Becoming a B Corp marks a commitment to sustainability and ESG, one that comes with numerous advantages. There are far fewer B Corporations, or ‘B Corps’, than most people think, mainly due to the difficulty in becoming one, but it is achievable and brings many advantages along with it. So, should your business consider becoming a B Corp?
As of September 2022, there are over 6,200 certified B Corporations across 158 industries in 85 countries, including Ben & Jerry’s, Patagonia, and Danone, boasting a total revenue of $150 billion (£123bn). That number is likely to increase alongside environmental, social, and governance (ESG) pressure and the global drive to sustainability.
For a long time, shareholder value has understandably been the most important goal for most companies. Although it remains a critical component, many companies have now moved away from a total ‘shareholder value above all else’ approach, towards a broader stakeholder value.
The change is partly due to consumer pressure on businesses to improve their environmental and ethical impacts, and partly because many companies recognise that pursuing a ‘business as a force for good’ strategy actually benefits their bottom line – as well as the planet.
With corporate sustainability more significant than ever, interest in B Corp status is growing rapidly. But is the long, costly certification process worth it?
Who is B Lab?
In 2005, Jay Coen Gilbert and Bart Houlahan had grown frustrated after selling their basketball apparel business, AND1. Having worked hard to build an ethical company, they watched on as the new owners quickly sacrificed sustainability for monetary gain.
This drove them to incite change by setting up B Lab, a non-profit designed to help businesses simultaneously grow and do good. B Lab certified its first B Corporations in 2007, launching a movement that has since become one of the most respected global standards in corporate sustainability.
While labels like ‘Fairtrade’ are awarded to specific products, B Corp’s ‘impact assessment’ scrutinises a company’s entire operation. It’s a rigorous process that can take several months (and attempts) to pass. Tens of thousands of companies have applied for B Corp status unsuccessfully. Out of those who are successful, the majority are SMEs (small to medium enterprises), with a sprinkling of bigger names, including the aforementioned Brewdog, Patagonia and Danone’s North America arm.
If you’re considering choosing to become a benefit corporation or ‘B corp’, here are some factors to keep in mind.
The implications to consider before applying
1. The Legal structure
Becoming a B Corp requires a change in your company’s legal structure. Any company thinking about applying should give this serious consideration.
B Corps adopt a legal framework that ensures the protection of their mission by requiring the company to consider the impact of its decisions on its stakeholders. This increased accountability enables B Corps to build mission into the legal charter of the company as it grows, brings in outside capital, or plans succession, ensuring that company values can better survive new management, new investors, and even new ownership.
B Corp certification requires companies to meet the legal requirement at the highest level in the certifying company’s legal structure. Only in specific limited circumstances may the legal requirement be applied at a lower operational entity and not a parent company if B Lab has deemed the Parent company to be in scope of the company’s certification.
2. External relationships
B Corp status may also affect how attractive a business is for third-party investment. If it is already, or may become part of a group of companies, how does the B Corp ethos sit within your wider shareholder and investment group?
3. Rolling costs
There is a cost associated with certifying as a B Corp, and companies must pay to recertify after three years. Any for-profit company with at least a year of operations can apply, but will have to part with between £500 to £50,000 (dependent on turnover) to do so.
4. It takes time
The process can take a significant amount of time and resources. Businesses must complete the B Impact Assessment, which consists of 200 questions, ranging from social and environmental impact to parental leave policies and salary ratios. Only companies that score 80 points and above are eligible to move onto the next stage, but, the majority of companies do not pass the first time and will take several attempts of iteration and improvement to reach the target.
5. The benefits of becoming a B Corp
Those who successfully complete the process often say the effort is worth the investment stating that B Corp status is increasingly important to customers, employees, and potential new staff. According to B Lab, companies that achieve B Corp certification have experienced “highly engaged and motivated employees, increased customer loyalty, greater levels of innovation, and market leadership.”
A 2021 study by Simon Kutcher and partners found that 35% of consumers would pay more for sustainable products or services. These results also showed the younger generations are more committed to this concept, with a respondent rate of 39% among Gen Z and 42% with Millennials. Becoming a B Corp is also a great way to publicise your business in a positive light and set yourself at a higher standard than many of your competitors.
However, whether certification boosts a business’s bottom line is tough to prove. According to a community survey from the B Lab, between 2017 and 2020, B Corporations saw average turnover growth of 26% compared to the national average of 5%. But, research by Dr Eleanor O’Higgins, of University College Dublin and the London School of Economics, found no evidence that B Corp certification adds to financial performance, although it does boost a company’s reputation and socially responsible action.
6. Can B Corps drive significant change?
The B Corp certification is undoubtedly gaining traction in the UK. In February this year, online supermarket Ocado joined Waitrose in launching a dedicated “aisle” for B Corp brands that already has more than 1,000 products.
This is just one example of how by becoming a B Corp you make it far easier for consumers to make sustainable choices to help investment into a more sustainable future.
B Corp remains a symbol that the public can trust as a mark of a business committed to making change for good. To become a B Corp, businesses of all sizes often have to bring in some new policies and ways of working. For example changing hiring policy to follow best practice in our strides to be an anti-racist business. By improving aspects of your business for staff and consumers B Corp can really help to drive societal change.
In conclusion
There are many UK and global businesses that are now beginning to realise that they have a responsibility beyond simply maximising profit. Being a force for good, including having a positive impact on employees, the local community and the world at large, as well as how we manage and store money without inhibiting commercial success is absolutely possible. Consumers are becoming increasingly environmentally and socially conscious, and with global clients now expecting their suppliers to have a point of view on these issues, B Corp certification can be a key differentiator in attracting talent as well as new business.
Achieving and maintain certification is by no means an easy process and you will have to be reassessed every three years, so becoming a B Corp is a long-term and ongoing commitment, not a one-off achievement or tick in the box. If you have the time and financial resources to consider certifying yourself, you’ll take a huge step in future-proofing your business while helping to create a healthier and fairer world. But, it has to be right for you and your company.
