B Corporations — A sign of your company’s purpose in an ESG-focused world

As Environmental, Social, and Governance (ESG) becomes an increasingly important part of how business is done in the UK, and is more and more an embedded feature of corporate life, we would like to draw your attention to an aspect of ESG which is less well-known, but which is gradually raising its profile as a feature in the UK corporate landscape and is an interesting opportunity for UK companies to explore.

What is a B Corp certification?

UK companies can now become a “B Corporation” or “B Corp”. B Corps are companies which have received a certification of high standards of social and environmental performance, transparency and accountability from B Lab, a global not-for-profit organisation. B Corps take account of the interests of all stakeholders, not just shareholders, when making decisions and in the way they run their businesses. Becoming a B Corp, and displaying the B Corp logo, is a very public way of showing that your aims and purpose as a company are aligned with ESG-focused values and benefiting wider society and the environment.

B Lab was created in the United States in 2006 with the mission to inspire and enable people to use business as a force for good. There are B Labs across the world, including in the United States, Australia, mainland Europe and East Africa, together forming the “B Global Network”. B Lab UK was launched in 2015 (www.bcorporation.uk). Well-known B Corps include Patagonia clothing, Teapigs, Aesop skincare, BrewDog, Innocent Drinks and Coutts & Co bank.

What is B Lab?

The B Lab vision is of an inclusive, equitable and regenerative economy, aimed at redefining what is meant by success in business. The B Corp Community’s stated aim is to provide leadership by demonstrating its commitment to people and the planet. There are now more than 4,600 B Corps in 78 countries and covering 155 industries, with 387,000 workers. In the UK there are now over 700 B Corps, spanning 56 industries. B Corps commit to positively impact all stakeholders – workers, communities, customers and the planet.

How to become a B Corp

To qualify to apply for B Corp status, an applicant must be a for-profit company, with at least a year of operations under its belt.

To achieve and maintain B Corp certification, all B Corps must:

• complete the “B Impact Assessment” and achieve a verified total score of 80+ points
• meet the B Corp “legal requirement”, which involves amending their articles of association to embed a commitment to consider the impact of decisions on all stakeholders
• sign the “B Corp Agreement” and the “Declaration of Interdependence”

publicly list their Impact Assessment score on the “B Lab Directory” and recertify every three years.

What is the B Impact Assessment?

The B Impact Assessment (“BIA”) is a free and confidential online tool that measures the applicant company’s impact on its stakeholders. It measures the company’s entire operation, from its supply chain and carbon footprint to its inclusion policies and employee engagement.

What is the minimum score on the impact assessment for a B Corp to get certified?

The applicant company uses data from the last 12 months and answers approximately 200 questions, the answers to which are verified by B Lab’s Independent Standards Team. A minimum score of 80 points is required to submit an assessment to certify as a B Corp. It is rare for companies to achieve this score on the first attempt, and most are required to make improvements based on the policies and practices included in the BIA, before completing the BIA again.

The B Impact Assessment is tailored to the applicant’s industry, size, sector and location. Start-ups with less than 12 months in operation can use the BIA to achieve “Pending B Corp” status. Large or complex businesses may be required to take multiple assessments.

The BIA is divided into five impact areas:

• governance: code of ethics; financial information disclosure; whistle-blower policy; mission and engagement
• workers: career development; health; wellness and safety; tracking satisfaction and engagement
• environment: environmental management system; recycling materials; water, waste and energy usage
• community: civic engagement and giving; diversity, equity and inclusion; supply chain management
• customers: customer feedback or complaint mechanisms; regularly monitoring customer outcomes and wellbeing.

Certification also requires the applicant company to disclose any sensitive practices, fines or sanctions related to the company itself or its partners in a “Disclosure Questionnaire”. This is confidential and does not affect the BIA score.

The B Corp legal requirement

The B Corp legal requirement is designed to formalise the company’s alignment with the B Corp movement’s values, and to:

• provide a legal basis to allow directors to consider the interests of all stakeholders, not just shareholders, when making decisions
• protect the company’s mission and values through capital raises and leadership changes and give business leaders more flexibility when considering sale and liquidity options.

B Corp articles of association

In terms of timing, the amendments to the applicant’s articles of association are required prior to certification for companies with 0-49 full-time employees; for businesses with more than 50 employees, more time is granted depending on the company’s legal structure, with limited companies having up to a year after certification to amend their constitution, and limited liability partnerships having 90 days.

The amendments required to a limited company’s articles of association are:

• the company’s objects must state that it exists to promote the success of the company for the benefit of its members as a whole and, through its business, to have a material positive impact on society and the environment, thereby showing a commitment to a “triple bottom line” approach to business
• the company’s articles must contain wording in relation to the section 172 Companies Act 2006 duty for directors to promote the success of the company that directors are not required to regard the benefit of any particular stakeholder interest or group of stakeholder interests as more important than any other
• the company’s articles must require the company to produce an impact report to accompany its annual accounts to help shareholders assess how directors have performed their section 172 duty.

The Declaration of Interdependence

This is a statement given by each B Corporation, envisioning a global economy that uses business as a force for good. The statement states that B Corps believe that:

• they must seek change in the world
• all business ought to be conducted as if people and place mattered
• through their products, practices and profits, businesses should aspire to do no harm and benefit all
• to do so requires that they act with the understanding that they are each dependent upon another and thus responsible for each other and future generations.

The B Corp Agreement

This commits the company to meeting the legal requirement, if it has not already done so, and governs the terms of the B Lab certification.

How Long does the B Corp certification take?

For small and medium-sized companies, the certification process generally takes between six and eight months, but can take longer for larger and more complex businesses.

How much does B Corp certification cost?

B Corps pay an annual fee, which licenses them to use intellectual property such as the Certified B Corp logo. The fee varies by region and size of company, but for a UK company with annual sales of between £500,000 and £999,999 the annual fee is currently £1,500, in addition to a one-off submission fee of £250.

What are the benefits of B Corp certification?

The advantages to be gained from having B Corp status will depend on the nature of the individual company and its business and will need to be weighed up as part of the decision on whether to seek B Corp certification.

Potential benefits include:

• Having a publicly visible mark (in displaying the B Corp logo) of your alignment with a purpose-driven, ESG-focused approach to doing business.
• The opportunity to attract new customers and clients who are drawn by what B Corp status says about your company’s values and standards – for example, both Waitrose and Ocado have introduced aisles in their online stores which are dedicated to selling B Corp-produced products.
• The possibility to unlock new sources of funding and investment from organisations and individuals who are concerned to put their money into progressive and purpose-driven investments where impact on society and the environment is important.
• Sending out a positive message to staff about their value to the organisation, and being attractive to potential recruits as an employer who demonstrates aims which balance profit and impact on the wider world around it.
• Having been through the B Impact Assessment, and succeeded in achieving certification, a company can feel confidence in its ESG credentials and its way of operating and impact on society and the environment, as evidenced by displaying the B Corp logo.
• Being part of the B Corp community can potentially lead to collaboration opportunities with other B Corps, and the sharing of ideas and “best practice” ways of operating, which can lead to the development of greater efficiencies and cost-savings in your business (for example in energy and water usage).

Next Steps

Becoming a certified B Corp will not be the right decision for every business, but for many it represents a modern and progressive route to take, demonstrating in a very public way your commitment to a positive impact on society and the environment, and being an innovative and inclusive business.