Trading companies could benefit greatly from becoming a B Corp or B Corporation. A number of professional services companies and household-name brands in more than 80 countries and over 150 industries have adopted the B Corp status which enhances their social impact credentials by demonstrating high social and environmental performance, transparency and accountability.
There are around 1,200 B Corp entities in the UK including Innocent Drinks, Finisterre, Sipsmith and Simplyhealth and celebrities such as Jamie Oliver, Emma Bunton and Bear Grylls have also worked to certify their businesses. In essence, any for-profit company that has been in operation for a year in a competitive market, is able to score at least 80 out of 200 for its B Impact Assessment (BIA) (an evaluation of a company's positive impact), amends it Articles of Association to meet legal requirements, and commits to meeting high standards of the non-profit network B Lab may qualify for B Corp status. This is subject to B Lab evaluation and verification, after which the applicant, if successful, is granted B Corp Certification. A B Corp pays an annual fee and applies for recertification every three years
B Corps must commit to, amongst other things, improving the lives of their workforce, ensuring good governance and of course looking after the environment. An added bonus to being a B Corp is to be part of a global community of 6,000 businesses with a similar shared vision.
Unpicking the above, you will find that for small and medium enterprises (SMEs) the commitment of resources to achieve and maintain B Corp status can often be prohibitive. The B Corp Certification process is data driven and requires any potential applicants to collect a substantial amount of data. Additionally, in order to obtain B Corp status, a business must complete the B Impact Assessment (BIA). The BIA measures the positive impact on governance, workers, the community, the environment and customers. The certification process also includes a disclosure questionnaire, highlighting any sensitive practices, fines, and sanctions levied to the applicant company.
At a time when global economies are struggling, committing resources for what is essentially a non-legal status for an SME might not be the way forward. We would nonetheless advocate for SMEs to adopt many of the principles of good governance being put forth under the B Corp umbrella. Getting the B Corp certification provides reputational benefits by raising the profile of a company so any resources put towards obtaining this may be rewarded. However, this is a long-term view and not an instant fix.
A potential way forward could be to adopt specific prescribed wording into the Articles of Association of the Company to create a legal commitment to creating a material positive impact on society and the environment through the Company's business and operations, and to consider the impact of the company's decisions on all of its stakeholders, including shareholders, employees, suppliers, society and the environment. Whilst this is already a requirement of the B Corp certification process, businesses that are not yet ready to scale up to B Corp status could forward-plan by making such changes that could pave the way for future B Corp applications and reduce costs nearer the time of the actual application. As the B Lab website states, the amended Articles of Association will serve to protect the company’s mission whilst empowering directors to consider wider stakeholder interests and make mission-aligned decisions over time.
As a requirement of certification, the Articles of Association of a company must also require the company to produce an annual impact report which should contain such detail as is necessary to enable its stakeholders to understand the way that the company has promoted its success for the benefit of its members as a whole and, through its business and operations, sought to have a material positive impact on society and the environment (taken as a whole). Even if a company is not looking to become B Corp certified yet, it could look to prepare such a report for its stakeholders (or, if the company is required to prepare a strategic report, it could publish the impact report as part of that and in accordance with the relevant requirements applying to a strategic report).
ESG, CR and CSR
Businesses may want to consider B Corp status as part of their involvement and participation in environmental, social and governance principles, corporate responsibility, and corporate social responsibility as a whole. The question any business leader, owner or manager may be asking themselves is why? Why have all these additional responsibilities and costs, when prior to this phase the rules of corporate governance required that making profits for the shareholders was the key to running a successful business?
The simple answer is that simply maximising shareholder profits is no longer the status quo. The metrics for being awarded contracts are changing. Having a sustainable supply chain, a well looked after workforce, strong corporate governance and an active involvement in social responsibility and looking after the planet are increasingly factors considered as part of tender evaluations.
Similarly, when a company becomes a target for acquisition, potential suitors are no longer just concerned with the bottom line of profits but are increasingly interested in a more holistic picture about the reputational impact, operations and supply chains of a particular target.