How Do I Pick a Third Party Standard?

In most states, benefit corporations are required to publish an annual benefit report that includes "an assessment of [its] overall social and environmental performance against a third party standard." This is also true in Colorado and is considered a best practice in Delaware. This transparency requirement is intended to help the benefit corporation, its directors, its shareholders, and the general public determine whether the benefit corporation has met its statutory corporate purpose to "create a material positive impact on society and the environment, taken as a whole, assessed against a third party standard."

A third party standard is defined as "a standard for defining, reporting, and assessing overall corporate social and environmental performance" that meets the criteria listed below.

Importantly,

  • Government has no role in determining whether a selected third party standard is acceptable or whether the benefit corporation has met its benefit corporation purpose to create a material positive impact;
  • Benefit corporation legislation does not require benefit corporations to adopt any particular third party standard in preparing its annual benefit report; and
  • Benefit corporation legislation does not require the annual benefit report to be audited or certified by any third party standards organization.

The criteria for acceptable third party standards:

According to the Model Legislation, a third party standard must be comprehensive, independent, credible, and transparent as defined below:

List of standards:

The below list is not intended to be exhaustive and B Lab does not take any position on whether any third party standard listed (or not listed) below should be deemed acceptable. It is up to the benefit corporation, its directors, and ultimately its shareholders, to determine whether any particular third party standard meets the statutory criteria.

In addition to those third party standards listed below, more than 100 'raters' of corporate sustainability practices are listed in the 'Rate the Raters' report published by the research and consulting firm SustainAbility. This list is available for free.

If you are aware of a third party standard that meets the statutory criteria that you think should be included on this list, please contact info@benefitcorp.net.

  1. The standard is comprehensive in that it assesses the effect of the business and its operations upon
    1. The employees and workforce of the benefit corporation, its subsidiaries, and suppliers;
    2. The interests of customers to the extent they are beneficiaries of the general or specific benefit purposes of the benefit corporation;
    3. The local community and society, including the interest of each community in which offices or facilities of the benefit corporation, its subsidiaries, or suppliers are located;
    4. The local and global environment.
  2. The standard is developed by an entity that is independent of the benefit corporation and satisfies the following:
    1. Not more than 1/3 of the members of the governing body of the entity are representatives of any of the following:
      1. An association of businesses operating in a specific industry the performance of whose members is assessed against the standard;
      2. Businesses from a specific industry or an association of businesses in that industry:
      3. Business whose performance is assessed against the standard.
    2. The organization is not materially financed by an association or business defined [above]
  3. The standard is credible in that it has been developed by a person that both:
    1. Has access to necessary expertise to assess overall corporate social and environmental performance;
    2. Uses a balanced multistakeholder approach including a public comment period of at least 30 days to develop the standard.
  4. The standard is transparent in that the following information is made publicly available:
    1. About the standard:
      1. The criteria considered when measuring the overall social and environmental performance of a business;
      2. The relative weightings of those criteria.
    2. About the development and revision of the standard:
      1. The identity of the directors, officers, material owners and the governing body of the organization that developed and controls revisions to the standard;
      2. The process by which revisions to the standard and changes to the membership of the governing body are made;
      3. An accounting of the sources of financial support for the organization, with sufficient detail to disclose any relationships that could reasonably be considered to present a potential conflict of interest.

B Impact Assessment

Governed by B Lab

The B Impact Assessment is a free, comprehensive, and transparent tool for assessing overall corporate social and environmental performance. Learn more about using the B Impact Assessment to generate benefit reports.

http://www.bimpactassessment.net

Ceres Roadmap to Sustainability

Governed by Ceres

The Roadmap is designed to provide a comprehensive platform for sustainable business strategy and for accelerating best practices and performance.

http://www.ceres.org

Food Alliance Certified

Governed by Food Alliance

Food Alliance provides comprehensive third-party certification for social and environmental responsibility in agriculture and the food industry.

http://www.foodalliance.org

Global Reporting Initiative

Governed by Global Reporting Initiative

The Global Reporting Initiative (GRI) is a network-based organization that produces a comprehensive sustainability reporting framework that is widely used around the world.

http://www.globalreporting.org

Good Guide Company Ratings

Governed by GoodGuide, Inc.

GoodGuide's mission is to provide authoritative information about the health, environmental and social performance of products and companies.

http://goodguide.com

Green America Business Network

Governed by Green America

Green America rates companies on their social and environmental impact.

http://www.greenamerica.org

Green Seal Business Certification

Governed by Green Seal

Certifying goods and services that meet the highest standards of environmental quality and performance.

http://greenseal.org

ISO 26000

Governed by ISO International

ISO 26000 will distil a globally relevant understanding of what social responsibility is and what organizations need to do to operate in a socially responsible way.

https://www.iso.org/iso-26000-social-responsibility.html

People4Earth Business Framework

Governed by People4Earth

People 4 Earth is a global non-profit organization improving the well-being of people and the health of our planet by providing a Sustainability Accounting and Management System and framework for products and services.

http://www.people4earth.org

Sustainability Quotient

Governed by Underwriters Laboratories

Sustainability Quotient (UL/SQ) is a comprehensive enterprise-level sustainability program to facilitate the integration of corporate sustainability best practices in enterprises that is built upon 3rd party verifiable standards such as UL 880.

http://services.ul.com/service/sustainable-company-certification/

Sustainable Farm Certification

Governed by Sustainable Agriculture Network

The Sustainable Agriculture Network (SAN) promotes efficient and productive agriculture, biodiversity conservation and sustainable community development by creating social and environmental standards.

http://sanstandards.org