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B-Corporations: Not business as usual

  • United Kingdom
  • Corporate
  • ESG - ESG Corporate

11-10-2021

 

Is “B Corp” status the panacea for socially-conscious businesses? It is certainly increasing in popularity in the UK, with a number of high profile businesses securing B Corp certification including Innocent Drinks, The Body Shop, and recently Coutts & Co bank.

As businesses look beyond the boardroom towards greater corporate responsibility, B Corporations (or B Corps) offer a change from business as usual.

Whilst not a legal status, B Corp certification is aimed at businesses that want to commit to making socially-responsible behaviour as much a part of their purpose as their financial robustness. Certification can communicate the culture, aims, and commitment of a company in a public way, as well as potentially provide a range of commercial opportunities. These attractive features go hand in hand with certain requirements - for example, the certification has key implications for company governance that should be considered.

The B Corp certification scheme was launched by a US not-for-profit B Lab in 2007 with the key strapline that “we must be the change we seek in the world”, which is quite a lofty ambition. Perhaps the most high profile B Corp in the US is the environmentally and socially-conscious Ben & Jerry’s.

The certification crossed the Atlantic in 2015 through the establishment of the charity B Lab UK which manages the certification process in the UK. In the UK, there were 360 B Corps at the end of 2020 and over 12,600 businesses had registered an interest in becoming certified.

There are approximately 4,000 B Corps worldwide and they are growing in popularity, with larger and more mainstream companies joining the scheme. What is interesting is the international nature of the mark whereas many other not-for-profit, or equivalent, designations are jurisdiction specific.

The certification, which is reversable, lasts for three years, after which it must be renewed. Companies that attain certification must commit to verified social and environmental performance; public transparency; legal accountability to balance their profit and their purpose; and to redefine what success means in business to consider the interests of all stakeholders, not just shareholders. There is a degree of overlap with the proposal for a Better Business Act, a campaign which is also being driven by B Lab UK.

Companies that are interested in certification should carefully consider before applying, to ensure that the purposes of the B Corp scheme align with the culture and strategy of the company.

In order to be certified, a company must:

• achieve a minimum verified score on the “B Impact Assessment” platform, which reviews the impact of the company on their workers, customers, community and environment;

• amend its governing document to require that its directors balance profit and purpose by adopting specific objects; and

• complete the verification process and permit B Lab UK to make available certain information from its B Impact Assessment on the B Lab UK online directory.

Currently, the key legal requirements of B Corp status that impact a company are the adoption of a new objects clause and provisions in its articles clarifying the directors’ duties in light of these new objects. There is also a requirement to prepare an annual impact report alongside its other reporting obligations.

Other legal considerations are the impact of these changes on company governance; and the company’s board and members. If the board of the company contains members, the possibility of conflicts need to be considered, for instance where the potential for income or profit may conflict with the requirement to make a material positive impact on society and the environment.

It should be noted that B Lab UK has reserved the right to “develop and update” the UK Legal Requirement of B Corp certification, so it is possible that these requirements may be subject to change.

B Corp status does not bring with it the same restrictions as operating as a charity or a social enterprise (such as a community interest company) as it enables companies to continue to operate on a commercial basis without the imposition of a statutory asset-lock.

It is likely that B Corp status will appeal to socially-conscious businesses that want to appeal to customers, clients, staff and stakeholders about how the business is run, and demonstrate their social and environmental credentials. We only see B Corp status becoming more popular in the UK in the coming years given its appeal to stakeholders.

If you have any queries or want to discuss gaining B Corp certification, please feel free to contact Stephen O’Reilly in our Charity team.