To B Corp or not to B Corp? What you need to know about Certified B Corporations

Many of us will have seen some of the brands we use advertising their Certified B Corporation (B Corp) status, from large multinationals such as Ben & Jerrys and Danone right through to more local companies for example, Stourgarden Ltd, Climbing Trees Ltd and HG & Co Ltd, all based here in Essex.  

In this “B Corp Month”, this short article highlights some of the key facets of a B Corps and the difference it makes to corporate governance. 

What is a B Corp?

A B Corp is a company which has been certified by B Lab, a non profit organisation, that it meets “high standards of social and environmental performance, transparency and accountability” (B Lab UK website).

The “B” stands for beneficial and so the corporations are assessed on their abilities to create value for society, not just for their shareholders.

B Corps have been in existence since 2007 and there are currently 1700 UK Businesses with B Corp status.  The majority are currently located in London and the South East and South West and B Lab are aiming to encourage companies across the UK to seek B Corp certification.

What does a company have to do to become a B Corp?

The process to become a B Corp cannot be undertaken lightly.  B Lab expect the highest standards and the process is “comprehensive and transformational”.  B Lab assesses both a company’s social and environmental impact, not just on its profits but also in respect of key stakeholders such as its employees, customer base and the wider community.  It looks at 5 keys impact areas, namely governance, workers, community, environment and customers.   The assessment covers operational questions and impact business model questions.

A company must also meet B Lab’s legal requirements and this includes ensuring the company’s constitutional documents, such as its articles of association are fit for purpose and include a commitment that the company will consider all stakeholders in their decision making processes not just its shareholders.

Who can become a B Corp?

Companies, sole traders and partnerships which operate for profit and which have been active for a year can pursue a certification.  It is not open to charities and non-profit organisations.  The assessment looks at what the company has been doing in the last year, rather than measuring its aspirations and so any entity seeking to become a B Corp has to be fully committed to the certification and with having its operations and policies in line with the B Lab assessment criteria.  B Lab note that most companies initially score beneath the requisite score of 80 and are given a period to improve.

What are the benefits of being a B Corp?

Most benefits are connected to the perception and credibility of the business.  It can lead to better employee retention or talent attraction.  The B Corp certification is attractive to consumers, especially in connection with sustainability and environmental commitments.  It can also attract greater investment, given there is a legal requirement for the directors of the B Corp to change their constitutional documents to include specific B Corp wording, which have the interests of stakeholders and longer term drivers in mind. The legal requirement is often referred to as the “triple bottom line” which focuses attention on “people, planet, profits”, looking at the social, environmental and financial impact of any decisions which a B Corp board takes.

B Corp certification is a journey not a destination

B Corps have to apply for recertification every 3 years and so a B Corp is constantly having to evolve and embrace new technologies to ensure their ESG approach is as up to date as possible.  This clearly ensures that the B Corp certification retains its value and strengthens a company’s commitment to the “triple bottom line”.  However it appears the hard work which goes into getting the certification can reap rewards beyond simply the kudos of the certification for the company, with most companies showing high percentage growth and rate of expansion in the years following their certification.  However, some certifications have been called into question in recent years, such as that of Brewdog’s, whose B Corp certification was withdrawn at a time when allegations of a toxic working culture there were made public.  Similarly, even though Danone has B Corp certification, its CEO was pushed out by shareholders who did not agree with the focus on sustainability rather than profits, despite that being one of the key tenets of B Corp certification.

These examples serve as a useful reminder that businesses need to be carefully balanced between making profits for its shareholders and investors and the views of consumers and employees who have more of an expectation of businesses demonstrating their fundamental values in their work and products and to their ESG commitments.  The B Corp certification and assessment process at present appears to be the most consistent marker globally of good stewardship and ESG emphasis and the process and its focus and will no doubt be refined and evolve in the coming years.

If we can assist with any questions you may have in relation to your company, contact one of our specialist team members today by calling 1206 574431 or by emailing info@tsplegal.com.