An introduction to 'B Corps' – what are they and how do you become certified?
We are seeing a growing number of our corporate clients looking to obtain B Corp status. Social and environmental responsibility is becoming increasingly relevant and companies which feel that they 'go the extra mile' are applying to be recognised for their efforts by way of the B Corp certification.
What are B Corps?
B Corps are companies who are certified as voluntarily adhering to high standards of social and environmental accountability, performance and transparency. B Corps are granted certification by B Lab, a not-for-profit organisation which describes itself as being "dedicated to using the power of business to solve social and environmental problems".
Whilst the concept of B Corps is relatively new, it is a movement which is growing rapidly. There are over 2,000 certified B Corps worldwide at present, including well-known companies such as Triodos Bank, Kickstarter and Ben & Jerry's ice cream.
Bevis Watts, Managing Director of Triodos Bank UK, told us the following about the decision to become B Corp certified:
“In 2015, [Triodos Bank] became the first pan-European bank to achieve certification as a B Corporation. As a business founded on principles of sustainability it was an obvious step for us to join the community. For us the B Corps represent a growing movement of successful, sustainable companies using business as a force for good and positive change. We are about creating lasting value for all stakeholders, not for just shareholders. The certification helps to increase awareness about sustainable business by distinguishing credible businesses that are genuinely committed to doing good – for a B Corporation sustainability is fully integrated into the business.”
Why become a certified B Corp?
B Corp status is described as being the business equivalent to the Fair Trade certification for goods. By embracing higher standards of 'ethical' accountability, companies may be capable of reaching out to wholly different groups of people as potential investors, customers and employees.
As well as the potential increase in revenue, becoming a B Corp may also generate positive reputational effects and differentiate companies from their competitors.
One of the most recent companies to achieve certification was Mindful Chef. Co-founder Myles Hopper commented:
"We are incredibly proud to achieve certification and it is something the team have been working extremely hard on behind the scenes. B Corp certified companies strive not only for profits, but using business as a force for good. This includes their employees and their customers, as well as society at large and the environment – both locally and globally. This embodies the founding principles of Mindful Chef and maintaining B Corp status will ensure that Mindful Chef stays true to its values whilst growing and spreading awareness of our mission."
Which companies can apply for certification?
In order to apply for the B Corp certification, the company should generate the majority of its revenue from trading and compete in a "competitive marketplace". Companies limited by shares or guarantee, community interest companies, co-operatives and limited liability partnerships are all able to apply. B Lab does not generally allow registered charities or public bodies to apply, but applications are considered on a case-by-case basis.
How to become a B Corp
In order to be considered for B Corp certification, a company must amend its articles of association. B Lab refers to this as "the Legal Test". The Legal Test largely requires the inclusion of a prescribed statement in the applicant company's constitution.
The wording simply states that the company aims to benefit its members, society and the environment. In doing so, the directors will give consideration to a range of accountability and transparency measures. This includes preparing a strategic report each year which gives a fair view of the company's business and performance as well as any risks and uncertainties.
Alternatively, a company can enter into a morally binding agreement with B Lab, committing to amend its constitutional documents within one year of receiving B Corp certification.
The company is required to complete an online questionnaire which seeks to find out how the company interacts with and affects its stakeholders; including employees, customers, the local community and others. Ultimately, this assessment results in the company being awarded a 'points score'.
B Lab will consider granting B Corp certification to companies which achieve at least 80 points out of a possible 200. The online assessment is supplemented by a review phone call as well as a confidential disclosure questionnaire.
It is worth noting that companies that have already amended their constitutional documents will be awarded a higher 'points score' than companies who have not yet done so.
If B Lab is satisfied with the company's assessment result the company will be invited to sign the B Corp Declaration of Interdependence and Term Sheet and become a certified B Corp.
Certification and beyond
Directors of certified B Corps must continue to adhere to the company's newly-worded constitution. This may involve some additional paperwork to demonstrate that the directors are considering the interests of the company's stakeholders, the local community and the environment, which will include the annual strategic report mentioned above.
Certification lasts for two years and so the company must renew every two years. There is an annual fee for certification, which is scaled according to the value of annual sales of the company. This fee ranges from £500 per year plus VAT for companies with annual sales no higher than £149,999 to annual fees over £50,000 per year plus VAT for companies with annual sales over £1billion.
If you or your company is considering becoming B Corp certified and you would like some more information, please contact Harry Trick.