Home > VSCPA > News > Professional News > 2010 > B Prepared for a New Kind of Corporation

B Prepared for a New Kind of Corporation  

On April 14, 2010, Maryland Gov. Martin O'Malley signed into law the nation's first legislation creating a new class of corporations required to create benefit for society in addition to its shareholders — Benefit Corporations, or B Corporations.

Just a month later, Vermont followed suit.

According to B-Lab, a Pennsylvania-based nonprofit committed to spreading the B Corporation mission, several other states are looking at introducing legislation in the near future — Colorado, New York, North Carolina, Oregon, Pennsylvania and Washington, to name a few.

But what exactly is a B Corp?

Unlike traditional corporations, B Corps are required by law to show they’ve netted a positive societal benefit. They must consider the impact of their decisions on employees, their communities and the environment.

What’s more, they have to prove it publicly by reporting annually on their social and environmental performance based on recognized third-party standards. Transparency and accountability are key.

Currently, those reports include B-Lab’s “B Impact Rating System,” which is available to all companies, B Corps or not.

B Lab has also announced it will launch the Global Impact Investing Rating System (GIIRS) in January 2011 — a rating system that will help companies assess the their social and environmental impact as well as investment portfolios and funds, like S&P credit risk ratings. In other words, it will help benchmark companies’ “goodness.”

The GIIRS will use the Impact Reporting and Investment Standards (IRIS) taxonomy, developed by B-Lab, which is designed to function across a variety of sectors to measure and communicate social and environmental impact. According to www.iris-standards.org, it leverages several frameworks, including International Financial Reporting Standards (IFRS).

What’s more, 10 percent of B Corporations are audited each year, overseen by the Standards Advisory Council (SAC), which is an independent body (one member of B-Lab managements sits on the Council) tasked with ensuring that the B Rating System is a fair yet rigorous standard for social and environmental performance. In 2008, all eight companies that were audited passed.

Despite the fact that “B Corporation” is largely recognized as a legitimate status, as of now B Corps lack an official tax status distinguishing them from S or C Corporations.

Overall, the point is to create truly sustainable companies that will benefit people and the planet and also (or as a result, perhaps) profit themselves. Unlike with traditional for-profits, money takes a back seat to benefitting society and the environment for B Corps, with the idea that doing the right thing will yield both tangible and intangible benefits.

New and established organizations can become B Corps with a two-thirds majority vote from shareholders, if a switch is required.

B-Lab’s website reports there are more than 300 B Corps in existence, representing $1.1 billion in revenues and $750 in annual savings across 54 industries. Check out a list of founders, including big names like WorkplaceDynamics, Management Resources and PhilanTech, LLC.

Current B Corps in Virginia include BetterWorld Telecom, Beyond the Bottom Line, Global Skills X-Change, Impact Makers, Inc. and Lateral Line.

In addition to offering model legislation to assist states, B-Lab also offers a number of other tools to help companies make the switch, including a state-by-state legal roadmap for making the switch, term sheets, resources to help companies improve audit committees and implement financial controls, and more.

The movement for corporations to remain for-profit while shifting toward a more nonprofit way of thinking is hot right now. The question is: How might this movement affect CPAs and what should CPAs do now to become prepared?

For instance, should CPA firms consider becoming B Corps? TriLibrium, an Oregon-based CPA firm, announced it was certified as a B Corp in July 2009. Will others follow?

And what will CPAs with B Corp firms need to know in terms of reporting?

Now is a good time for CPAs to get up-to-speed and identify issues and opportunities that might stem from this movement. It’s always smart to B prepared.