Vermont, California, Oregon, Washington and Colorado—are currently considering similar statewide legislation.  The next step, according to Andrew Kassoy, Co-founder of B Lab, is to begin providing incentives for business to become B Corporations, such as tax, procurement and investment preferences.

Philadelphia was the first city to offer tax incentives for B Corporations in December 2009.  Pennsylvania houses 41 B Corporations to date.  Which cities will be next?