Amidst the Covid-19 pandemic that has rocked the commercial world, ‘B Corp’ has also been winning the attention of business owners, but what is it really all about?
What does the B Corp badge of honour say about a business?
Well, if a company has achieved B Corp certification, it means they have met rigorous standards of social and environmental performance, legal accountability, and public transparency – so the benefits of certification to a company in a world of Gretta Thunberg and buying patterns influenced by ever-heightening corporate social responsibility, are pretty obvious, both from a PR ethos perspective, and attracting likeminded staff.
So what does it take?
However, the term bandied around to describe the extent of satisfying B Corp criteria is a ‘triple bottom line approach’, with environmental, social, and governance (ESG) being fundamentally ingrained in a company’s mission and legal structure to benefit all stakeholders, not just shareholders.
Who can become a B Corp?
Since the movement begun in 2007, no fewer than 2,500 corporations globally have achieved the elusive status, with Ecosurety grabbing the headlines for becoming the first UK recycling company to achieve certification, alongside famous global brands like Patagonia and Ben & Jerry’s ice-cream. Lovely stuff. But a company doesn’t have to be a muscly Unilever subsidiary like Ben & Jerry’s to achieve B Corp status. In fact, most B Corps are small businesses, and some are even sole traders.
Let’s start with the basics..
To be well on the way to satisfying the criteria, a business must:
- Have a profit making purpose;
- Not be a charity;
- Compete in a competitive market place;
- Not be a public body, or any company where the state is the majority shareholder.
Well that sounds easy
Pretty simple, you may be thinking, but B Labs Standards Advisory Council (the governing body behind the movement) requires that a company must complete a ‘B Impact Assessment’ (BIA) to measure their positive impact on community, customers, workers, and of course, the environment.
What’s involved in the assessment?
The assessment is free and confidential, and is split into two categories, depending on size, sector, and market: ‘Operations, which covers a company’s day-to-day activities, and Impact Business Models, which awards additional points for business models designed to create additional positive impact.’
(taken from the bcorporation.net website).
Can start-ups take the assessment?
The assessment covers 200 questions concerning operations over the past 12 months, so for start-ups looking to take the assessment, they must have been trading for at least 12 months, otherwise, they will only be eligible for Pending B Corp Status, which requires payment of a $500 fee in order to broadcast their B Corp aspirations to the world.
Is Pending B Corp Status required before full certification?
Whilst Pending B Corp Status is not a prerequisite to full B Corp Status, changing the company’s constitutional documents to include the aptly named ‘B Corp legal language’, is – so taking the assessment sooner rather than later in your business journey is a distinct advantage. But for companies with a long trading history, greater value in the assessment will be given to those who have already changed their constitutional documents rather than those who have only signed the B Corp legal language statement to signify that they will make the required changes within the next 12 months.
What is the B Corp legal language structuring requirements?
The legal structuring requirements for a private company limited by shares, for example, would include changing the articles of association and shareholders agreement (if any) by special resolution (75% of shareholder vote) to ensure that shareholder interests do not override other stakeholder interests, like employees, suppliers, society, and the environment. Additional shareholder rights should also be created to enable them to hold directors and other office holders more accountable for meeting the other B Corp criteria. A ‘B Corp Champion’ should also be nominated by the board of medium to large sized organisations only, who should chair and spearhead the transformation. The amended articles and copy of the resolution are to then be filed at Companies House.
What’s next?
The final process of the BIA is the Disclosure Questionnaire, which focuses on the material negative impact of business operations, such as sensitive practices, fines, and sanctions related to the company. However, answers to these questions will not affect a company’s BIA score, although material issues brought up in the Disclosure Questionnaire may warrant further transparency and a commitment to implement specific remedies. In rare cases the company’s certification may be denied or revoked.
What’s the score?
Upon completion, a numeric score is produced, with a minimum verified score of 80 required across all impact areas. An initial evaluation will then determine the most appropriate certification process for the characteristics of the business.
Prove it!
The business will then be required to produce evaluation documents, which will vary depending on the size of the business and the answers provided in the BIA. The next stage of the Assessment Review call to discuss the results cannot be reached until the evaluation documents are produced, but given the current delay at the time of writing this article of 1-6 months, a business should have plenty of time to submit the documents.
What is the call for?
The Assessment Review call will typically last 60 to 90 minutes to ensure that the B Lab’s Standards Advisory Council can assess the business’s unique circumstances in sufficient detail. After the call, additional documentation may be required to further verify answers given in the assessment.
Is that it?
B Labs will also carry out background checks, such as a Companies House search, but also on the profile of directors, which may well include social media checks. If the business’s BIA score is still 80 points after completion of these verification processes, then this should conclude a B Corp verification status, and the BIA results will be applied to the B Impact Report, which is publicly available at the bcorporation.net website.
Almost there
A bit like the Foods Standards Agency, B Labs will conduct in-depth site reviews of their certified B Corps, either in person of virtually. Reviewees are randomly selected from 10 percent of registrants. On top of this, all B Corps must undertake another BIA every 3 years for recertification.
We hope this article was useful for you and your business if you’re seeking B Corp certification, but if you need further clarification on certification requirements, or the exact changes needed to your constitutional documents, then our reports for these start at just £570.
Alternatively, if you have any questions not answered above, then please feel free to submit them by commenting on our Topic of the Week post on LinkedIn, and we may be able to publish an article response like this on your topic or question, for free. We’d love to hear from you, and you can always get in touch with us for a free consultation.
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