Public Benefit Corps, B Corps and ESG...oh my! - Kathy Varol

Public Benefit Corps, B Corps and ESG…oh my!

ESG reporting

Let’s take a moment to talk about two symbiotic relationships to an Environmental, Social and Governance (or ESG) strategy: B Corporations (B Corps) and public benefit corporations (or PBC’s).

Neither is needed for a strong ESG strategy that sets your company apart as an industry leader.

But they can be helpful from a signaling standpoint for consumers and potential employees while protecting the future commitment of your company to ESG principles.

So what are they?

A Public Benefit Corporation is a legal business classification.

In most states in the US, it’s a legal structure of a company, just like a C-Corp, an S-Corp, or an LLC. In a number of countries there is a PBC equivalent.

How a business is owned and structured has an enormous impact on the role it plays in society.

A PBC is legally required to consider the impact on all stakeholders—employees, consumers, society, the planet—not just shareholders. This means the PBC corporate structure can help guarantee the continued implementation of a strong purpose and ESG strategy.

To meet transparency provisions, PBC’s are required to create a benefit report to inform the public about the overall social and environmental performance. This supports ESG reporting.

B Corporation certification is a third-party validation of a company’s current practices while considering all stakeholders.

A B Corp certification is not legally binding like a PBC. However, where PBC’s exist, converting to the PBC structure is part of the B Corp certification requirement.

B Corporations are scored on their performance every year.

One issue with ESG reporting is that there is no universal approach or framework, and ESG ratings are not consistent across rating systems. For example, ESG ratings of Apple range from very good to very bad depending on the rating system you look at…not exactly helpful.

The B Corp certification, on the other hand, is a consistent and standardized approach. This brings a halo of trust and transparency to the process.

If your company is able to successfully certify as a B Corp you’ll have a strong ESG rating as well, with the added benefit of having a widely recognized third-party certification.

If you’re serious about your ESG commitment, both restructuring as a PBC and earning B Corp certification are definitely worth considering. Doing either is a big investment of time and resources. The process can be confusing. If you would appreciate some expertise in helping you consider what’s best for your company, I offer consulting and advising services. Please email me and we’ll see how I can help.

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