Public Benefit Corporations vs. B Corp Certification: The Key Differences Explained
As businesses increasingly focus on social and environmental responsibility, terms like Public Benefit Corporation (PBC) and B Corp Certification often come up. While they share a commitment to making a positive impact, they serve different purposes and have distinct processes. Here’s an overview of what sets them apart and how they overlap.
What is a Public Benefit Corporation (PBC)?
A Public Benefit Corporation is a legal status companies can adopt to formalize their commitment to balancing profit with broader social and environmental goals. Becoming a PBC involves amending a company’s incorporation documents to embed this commitment into its fundamental legal structure.
The laws governing PBCs differ from state to state (and in some states they are referred to simply as Benefit Corporations), but certain key features are consistent regardless of where the company is formed. These include:
- Purpose: PBCs must state in their articles of incorporation that their purpose includes creating a general public benefit beyond merely maximizing value for their owners. In some states, a PBC may (or must) also identify a specific public benefit, such as improving environmental health or supporting communities.
- Accountability: Directors are required to consider the impact of their decisions on all stakeholders, including employees, customers, and the environment, not just shareholders. Critically, the PBC laws also protect directors from shareholder lawsuits if they make decisions that serve the interests of all stakeholders, even if these decisions may not maximize short-term shareholder value.
- Transparency: PBCs must produce an annual benefit report to demonstrate how they are achieving their stated mission. This report typically must be provided to shareholders and/or posted on the company’s website. PBCs typically must measure their impact using a third-party standard (which may be the B Corp Impact Assessment, but other standards also may be used).
The PBC structure allows companies to prioritize long-term impact and stakeholder value alongside shareholder returns, creating a legal framework for companies that wish to pursue a triple-bottom-line approach (People, Planet, Profits).
It’s important to note that, as of now, a handful of states have not adopted PBC legislation. Additionally, some of these states recognize PBC status for both corporations and LLCs, while others limit it to corporations only. You can find the full list of PBC legislation by state here.
What is B Corp Certification?
B Corp Certification is a third-party certification granted by the nonprofit organization B Lab. Unlike PBC status, which focuses on legal structure, B Corp Certification evaluates a company’s actual performance in areas such as social impact, environmental practices, and governance.
To achieve B Corp Certification, companies must:
- Complete the B Impact Assessment and score at least 80 out of 200 points. This assessment measures performance in areas like employee benefits, supply chain practices, and community involvement. (B Lab has announced changes to the B Impact Assessment that will likely come into effect in 2026, but its basic function as a tool to measure impact will remain unchanged).
- Make a legal commitment to stakeholder governance, ensuring the business considers its broader impact. To meet this requirement, companies that wish to achieve B Corp Certification typically must become PBCs or add specific provisions to their incorporation documents.
- Meet transparency requirements, including publishing their B Impact Report on B Lab’s website.
- Recertify every three years to maintain their certification and adhere to evolving standards.
B Corp Certification provides a rigorous framework for businesses that want to demonstrate leadership in sustainability and social responsibility.
Key Differences
- Legal Status vs. Certification: PBC status is a legal designation, while B Corp Certification is an optional accreditation that evaluates performance. A company may elect to be a PBC without pursuing B Corp Certification, but B Corp Certification typically requires a company to become a PBC (or similar corporate form) in order to certify.
- Accountability: PBCs are accountable to state-specific requirements and their shareholders. B Corps are held to external performance standards set by B Lab.
- Impact Standards: PBCs generally do not require third-party verification of their impact, while B Corps undergo B Lab’s detailed assessment of their impact through the certification and recertification process.
- Process: Becoming a PBC involves filing legal amendments and annual reporting, while B Corp Certification requires a comprehensive assessment and periodic recertification. A company may become a PBC with very little cost and effort, as this merely entails filing an amendment with their state of incorporation. B Corp Certification, on the other hand, is a more involved process that typically requires a more substantial investment of resources.
- Public Perception: B Corp Certification permits a company to use the B Corp logo in its marketing and other public communications. Consumers (particularly younger ones) are increasingly aware of the significance of B Corp status and seek out B Corps both for purchasing of goods and services and as potential employers. PBC status is less known among the public and generally has less impact on public perception; its value is more focused on creating a legal basis for stakeholder-oriented management or as a first step toward B Corp Certification.
How They Work Together
While distinct, these two paths can complement each other. A company might adopt PBC status to protect its mission legally and then pursue B Corp Certification to prove its impact to customers and stakeholders. For example, companies like Ecolytics, Patagonia and Ben & Jerry’s have embraced both, demonstrating their leadership in combining governance and performance. Other companies, such as ImpactGC, may incorporate as PBCs from the start and use the B Impact Assessment as a framework to guide their corporate policies and practices; once they have achieved the required 12 months of operating history, they may pursue B Corp Certification to verify the effectiveness of these policies and practices.
Which Should Your Business Choose?
The choice depends on your goals. If you want to integrate stakeholder governance into your company’s structure, becoming a PBC is a meaningful first step. The PBC legal structure offers a great deal of flexibility to allow founders and owners to incorporate their own social and environmental goals into their companies’ DNA. If you’re looking to validate your impact and enhance credibility, B Corp Certification can elevate your business’s reputation.
Both approaches represent a shift toward a more inclusive and sustainable business model, showcasing a commitment to creating value not just for shareholders but for society and the planet as well.
