In today’s day and age, we hear a lot of talk about the challenges modern businesses face. What we don’t often hear is how businesses are leveraging challenges as opportunities to do good. Leading through innovation, growing through the power of collaboration, and doing our part as members of the global community are just a few of the ways small businesses and corporate giants alike are building a more sustainable world.
With so many ways to do good, discerning what each business classification truly means can be a little confusing. We’re here to simplify this by breaking down the key differences between a Certified B Corporation — or B Corp — and a nonprofit. We’ll explore the ways these two entities differ, the strengths and role of each in the business arena, and how both entities are affecting positive change in today’s corporate world.
Big Sky Recycling and our dynamic business partners measure our success by the good we leave behind. Understanding the certifications that make these goals possible is a good way for consumers to feel empowered and informed in the companies they support.
Certified B Corporation
Sharing a commitment to sustainability and positive impacts are a cornerstone of good business practices. However, it’s important to understand the difference between each type of entity as we make professional decisions regarding career path, contributions, and what organizations to promote throughout our local community.
When we think of B Corporations, we think of green! Not green in the traditional business sense of the term, but a much more valuable sort of green — a renewable planet for generations to come. B Corps are not simply concerned with environmental impacts (although a greener tomorrow does play a large role). These companies follow a business model that prioritizes people and the planet before profits. The general idea is that responsible businesses are profitable businesses. In order to receive certification, a business must undergo a rigorous review to ensure its operations are responsible, ethical, and sustainable.
Who Owns a Certified B Corp?
Ownership is a key distinction when discussing business entities. A Certified B Corporation has shareholders and operates like a traditional for-profit business that anticipates some form of revenue and ROI. Although many B Corps share similar goals with their nonprofit counterparts, B Corps must deliver all of the functional components of a competitive business in order to remain sustainable.
Within this obligation, B Corp organizations enjoy more freedom than nonprofits due to full control of resources and revenue. Nonprofits must strictly allocate 100% of resources towards work that directly benefits their stated mission and are often subject to board approval for any actions that are not directly relevant to said mission — even if these actions may be beneficial to the health of the organization.
B Corporations, by contrast, enjoy the freedom to make profitable decisions that in turn support the goals of sustainability and environmental efficacy.
What Do B Corps Do?
Unlike a nonprofit, the mission of a Certified B Corp is broad and covers a variety of topics from sustainability to inclusion and fair wages. A B Corp does not have a set cause and carries on with standard business operations that may or may not be related to how the company chooses to operate. Think of B Corp certification as a way of practicing business, not the business itself.
Nonprofit organizations are expansive and cover a variety of causes from environmental to community-based to global humanitarianism and beyond. Religious organizations also qualify as tax-exempt nonprofit entities. Just as the name implies, nonprofits are not businesses in the traditional sense of the word. These organizations operate for a specific purpose and cause. In order to maintain their 501(C) status, nonprofits must provide evidence that every resource is serving the stated purpose of the organization.
Who Owns a Nonprofit?
Nonprofit organizations do not have owners or shareholders. Instead, the organization is managed by a board that oversees the daily operations and ensures the group stays true to its mission. Nonprofit corporations do not declare shares of stock when established. In fact, some states refer to nonprofit corporations as non-stock corporations.
While nonprofits enjoy less freedom in spending and decision-making, they are more targeted in their approach. Nonprofits can apply for grants and hold fundraisers, where B Corps can sell stock or acquire debt like a traditional business in order to finance their operations. Nonprofits are also tax-exempt, whereas B Corps must file taxes along with the rest of us.
Can a Nonprofit Also be Certified B Corp?
Nonprofits may or may not adhere to the standards of a Certified B Corp. However, those that do so voluntarily cannot apply for B Corp status due to the clear distinction in ownership and profitability between the two. Think of nonprofits as strictly charity based and funded for a specific humanitarian cause, whereas B Corps are businesses that balance profit and purpose, using their business as a force for good.
How Are Certified B Corps and Nonprofits Similar?
Both Certified B Corps and nonprofit entities must adhere to strict guidelines in order to maintain their status. Transparency is a key element of both types of entities. Where nonprofits typically report to board members, B Corps must report to shareholders. Likewise, nonprofits must track and account for every donation and grant. B Corps are subject to similar financial transparency for the sake of operating a fair business practice.
Neither entity is required to report publicly, but it is typical for both types of entities to share their best practices and successes in order for their communities to learn and grow. Each type of entity has their own unique place in the public and professional realm. By supporting ethical organizations, consumers, employees, and managers can continue to work together as community leaders advocating for a brighter tomorrow.
There’s nothing more valuable than investing in our future. Big Sky Recycling gives back with every cell phone recycled, helping save the environment and supporting those in need. Learn more about the nonprofits we support and how to start recycling today.