Looking Ahead: An Exploration of B Corporation Status for a Legal Tech Social Enterprise
February 8, 2022
What’s next for a growing legal tech social enterprise like A2J Tech? How can we continue to expand our goal of access to justice? What is a B Corporation, and how does it align with our mission? We will dive into what gaining B Corporation status would mean for A2J Tech’s employees, clients, and the larger community and outline the benefits and drawbacks of gaining B Corporation status in terms of time, effort, and finances. A2J Tech feels that becoming a B Corporation could help better situate us to make our commitment to access justice not only explicit but also part of our codified obligations. After reading this post, we would love to hear your thoughts on this potential move to a B Corporation and what it could mean for companies like ours.
What type of business is A2J Tech currently?
First things first, A2J Tech is a growing, innovative, and socially-conscious enterprise that uses technological tools to facilitate access to justice. But what exactly is a social enterprise? There are many definitions of a social enterprise. Still, generally speaking, it is an organization that addresses a basic unmet need or solves a social or environmental problem through a market-driven approach. At A2J Tech, we call ourselves a social enterprise because our ultimate goal is access to justice.
For example, A2J Tech strives to develop repeatable processes so that each legal aid organization can have high-quality technology. We want to provide websites, document automation, online intake, and more tools at a lower cost because we have built templates, processes, and infrastructure to prevent the high costs of reinventing the legal tech wheel. We have licensed attorneys, UX designers, and software developers who take on projects for legal aid organizations, law firms, and software companies that employ document automation, graphic design, project management, website development, software development, and digital marketing to make legal technology accessible to everyone at a reasonable price.
What exactly is a B Corporation?
According to B Lab, a B Corporation aims to “use business as a force for good.” Companies that want an official stamp of social enterprise approval can apply to achieve the B Corporation status. A B Corporation is not a type of legal entity, it is a designation, the effect being recognized and held accountable to our social good mission of improving access to justice. A B Corporation can be any corporate structure—an LLC, a partnership, a C Corporation, or an S Corporation.
On a global scale, some of the most well-known B Corporations are Ben and Jerry’s, Patagonia, and Unilever. Smaller companies close to home in Colorado, such as Altvia Solutions, have been granted certification in the technology industry.
(At A2J Tech, we are looking to see if there are any B Corporations in the legal technology and access to justice space—if you know of any of them, let us know in our survey at the end of this post! We would love to connect with them.)
Let’s dive into some key features of a B Corporation
Purposes of a B Corporation
Three features differentiate a B Corporation from other corporate structures:purpose, accountability, and transparency.
Public Benefits. B Corporations must operate responsibly and sustainably and hold a corporate purpose to promote one or more public benefits.
Accountability. A traditional corporation must prioritize the financial interest of its shareholders. In contrast, the directors of a B Corporation have a fiduciary duty, or legal responsibility, to manage the B Corporation’s business in a way that balances three factors: the financial interest of the shareholders, the best interests of those materially affected by the B Corporation’s conduct, and the B Corporation’s public benefit purpose(s).
Transparency. B Corporations are required to prepare an annual public report with the following requirements: (1) describe how the corporation has promoted its public benefit purpose(s) and the interests of those materially affected, and (2) assess its overall social and environmental performance against a third-party standard.
Areas of Assessment
Part of the B Corporation certification application requires the social enterprise to complete an online assessment. There are five main topics sections in the online B corporation assessment:
Governance: the way the company is managed
Workers: employee treatment
Community impact: job creation, diversity, and inclusion, engagement
Environmental impact: ecological sustainability of the company
Customers/Impact business models: serving in-need populations, giving programs, education, etc.
In addition, A2J Tech would be required to write and submit a B impact statement, signed by an executive, within four weeks of completing the assessment. This impact statement would outline our access to justice goals and how we have achieved them. It is estimated that the entire B corporation application process can take anywhere from six to ten months.
Why become a B Corporation?
Let’s talk about benefits.
