When Etsy went public recently, the business deal drew attention to B Corps. The arts and crafts online marketplace chose to become a Certified B Corporation, which is a company that commits to uphold social and environmental standards with accountability and transparency.
"B Corp is to business what Fair Trade certification is to coffee or USDA Organic certification is to milk," it says on the website of B Lab, the nonprofit organization that certifies B Corps.
Currently, there are more than 1,000 Certified B Corps from 33 countries and more than 60 industries. Some of the more recognizable names include Patagonia, Ben & Jerry's, Seventh Generation and Warby Parker.
Why did Etsy decide to become a B Corp?
The company made this statement on its website when announcing the deal:
"We believe that business has a higher social purpose beyond simply profit. The B Corp assessment gives us a framework to measure Etsy’s success against rigorous values and responsible practices as we scale as a company."
The story behind B Corp
In 2006, old friends Jay Coen Gilbert, Bart Houlahan and Andrew Kassoy founded B Lab to make the world a better place through business. The rules they created to be socially responsible are pretty stringent.
To become a B Corp, a company must fill out an extensive assessment questionnaire to assess the impact of the company on its stakeholders. There are questions about the percentage of employees reimbursed for continuing education and whether employees received paid or non-paid time off for community service. A company must score a certain number of points on the assessment.
Because the requirements are tough, so far it has been mostly smaller companies that have become B Corps.
“It’s easier to make changes if you’re smaller,” Katie Kerr, who runs communications for the organization, told The New York Times. “Big companies are more risk-averse and are slower to adopt.”
“We’re now working with large companies, which takes longer,” she added, “but has a great impact.”
Being a B Corp is not a legal designation. It has no bearing on a company’s articles of incorporation or the rights of its shareholders, points out the Times' article. For that, a company can become a benefit corporation. In fact, the two terms are often confused.
The buzz has been good about B Corps in both the business and environmental communities. Inc. magazine called the B Corp certification, "the highest standard for socially responsible businesses." The Sierra Club called it "one of the most trustworthy eco-certifications."
Etsy summed up its decision: "We are inspired by this movement that overwhelmingly proves the feasible harmony of business interests with social and environmental responsibility."
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