Socially responsible investing has become increasingly important over the last few years. It is a way of investing that seeks to align investment decisions with social values. Ethical investors seek to invest in companies that share such values.
Over time, investors have become more aware of the positive and negative impacts of the companies they invest in. Some find that they have invested in companies that ignore social costs to make profits. As a result, many investors are drawn to businesses that make profits and care about social impact.
The growing need for socially responsible investments has given rise to companies that seek to maximize profits and social impact, like public benefit corporations.
What is a Public Benefit Corporation?
So, what is a public benefit corporation?
A public benefit corporation is a type of company for social entrepreneurs who create businesses that benefit society and shareholders. The purpose of such companies is stated in their formation documents because their structure requires transparency and accountability in environmental and social impact matters. Such companies must measure performance and report their findings annually to the state, shareholders, and the public.
Differences between Public Benefit Corporations and B Corps
Definition
Most people assume that these two types of companies are similar, but they aren’t. B Corp is a certification provided to eligible companies by nonprofit BLabs. Eligible companies must complete and pass the B Impact Assessment. On the other hand, public benefit corporations are legal entities whose certificate of incorporation shows them as a public benefit. However, these companies are not driven by profit alone as they aim to create social impact.
Status
The public benefit corporation status is a legal assignment recognized by specific states. In contrast, the B corp status is a certification that shows a company’s ability to meet the high environmental and social performance, transparency, and accountability standards.
Performance
B Corps are expected to achieve a given minimum score on the B Impact Assessment and should get recertification after every two years. On the other hand, public benefit corporations must provide self-reported evaluations and metrics to their shareholders.
Availability and Costs
Public benefit corporations are only available in 30 states, while B corps are available to any business despite its state or structure. In addition, public benefit corporations’ costs range from $20 to $200 for state filing fees, while certification fees for B Lab range from $500 to $50,000 annually and are determined by revenue.
Accountability
Although both types of companies must consider their impact on society and shareholders, a public benefit corporation can use any assessment tool available, while a B corp can only use the B Impact Assessment. In addition, it doesn’t require a third-party audit like a B corp.
Conclusion
Investors are becoming wise in the type of companies they invest in. If you find yourself wondering “what is a public benefit corporation, it’s important to understand that most investors want companies that have a vision, mission, and values they identify with. In addition, investors can use a company’s performance metrics to make an informed valuation opinion.