A2J Tech has had a strong mission to use technology services to increase access to justice from its inception. The official certification of the B Corporation status will solidify this mission in a powerful way to our employees, clients, and the larger legal tech community. Founder and CEO Joseph Schieffer believes that, “B Corporation status is the gold standard for companies that want to have a social impact. Given our mission of improving access to justice, I think we should strongly consider becoming a B Corporation and joining a community of businesses that have similar values.”
In fact, other B Corporations have reported operational cost savings due to gaining access from B Lab to best practices across the field. It largely depends on the industry the company is in to determine how these savings could manifest. For example, Dansko, a Pennsylvania-based footwear manufacturer, reported that becoming a B Corporation allowed the company to review the impact on the surrounding community of its energy and water usage and cleaning products used, providing the company with a cost-effective way to measure and reduce its overall environmental impact.
Additionally, B Corporation status is known to market well and attract top talent with the use of the B Corporation logo. In a similar vein, employee engagement is reported to improve; B Corporations have reported the change promotes and encourages key values and employee-centric culture. Employees can also profit-share, or own shares in the corporation.
In terms of community, B Corporations enjoy an enhanced socially-conscious perception of the company to the public and other organizations in the field. Furthermore, there is a better potential of attracting and winning over conscious clients and organizations with the widely trusted B Corporation status. B Corporations report increased internal accountability from employees and shareholders to the company’s core purposes. As another benefit, B Lab provides data that is helpful in implementing social programs and provides benchmarking models and templates for employee manuals.
It is important to emphasize that a B Corporation is not a legally recognized corporate status, it is just a type of recognition and marketing status that a socially-conscious business can achieve. Additionally, B Corporation directors and officers may have elevated corporate legal liabilities (though these liabilities can be greatly limited in the directors and officers clauses of the company’s bylaws, the legal protocols, and guidelines for operation).
Is there a downside to being a B Corporation?
We’re glad you asked—becoming a B corporation is not without risk. A2J Tech would need to maintain our B corporation status, which means that if A2J Tech fails to meet reporting, financial (fees), or auditing requirements, that can trigger the process of stripping away the B corporation status.
First, A2J Tech will be subject to B Lab auditing. This is a limitation because audits allow for third parties to come in and make judgment calls on the B corporation’s decisions, and if the auditor believes that a certain decision was not in line with requirements, it could also begin the process of losing B corporation status.
Additionally, B corporation status offers no tax-exemptions. That is, there is no corporate tax benefit for being a B corporation. Accordingly, the corporation will be taxed as a typical corporation. In terms of liability, B Corporations have slightly increased external liability due to the addition of the purpose clause to the company’s bylaws. There is also a great need for legal due diligence review of A2J Tech’s operations to determine if contracts and licenses would be impacted by the change in corporate status.
Aspects of the actual B Corporation application can be lengthy. The company must complete the assessment (2-4 hours), write the impact statement (2 weeks), and amend all governing documents including the articles of incorporation to add in (1) new name, (2) purpose clause, and (3) director’s clause prior to beginning the application. It is reported that it takes anywhere from 6-10 months total to complete the application. Moreover, there is always the possibility of not meeting the necessary 80 out of 200 points on the assessment to achieve certification, though there is an opportunity to work with B Lab to amend post-verification.
Finally, although access to the B Corporation application is free, A2J Tech would have financial obligations to both obtain and maintain the B Corporation status. Certified B Corporations pay an annual certification fee, which licenses them to use intellectual property like the Certified B Corporation logo. This fee starts at $1000 and scales with revenue (the annual certification fee is a function of sales). The full pricing schedule is accessible on the B Lab website.
Wrapping it Up
With our mission of access to justice at the forefront, A2J Tech is in the process of exploring what a certified B Corporation would mean for our social enterprise, and if it would be in the company’s and community’s long-term best interests. In all of our work, we strive to be transparent and community-driven and this business decision is no exception. We invite our employees, clients, and community members to engage with us in a robust discussion surrounding the decision to become a B Corporation so, please, share any comments and suggestions with us.