Certified B Corporation (“B Corps”): What, why and how?
What do the “Queen’s Bank” Coutts, fashion house Chloé and food producer Jolly Hog have in common? Perhaps the clue is in the title of this article, but yes, they, along with over 1,700 UK businesses, are all B Corps!
If you have been pounding the streets of London recently, the Strand in particular, you are likely to have seen Coutts proudly display the fact that they are a B Corp on the front of their head office. You could also have noticed a whole raft of other companies announcing their delight at their newfound status as a B Corp.
“But what is a B Corp? Why should I become a B Corp company and is it worth it? How can I be part of the “B Corp Movement”?” you may ask. Read on for all you need to know.
What is a B Corp?
A B Corp is an independently certified, profit-making business that can demonstrate, and continue to demonstrate, that they meet recognised standards of social and environmental performance, transparency and accountability and have received a certification from B Lab UK following their assessment process.
Corporate Social Responsibility (CSR) and, more recently, Environmental, Social, and Governance (ESG) policies have become increasingly important in how businesses are run in the UK. Businesses are more alive to the climate crisis and the current state of the world, and how their actions and decisions impact their staff, the wider community and the environment.
Back in 2006, B Lab, a not-for-profit organisation, was founded in the US with the mission to create an inclusive, equitable and regenerative economy by reducing inequality, lowering levels of poverty and creating healthier environments, stronger communities, and more high quality jobs with dignity and purpose. Rather than being driven solely by profits, every B Corp has a vision that’s grounded in moral and social good.
B Lab finally came to these shores in 2015, with the establishment of B Lab UK and has allowed British companies to show to the world that they operate in accordance with the global principles upon which B Lab was founded.
Why should I become a B Corp company?
There are a number of reasons why a company would want to become a B Corp:
1. Recognition
You would be internationally recognised as having a reputable certification which independently verifies your ESG initiatives. This is an excellent way to publicise your business and highlight how you hold yourself to a higher standard than your competitors.
2. Attracting new customers
Applying for B Corp status should not be used solely for the purpose of “greenwashing”, however, a welcome by-product is that having B Corp status can make your business more attractive to consumers. Studies show that consumers now seek out brands with ethical and sustainability credentials when making purchases.
3. Attracting employees
The movement towards ethical and sustainable practices also extends to the recruitment of new employees, as Millennials and Gen-Z specifically seek out companies with a good work/life balance, who are more inclusive and who invest in their staff. Importantly, one of the categories which is considered in the application process is the impact on the workers and the community, so, again, certified B Corp status is a clear way of highlighting your commitment to your staff.
4. Investors
Whilst return of investment and profitability are still key drivers for investors, they are increasingly taking ESG and CSR into account when conducting their diligence. Companies who are B Corps have an independently verifiable certification regarding their ESG and CSR commitments and can be more attractive to investors. Another bonus will be that a B Corp is likely to attract investors who more align with their principles.
5. Becoming part of a wider community
Being part of the B Corp community can potentially lead to opportunities to collaborate with other B Corps, which can lead to the development of greater efficiencies and cost-savings in your business.
By becoming a B Corp, and displaying the B Corp logo, you are visibly showing that you align yourself with the B Corp movement’s vision of creating an inclusive, equitable and regenerative economy.
How do I become a certified B Corp company?
There are three steps to becoming a B Corp:
- Complete the B Impact Assessment and achieve a verified score of 80+ points in each criteria;
- Meet the legal accountability requirement; and
- Sign the B Corp “Declaration of Interdependence” and fee the registration fee.
Completing the B Impact Assessment (BIA) and scoring
The BIA is a free and confidential online platform that evaluates a company’s impact on its workers, customers, community and environment. It is tailored to the industry, size, sector and location of a company and measures their entire operation, from its supply chain and carbon footprint to its inclusion policies and employee engagement.
The BIA is divided into five impact areas:
- Governance – governance policies (for example; whistle blowing, anti-bribery etc.), codes of practice, ethics, mission statements;
- Workers – career development, health, wellness and safety;
- Environment – environmental impact assessments and policies, recycling, waste and energy usage;
- Community – supply chain management, community and charity engagement, diversity, equity and inclusion;
- Customers – customer feedback or complaint handling, service.
- There are approximately 200 questions to answer, and data must be provided from the past 12 months trading. Start-ups with less than 12 months in operation can use the BIA to achieve “Pending B Corp” status. Completing the questionnaire will typically take approximately 90 minutes to two hours, depending on the size of your business and the complexity of the responses or documents provided. Helpfully, an application can be saved and returned to, so it doesn’t have to be dealt with all in one go.
B Lab also ask any applicants to disclose any sensitive practices, fines or sanctions related to the company or any of their partners in a “Disclosure Questionnaire”. This is confidential and does not affect your BIA score.
B Lab’s Independent Standards Team verifies the responses and any documents provided in support and a company must achieve a minimum score of 80 points (out of 200) to certify as a B Corp. Some companies may be asked to make some improvements and evidence these, before resubmitting their BIA and being approved.
Once completed, you will receive an impact report and, should you qualify as a B Corp, your report will be published online on the official B Corp website.
Legal requirement
As part of the process to become certified, a company, regardless of their legal structure, will need to change its constitutional documents to incorporate certain prescribed B Corp language which emphasises a commitment to having a material positive effect on society and the environment. The purpose of this is to entrench certain priorities and principles in a company’s governing constitution.
There is a formal process to amending the constitution of a company, so you should check to ensure that there are no restrictions on making these amendments and, if there are, that these are dealt with well in advance of making an application for B Corp status. If your business has less than 50 employees, these changes must be made before you can be certified, but for companies with more than 50 employees, extra time is given to make the appropriate changes.
Once the necessary amendments have been made, the relevant documents will need to be filed at Companies House and your constitution will be publicly visible.
Finally, you will be asked to sign the B Corp Agreement, a current version of which can be found here, which commits a company to meeting the legal requirement (if it has not already done so) and governs the terms of B Corp certification.
The B Corp “Declaration of Interdependence”
The last step to becoming a certified B Corp is for you to sign the Declaration of Interdependence, which states that B Corps believe:
- That they must be the change they seek in the world;
- That all business ought to be conducted as if people and place mattered;
- That, through their products, practices, and profits, businesses should aspire to do no harm and benefit all; and
- To do so requires that we act with the understanding that they are each dependent upon another and thus responsible for each other and future generations.
Further considerations and maintaining certified status
You should make sure that you have considered the impact on your business of being a B Corp, before any application is made. There is a significant time investment required in the application process and ensuring that you are successfully hitting the criteria in any application.
Also, there are upfront and annual fees payable to B Lab associated with certification and renewal, but these are based on the annual revenue of the company. Finally, if the B Corp status is lost, this could have a negative impact on your reputation, public image, marketing and client or investor relations. You must be in a position whereby you can commit to maintaining your B Corp status.
Once you have been certified, you will need to renew your company’s certification every three years. This will include undertaking a reverification and update of your initial BIA including a reappraisal of your score by B Lab, providing additional documents if requested and continuing to meet the legal requirements. You will also have to make sure that you continue to pay your annual fees.
Next steps for you and your business
For many businesses, becoming a certified B Corp is an exciting prospect and is a very progressive way to demonstrate your commitment to having a positive impact on society and the environment.
If you are interested in becoming a B Corp, Geldards are fully equipped to help you on your journey and can guide you in the process. If you would like to discuss your business, and would like to apply for B Corp status, then please contact the Corporate team at Geldards.