Updated November 23, 2020:

In a B Corp Washington State, also known as a B Corporation, the organization is concerned about doing more than creating value for its shareholders. B Corps aim to have a positive impact on greater society.

The Need for B Corps

Big businesses have proven that they have the power to deliver results. Unfortunately, these results are generally focused on benefits to shareholders, rather than the type of benefits that make our world a better place and have demonstrable benefits for society at large.

While government agencies and non-profits may make every effort to intervene, neither of these entities has the means or the power of big businesses. A question has therefore been posed: What if there was a different style of corporation — one which provided both monetary success and benefits for society?

Traditional Business Models

The traditional model of business has been to gather raw materials, make something new, sell it, and make a profit to add to the wealth of an individual or organization. This model has left a trail of destruction in its wake, in terms of devastating impacts on the environment, the proliferation of poverty and unfair distribution of resources. In contrast to this, the ethos of responsible corporations is to create positive changes, both socially and environmentally.

The idea of Corporate Social Responsibility (CSR) is still relevant when it comes to gleaning benefits for society from businesses. This concept became prevalent when it became apparent that customers cared about how a company showcased its commitment to environmental and social issues. The notion of sustainable business practices took the concept of CSR a step further, incorporating factors such as environmental impact and carbon footprint. However, there was a persistent suspicion that certain companies treated CSR as a marketing tool rather than an integral facet of the company's operations.

Adopting a New Approach

There was a great need for a new style of corporation, with a structured approach to creating a positive impact on society. However, the legislation that goes along with this takes a significant amount of time to be developed and adopted. A new business certification system called B Corporations or "B Corps" was therefore set up to recognize companies driven by social and environmental impact concerns.

Being a B Corporation enables a company to use a third-party assessment, trusted by investors and customers, to demonstrate the beneficial impact that it has on society and the environment. Since being introduced, the B Corporation certification has been growing in popularity with key stakeholders, including investors, companies, and customers. By September 2012, there were already more than 600 certified companies.

Over and above the B Corporation system, significant progress has been made in creating a legal company structure (equivalent to an LLC, an S Corp, or the like). Thanks to this structure, companies can now incorporate with their commitment to social and environmental responsibility as one of their cornerstones. Maryland became the first U.S. state to have a Benefit Corporation bill passed in 2010.

Benefit Corporations and B Corporations: What's the Difference?

Benefit Corporations and B Corporations are terms often used interchangeably, but there are a number of significant differences between them.

  • A Benefit Corporation, unlike a B Corporation, is a formalized legal entity. It is similar in structure to other types of corporations but is set apart by greater degrees of accountability, transparency, and purpose.
  • The structure of a Benefit Corporation requires all stakeholders, rather than just shareholders, to be taken into consideration during the decision-making process.

Social Purpose Corporations in Washington

Following long deliberations, Washington legislators have approved a new entity called the Social Purpose Corporation (SPC). This has been done in place of implementing a Benefit Corporation bill as other states have done. This allows companies to work towards achieving environmental and social goals while pursuing financial returns. When compared to Benefit Corporations in other states, Washington's SPC bill has less stringent requirements in terms of verification and reporting.

  • Rather than having a reporting standard that is externally verified, an SPC is simply required to publish a report every year, detailing how the company is fulfilling its social purpose.
  • SPCs are not obligated to consider social purposes in their decision-making — rather, they "may" do so.
  • An SPC can never face legal action for failing to pursue social purposes.

Importantly, having B Corporation certification does not in any way mean that a company cannot be incorporated either as a Benefit Corporation or as an SPC. Rather, any company can use B Corp certification as a way of confirming its commitment to social and environmental issues.

If you need help with a Benefit Corporation, SPC, or B Corp in Washington state, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.