The line between nonprofit organizations and for-profit corporations used to be very clear. Today, that line is becoming fuzzy. Regulations that once favored nonprofits have come under fire as businesses become more civic-minded. At the same time, 501(c)(3) organizations have strayed further outside the bounds of traditional service in order to advance their missions. The two worlds are melding together now more than ever before.
Perhaps the trend that most exemplifies this is the rise of hybrid social enterprises—companies whose purpose is to pursue a social mission through a commercial venture. Think TOMS Shoes, Ben & Jerry’s and Warby Parker. From 2006 to 2011, the number of for-profit companies pursuing a greater good beyond filling shareholders’ pocketbooks increased from 37% to almost 50%.
Typically, for-profit corporations wanting to make an impact would generate good will through charitable donations and a combination of environmental and social advocacy. Some companies, however, are looking to do more than just an occasional act of random kindness. That’s what benefit corporations are for.
What are Benefit Corporations?
Benefit corporations are for-profit companies that intend to make money, but hold themselves at a higher standard when it comes to their altruistic efforts and financial goals.
These companies are often structured like normal businesses, but typically distribute a significant percentage of their profits to worthy causes. Like nonprofits (or not-for-profits), benefit corporations have to be transparent about the impact they make and regularly disclose their business practices to outsiders.
Nonprofits and benefit corporations might have some overlap, but they don’t really compete with one other. In fact, benefit corporations represent another avenue for nonprofits to raise funds, receive in-kind donations and forge mutually beneficial partnerships.
Benefit Corporations vs. Certified B Corps
People often confuse benefit corporations with Certified B Corps. They do share a lot in common, but keep in mind these important differences.
- Both lead a global movement to use business as a force for good.
- Both meet higher standards of accountability and transparency.
A benefit corporation is a true legal entity classification for a for-profit business. It must commit to “making a material positive impact on society and the environment.”
Benefit corporations can go a step further and seek B Corp certification. B Corp certification is a third-party certification from the nonprofit B Lab and includes considerations for these items:
- Measurable social performance
- Accountability
- Transparency
- Measurable environmental performance
Businesses also pay fees and undergo ongoing, extensive audits to ensure compliance with all the standards. Certified B Corps must achieve a minimum verified score on the B Impact Assessment and recertify every two years against evolving standards. Benefit corporations do not have an objective minimum requirements and no ongoing verification once they are incorporated.
What This Means for Your Nonprofit Organization
First, don’t worry—benefit corporations are not a threat to nonprofits nor should you think of them as competition. Donations or investments made to them are not tax-deductible; they still operate as a for-profit company.
In fact, as a nonprofit organization, it may be in your best interest to partner and work with a benefit corporation or Certified B Corp. Your mission to be a force for good in your community will help you align with a company that has a charitable focus (plus businesses that commit to altruistic standards will typically understand the ins and outs of the nonprofit industry very well.) If they’ve gone to the trouble of setting their company apart as a force for good, you know their mission is in line with yours—to make a positive difference in the world.
Consider these ways that partnering with a Certified B Corp or benefit corporation can further your cause:
- Increased efficiency in accomplishing similar goals.
- Decreased expenses by sharing costs associated with administration and infrastructure (e.g., facilities, transportation, training.)
- Expanded programming with potential access to business experts aligned with your mission.
Another bonus: You’ll stay updated on new technology. For-profits constantly invest in new technologies and tools that improve business efficiency and help increase the bottom line. Nonprofits who do this typically find that they save valuable time and resources that they can then invest in the execution of important programs.
Firespring is both a Certified B Corp and benefit corporation with a purpose to leverage our people, products and profit as a force for good. We know our impact in the world can be magnified through the nonprofit clients we serve. To support that, we’ve provided grants, free educational programs and technology for over a decade to equip nonprofits with the tools and resources needed to further their mission. Learn more about how partnering with Firespring can help you accomplish your goals.