B Lab (also known as B Lab Company) is a non-profit which certifies for-profit companies as “B Corps” to indicate a commitment to broader left-of-center social values alongside profit. B Corp status is a third-party certification and has no legal status, though attaining a B Corp certification requires companies to amend their corporate charters.

As of December 2021, there are 3,500 B Corps in over 70 countries. ¹ All B Corps pay an annual fee determined by their location and sales volume. B Lab is funded both by fees and private donations.

B Corps have been criticized for being an insufficiently strong mechanism to fight global problems like climate change. B Lab has been criticized for certifying companies that produce supposedly socially destructive products or engage in unethical behavior that isn’t tracked by B Lab’s certification process.

Founding

B Lab was co-founded by Andrew Kassoy, Bart Houlahan, and Jay Coen Gilbert. In the mid-2000s, Houlahan and Gilbert sold AND1, a basketball apparel company, for $250 million, while Kassoy worked in private equity. The three met for numerous discussions in which they agreed that modern businesses are excessively profit-focused and should adopt more altruistic guidelines, a concept often phrased as preferring that businesses focus on benefiting “stakeholders” instead of only “shareholders.” In a 2020 interview, Kassoy said “shareholder primacy is the source-code error in capitalism,” and he criticized Milton Friedman’s famous defense of shareholders as the ultimate arbiter of a company’s values. ²

However, Kassoy has maintained that he is a champion of free-market capitalism, saying, “it’s amazing what capitalism can produce that other systems have not been able to. It’s pulled billions of people out of poverty and created innovations that have improved many people’s lives. I think we, at our peril, underestimate how much business can do for social good if the system is structured in the right way.” ³

Kassoy, Houlahan and Gilbert found no “infrastructure” for guiding companies in their preferred direction, so they founded B Lab as a means of persuading companies through certifications that could produce marketing benefits. ⁴

B Corp

B Corp certification indicates that a private for-profit company meets certain environmental social goals. These goals include impacts on customers, employees, supply chains, and philanthropic ends. Certified companies are required to take a “Declaration of Interdependence” to signify their role in the global economy. Certification is awarded to companies which pass B Corp’s B Impact Assessment. As of December 2021, certification takes 6-10 months on average to complete, and 33% of applicants pass the Assessment. ⁵

Fees

B Corps are required to pay a $150 application fee and an annual membership fee determined by sales volume. American and Canadian businesses with annual sales between $0-150,000 pay a $1,000 annual fee. The standardized fee rate scales up to $50,000 per year for businesses with sales between $750-999 million. For larger companies, the fees are set at the discretion of B Lab. ⁶

Distinction from Benefit Corporation

According to B Lab’s website, B Corps and benefit corporations are often confused. Benefit corporations are for-profit companies legally certified by the government to pursue both social goals and profits as fiduciary duties. B Corp status is not legally binding, but rather is a third-party administered certification. Companies can be B Corps and benefit corps simultaneously, such as Patagonia and Ben and Jerry’s. ⁷

Legal Issues

Companies which accept B Corp certification are required to amend their corporate charters to state that “we will consider the interests of our stakeholders.” In the case of publicly traded companies, the Delaware Supreme Court and executive have deemed this revision illegal unless shareholders vote for the revision. In other states, corporate executives have limited capacity to unilaterally alter corporate charters under the “business-judgment rule.” ⁸

Funding

From 2006-2019, B-Lab raised $32 million. In 2017, the group’s revenues were almost evenly split between donations and fees. ⁹

B Lab has received funding from the Rockefeller Foundation and the U.S. Agency for International Development. ¹⁰

Criticism

B Lab has been criticized for giving B Corp certificates to companies which technically meet its standards but produce allegedly socially detrimental products and services, including marijuana, private prisons, and for-profit education companies, as well as companies involved in anti-union activities and tax evasion. ¹¹

B Lab has been criticized for allowing companies to use B Corp certification as a short-term public-relations ploy which can be abandoned at their convenience, a tactic allegedly used by Etsy. Other B Corps have dropped their certifications after being purchased by other companies. ¹²

B Lab has been criticized for having private standards which shift without warning, and for relying too much on self-reporting from B Corp applicants. ¹³

Left-wing pundit Anand Giridharadas has criticized B Corps for their lack of legal enforcement and limited effectiveness in solving global issues. Giridharadas believes that B Corp status and similar mechanisms distract from more effective movements and organizations, particularly in governments. ¹⁴

1. “More Questions?” B Corp. Accessed December 15, 2021. https://bcorporation.net/about-b-corps.
2. ^[1] “Declaration of interdependence: B Lab Global’s Andrew Kassoy.” McKinsey and Company. August 20, 2020. Accessed December 15, 2021. https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/declaration-of-interdependence-b-lab-globals-andrew-kassoy.
3. “Declaration of interdependence: B Lab Global’s Andrew Kassoy.” McKinsey and Company. August 20, 2020. Accessed December 15, 2021. https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/declaration-of-interdependence-b-lab-globals-andrew-kassoy.
4. “Declaration of interdependence: B Lab Global’s Andrew Kassoy.” McKinsey and Company. August 20, 2020. Accessed December 15, 2021. https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/declaration-of-interdependence-b-lab-globals-andrew-kassoy.
5. “Certification.” B Corp. Accessed December 15, 2021. https://bcorporation.net/certification.
6. “Certification.” B Corp. Accessed December 15, 2021. https://bcorporation.net/certification.
7. “More Questions?” B Corp. Accessed December 15, 2021. https://bcorporation.net/about-b-corps.
8. “Declaration of interdependence: B Lab Global’s Andrew Kassoy.” McKinsey and Company. August 20, 2020. Accessed December 15, 2021. https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/declaration-of-interdependence-b-lab-globals-andrew-kassoy.
9. “B Corp certification won’t guarantee companies really care for people, planet and profit.” The Conversation. October 7, 2019. Accessed December 15, 2021. https://theconversation.com/b-corp-certification-wont-guarantee-companies-really-care-for-people-planet-and-profit-124459.
10. “B Corp certification won’t guarantee companies really care for people, planet and profit.” The Conversation. October 7, 2019. Accessed December 15, 2021. https://theconversation.com/b-corp-certification-wont-guarantee-companies-really-care-for-people-planet-and-profit-124459.
11. “B Corp certification won’t guarantee companies really care for people, planet and profit.” The Conversation. October 7, 2019. Accessed December 15, 2021. https://theconversation.com/b-corp-certification-wont-guarantee-companies-really-care-for-people-planet-and-profit-124459.
12. “B Corp certification won’t guarantee companies really care for people, planet and profit.” The Conversation. October 7, 2019. Accessed December 15, 2021. https://theconversation.com/b-corp-certification-wont-guarantee-companies-really-care-for-people-planet-and-profit-124459.
13. ^[1] “B Corp certification won’t guarantee companies really care for people, planet and profit.” The Conversation. October 7, 2019. Accessed December 15, 2021. https://theconversation.com/b-corp-certification-wont-guarantee-companies-really-care-for-people-planet-and-profit-124459.
14. Gilbert, Jay Coen. “Are B Corps an Elite Charade for Changing the World?” Forbes. August 30, 2018. Accessed December 15, 2021. https://www.forbes.com/sites/jaycoengilbert/2018/08/30/are-b-corps-an-elite-charade-for-changing-the-world-part-1/?sh=3a9c6d1a7151.