SECTION A: ABOUT B CORPS and B LAB
What is a B Corp?
Regular companies are operated for shareholders. B Corps are companies that are operated for the benefit of workers, communities, the environment AND shareholders. This means that business can be used as a force for good, and redefines success in business. Ultimately, B Corps have the potential to re-shape the economy.
How does a business become a B Corp?
A company must meet the legal requirement and the performance requirement, by securing a minimum of 80 points (out of a possible 200) of the B Impact Assessment, committing to consider all stakeholders, not just shareholders and signing the B Corp declaration. For more information on the B Corporation Certification process, please see the website at www.bcorporation.net
What if the company is a start-up?
Start-ups cannot become Certified B Corps because the assessment looks at the past 12 months of a company’s practices and policies, rather than what they intend to do in the future. But start-ups can earn a temporary Pending B certification, valid for 12 months, while they pursue the steps to full certification. To become a Pending B Corporation a start-up must meet the legal requirement. For further details on this and the other requirements for Pending B Corporations please contact email@example.com
What does the score represent? Could a company get through if it only performs in one area? Is there no minimum you must achieve in each section?
A score is an assessment of a company’s overall impact across the four dimensions of workers, governance, environment and community. This sets the context and the benchmark for further change – it is aspirational of continuous improvement. There are many ways in which the minimum score can be reached, but it would be hard to score sufficient points to be certified if your company is not performing with respect to any one of the core criteria. However, it is hard to achieve points and a score above 80 represents a very significant achievement. The Assessment only scores positively (there are no negative scores). B Corps have to recertify every two years; and the assessment process itself is a working document – version 5 will launch in February 2016.
What do I have disclose to be a B Corp?
Transparency is at the heart of B Corps’ principles. To certify, you will need to answer various questions about your business and in support of these answers, provide the standards team with evidence of the policies. The final score of a Certified B Corp is broken down across categories and is online for public interest but the supporting evidence is not publicly available.
Why would I want to certify if I have to expose publicly that my score is lower than a competitor?
This is about building a community of change leaders; competitors can be collaborators and can create the inspiration needed to commit to being a B Corp. B Corp Certification identifies a company’s commitment to create positive impact to investors and commissioners, suppliers and public support organisations, so excluding your organisation from this could carry greater business risk! For example, COOK company, one of UK’s first B Corps, reached its 80 points after undertaking a deep review of its processes and policies; the company found the experience hugely rewarding for creating change in their business and were delighted with the achievement of being certified as a B Corp, but it certainly wasn’t easy! They have since developed this process and been re-certified.
Profit with purpose – does that mean my organisation has to be tackling a social or environmental problem or need to become a B Corp?
B Corps can be organisations which tackle a social or environmental need as their core revenue stream; (ie. through what they do) but a strength of the community is that it represents organisations across many sectors who commonly earn their certification because of how they operate. There are points in the assessment accorded to both of these dimensions and there are many permutations in how the threshold score of 80 points can be achieved.
I’ve heard in the US that states have passed laws to create a legal form called Benefit corporations which B Corps would need to use. Do we need to change the law in the UK?
In the US, company law operates at a state level, and for-profit company law tends to be inflexible with respect to shareholder value maximisation. Therefore, the B Corp movement has had to campaign to pass laws, which has been achieved in over 33 US states now. This is benefit corporation legislation, which changes the purpose of the company so that it is being operated not just for shareholders, but also for workers, the community and the environment, ranking them alongside shareholders, and not subordinate to them. B corps then use this legal form to certify if they meet the rigorous assessment criteria. So some Benefit corporations may not become B Corps but all B Corps that certify in the US will have had to adopt the Benefit corporation legal structure.
In the UK, we are fortunate that our Companies Act (2006) is sufficiently flexible to allow for this change in the purpose of the business without having to create a new legal form. The B Corp legal requirement in the UK uses the Articles of Association of the company to embed the commitment to treat all stakeholders' interests equally. The effect is identical to that of the US legal requirement (i.e. Benefit Corporation legislation). B Lab UK have a Policy Council which has established this UK Legal Requirement.
How does B Lab deal with tax issues?
If any Certified B Corp is in material breach of the B Corp principles & ‘Declaration of Interdependence’ which is signed at the point of adopting B corp certification, action will be taken. Obviously, if the breach is not remedied, then certification will be revoked. In specific case of Etsy, the allegations have been drawn to our attention and we are investigating them.
How do you make sure businesses don’t stray from the certification? How will you keep tabs on business that have certified?
Re-certification is obligatory every two years, and the standards are also re-issued every two years. 10% of certified companies are randomly selected for an on-site visit. Finally, there is thorough complaints process. We can put you through to standards team if you’d like a more detailed answer.
How is the assessment test designed and carried out? Is it robust enough?
The assessment process is robust and interactive so it responds to key questions provided by the company. B Lab UK has created a Standards Council and it will be introducing a feedback process to ensure UK certifying companies’ comments are reflected in future iterations of the assessment. The Assessment is constantly reviewed based on feedback (version 5 is to launch in early 2016). The Standards team (which is separate team from B Lab UK) carries out a 90 minute review call and then follows this up with documentation review to assess whether the answers given are supported by company’s policies and procedures. The Standards Team are specifically trained in the issues to identify and address and this standardised process gives robust credibility to the system. There are many ways to achieve a combined score of 80, so it is flexible enough to allow for a wide range of industries, business models and organisational systems to gain certification if they are committed to and operating to create positive impact. This builds the diversity and strength of the B Corp movement.
