Third-Party Standards and Sustainability Reporting: The Case of Minnesota Benefit Corporations

Abstract

Sustainability reporting is an increasingly debated policy tool to facilitate accountability for businesses’ environmental and social impacts, particularly for hybrid ventures expressly pursuing both economic and social goals. However, little is known about how hybrid ventures navigate compliance with ambiguous reporting requirements, in which even mandatory reporting leaves significant room for heterogeneous and selective information disclosure. The premise of this paper is that compliance in sustainability reporting is socially constructed, and that third-party organizations serve as legal intermediaries influencing how extensively hybrid ventures report their social impact. To explore this, I develop a novel dataset featuring all annual benefit reports filed from 2016–2022 in the population of public benefit corporations in Minnesota. Using computer aided text analysis, I find that benefit corporations that have attained the B Corp certification from the third-party organization B Lab produce the most extensive reports, followed by non-certified firms that reference B Lab, followed by other benefit corporations. These results provide an extensive look into benefit reporting, which represents a key governance tool for this prominent legal structure for hybrid ventures—revealing the profound role of self-regulation via private, third-party governance in facilitating the nature of sustainability reporting compliance.

Keywords: benefit corporations, B Corps, B Lab, sustainability reporting, information disclosure, hybrid ventures, legal intermediaries, self-regulation

JEL Classification: K20, M13, Q01