Referencing benefit corporations, B Lab Policy Director Erik Trojian said, “…bake your morals and your missions into the DNA of your company.” From benefit corporations to certified B corporations and direct trade to fair trade, there are several business practices that incorporate social responsibility and support ethical consumption. But, what do they all mean?

Benefit Corporation

Benefit corporations are legal entities that include positive social and/or environmental impacts as part of their legally defined goals, meaning that they’re not just businesses out for profit. An example is My Sister which employs survivors of sexual exploitation, gives 6% or more of their sales to nonprofits fighting sex trafficking and raises awareness domestically and internationally.

Since 2010, more than 20 states and Washington DC have passed legislation recognizing and providing legal protections for benefit corporations.

“Whereas a regular business can abandon altruistic policies when times get tough, a benefit corporation can’t. Shareholders can sue its directors for not carrying out the company’s social mission, just as they can sue directors of traditional companies for violating their fiduciary duty.” - James Surowiecki

In the same vein, shareholders aren’t allowed to sue their corporations for valuing social responsibility as much as or more than profit. To ensure accountability and transparency, benefit corporations must make annual public reports about their social and environmental performance. Independent third parties chosen by the corporations prepare these reports, but note that corporations must still explain their process for choosing their third party standards. The main function of these reports is to give shareholders enough information to determine whether or not the businesses are fulfilling their stated purpose. In addition, corporations must post these reports on their websites.

Are you a social entrepreneur? Consider starting a benefit corporation.

Certified B Corporation

Though they sound similar, benefit corporations and certified B corporations have some differences. Certified B corporations must do the following:

• Have their performance verified by the B Lab;
• Get re-certified every two years; and
• Pay between $500-$25,000 in certification fees every year – the fee is based on the company’s annual sales.

The certification is available to all private businesses in the U.S. and abroad, and those with the certification have access to a variety of support services from the B Lab. In contrast, benefit corporations are only in specific U.S. states and countries, and they receive no formal support from the B Lab. A benefit corporation can be a certified B corporation, but a company doesn't have to be a certified B corporation to be a benefit corporation.

Both are accountable to shareholders and stakeholders, and both must publish public reports on their overall impacts in comparison to third party standards.

Patagonia and Ben & Jerry’s are certified B corporations. Patagonia is concerned with sustainability but also monitors its supply chain partners to promote safe, fair, legal and humane working conditions. Along with eco-friendly practices, Ben & Jerry’s sources fair trade certified ingredients in its pint, mini cup and scoop shop ice cream products.

Find a certified B corporation, or ask companies to assess their impact by taking the free B Impact Assessment.

Direct Trade

Direct trade is a practice, mostly by coffee roasters, of directly buying from farmers. Standards vary between producers, but the trade is seen to make a positive impact since it promotes direct communication and price negotiation between the buyers and producers. Direct trade and fair trade have similar values. Direct trade is different for the following reasons:

• Participating farmers, comparatively, tend to get higher premiums;
• There’s an incentive for farmers to improve quality so that they can ask for higher prices;
• Individual farms can participate (in fair trade, farms must be part of a cooperative and, traditionally, plantations and estates are excluded); and
• There are no dues, fees and surcharges paid to third parties.

Intelligentsia Coffee & Tea and Counter Culture Coffee are popular roasters known for directly trading with farmers.

Fair Trade

At its core, fair trade is about justly compensating farmers and artisans, helping producers in developing countries get better trading conditions and building sustainable businesses. Other principles include transparency, accountability and no forced or child labor. There are several organizations involved in fair trade: Fairtrade International, FLOCERT, the World Fair Trade Organization and the Fair Trade Federation.

Those who purchase fair trade certified products know that the producers were paid at least the minimum fair trade price and premium and that no slave labor was used. Furthermore, these goods meet certain producer organization, hired labor, contract production and trade standards.

To get a history of the fair trade movement and to see where it’s heading, check out this post by Equal Exchange and support authentic fair trade. For a list of fair trade goods, browse through our Fair Trade Friday features!

Topics: Slave Free Lifestyle, Business, Forced Labor