SECTION B: THE GLOBAL MOVEMENT
Isn’t this just an American import?
No. The movement started in the US, but it addresses a global problem, i.e. the narrow concept of a company as being for its shareholders only, as opposed to a broader concept of a company as being for workers, communities, the environment AND shareholders. This is why the movement has grown so powerfully with B Corps represented in 42 countries. It is fair to say that it sometimes can retain an ‘American accent’, on the basis that over half of the B Corps are in North America, but this is fast changing as other accents join the party, most notably the Latin Americans, Europeans and Australians – and now the Brits. Last year, more than half the B Corps who certified did so OUTSIDE the US, and this is a dynamic which is accelerating (witness what’s going on in the UK with this).
How big do you think the global movement will be in the next five years?
We do not make predictions on its growth. This is up to business leaders who want to be identified as changing the role of business in society. We will share historic data and trends, and you can make your own extrapolations if you like. Please see www.bcorporation.net for further information.
SECTION C: THE BROADER COMMENTARY
How do we know if B Corps really create positive impact and benefit?
We know this two ways: firstly, intuitively – that it makes sense. We know that if we are sparing with our water usage, we ensure there is sufficient water for future use to support crop growth, to make more products. If we treat staff well, we attract and retain talent. We also know this from evidence of how B Corps are performing .25 B Corps are represented in the top 5000 fastest growing companies; staff retention is higher than average, and these companies are proving to be resilient, nimble and innovative. Many B Corps produce their own impact reports regularly against these core criteria. We are building the evidence base all the time to support the claim that companies which treat people and the planet with respect, are likely to generate ‘profit plus’ i.e. returns in excess of mere profit. In the end this is what drives lasting value in business.
Surely it detracts from the interest of shareholders and won’t that cause problems for businesses?
Some may say that. The truth is that people running businesses want those businesses to succeed. If you do not have happy shareholders it is really hard to succeed, as they want to sell their shares and take their capital elsewhere. If you are doing a good job for your shareholders, then other people will want to buy shares, which means you can raise capital to scale the business. So ironically, becoming a B Corp does not ‘reduce’ the focus on ensuring that shareholders are happy. Instead it allows the consideration of other stakeholders – employees, communities and the environment – to become a core and equal part of the discussion. Rather than constrain the business, this liberates a much broader and bigger conversation in the board room, which is to the long term benefit of the company and its shareholders.
How will the movement redefine success in business?
Because success is no longer measured merely by shareholder return, it is measured by how successfully the business is serving the interests of its workforce, its communities, the environment AND its shareholders.
Do you expect big businesses to take this seriously?
Yes, they are. At the UK B Corp launch, Paul Polman, CEO of Unilever, announced the company’s commitment to supporting the creation of a Multinational Public Companies Advisory Council to examine how the principles of B Corps could be more easily applied to large public corporations. This work will begin globally with the B Corp movement this year, in 2016.
What do investors think about B Corps?
Impact investment is growing rapidly and impact investors have £8.2 billion funds globally earmarked for projects and businesses that make a positive impact on the planet and its inhabitants. The B Corp brand is a fast way of identifying those organisations that see the creation of positive impact as core to their operations.
There is also increasing evidence that companies that take full account of Environmental Social and Governance considerations outperform those companies that are not considering this. Well-governed companies have tended to outperform poorly governed companies by an average of over 30 basis points per month (according to Hermes, ESG report 2014).
Examples of investors’ perspective on B Corps are provided by the recent IPO of Etsy, in which a key risk identified was the risk of the company not recertifying as a B Corp. Ben and Jerry’s was a B Corp before it was bought by Unilever: now it is promoting the B Corp way of business throughout its parent company. Plum Organics, an organic baby food company, sold to The Nest Collective, which became a Certified B Corp shortly thereafter. Plum Organics remains a Certified B Corp as a wholly owned subsidiary.
Within the UK community of B Corps, we currently have 9 certified B Corp investors or financial intermediaries and globally there are commercial banks, venture firms, and investment houses all represented and trading with other B Corps.
Can a business that damages the environment through their business activity ever be a B Corps?
We all damage the environment every time we get out of bed. The B Impact Assessment enables a business to measure and manage its environmental impact, and it incentivises companies to reduce it. A company whose business model depended on significant damage to the environment to create revenue would struggle to certify as a B Corp. However, there are many different ways that 80 points can be achieved, and most companies will have strengths in certain areas over others. Intentionally, the assessment does not score negatively, a company can only accrue positive points. The assessment and review process is able to delve further to ensure that there is not a material breach of the interdependence code that must be signed for certification – which commits B Corps to creating a positive impact for people and planet as it creates profit.
How is this different from social business movements that we’ve already seen?
Business is the most powerful engine invented by mankind. We want to work with all range of other business types –with social enterprises, international businesses, start-ups and well established businesses so that together we can be the change we know we can be.