B Corporations are businesses that claim to meet “the highest standards of verified social and environmental performance, public transparency and legal accountability to balance profit and purpose”. (The “B” doesn’t officially stand for anything specific, but it’s widely seen as short for “beneficial”.) They are overseen by B Lab, a not-for-profit organisation that has certified more than 3,000 firms worldwide since its foundation in 2006.
To gain B Corp certification, a company must first score at least 80 points on the so-called B impact assessment (BIA). This is a detailed evaluation of how its business model and daily operations affect its employees, its customers, the community and the environment.
Once a firm scores 80, its certification is verified by B Lab’s standards analysts to ensure that its wider impact is measured as rigorously as its profits are. Certification – for which there is an annual fee – also requires the company to change its articles of association to make it a legal requirement that it considers the effects of its decisions on all these stakeholders.
Setting the bar high
“Let’s not mess around: becoming a B Corp is really hard,” stresses B Lab UK’s co-founder and chair, Charmian Love, in response to Director’s questions about the fact that only 232 British businesses have achieved certification in the five years since the US-based movement established a permanent presence in this country.
“B Corp is meant to celebrate exceptional leaders,” she says. “Not every company can be a leader, so the idea is to identify the top performers that others can emulate.”
British firms that have gained certification include the UK subsidiary of dairy giant Danone at one end of the scale and Callaly, a provider of feminine care goods that employs 15 people, at the other. But more than 70,000 businesses have used the BIA, which is available free online to those seeking an idea of what it would take for them to become B Corps.
“B Corps are the future,” says Love, who is also entrepreneur in residence at Saïd Business School, Oxford. “They might not be everywhere yet, but they’re here. The times we live in require this kind of leadership – and we have evidence to show that it works.”
The B Lab approach can be summed up as a form of stakeholder capitalism. While this school of management thought can be traced back to the 1930s, it has gained popularity in recent years. Already in 2020, the World Economic Forum has updated its Davos manifesto to include many of its key themes, while Dame Sharon White said in her first speech as chair of the John Lewis Partnership in February: “More than 10 years since the financial crisis we’re still asking: is business doing its role to create a good society, good jobs and decent pay?”
As White suggested, there has been far more talk about moving towards stakeholder capitalism than action – a situation that the B Corp movement is looking to change.
A statement of intent
Love cites three key factors that equip B Corps to achieve this goal. First, their impacts on stakeholders are independently assessed. Second, they must re-certify every three years, because “standing still in this fast- changing world is effectively going backwards”. Third, they must change their articles of association to align their legal structures with their missions.
“By making it legally explicit that it’s your duty as a director to consider shareholders as equals to other stakeholders, you alter the DNA of your business fundamentally,” she says. “We’re in a period of dramatic change regarding the role of business in society, so directors need to be tuned in to what all their core stakeholders are thinking.”
Love points to a study showing that the sales growth of consumer-focused B Corps in 2012-17 was 49 per cent compared with 15 per cent for their non-certified equivalents – and that B Corps attract twice as many applicants for jobs. But she happily acknowledges that aspiring to B Corp status isn’t the only way to deliver sustainability.
“Companies will find different paths with different bodies,” she says. “But we all share a view of wanting to help organisations go through the change that we all feel is needed in the world right now.”
To those directors still sceptical about the need to evolve, Love recommends asking customers about their views on climate change or staff about the importance of working for a firm with a purpose. Their responses, she suggests, may surprise you.
The full article can be read in the April / May 2020 issue of Director magazine
Become a member of the IoD
The IoD has a range of memberships for directors, founders and co-founders, providing all the resources and facilities needed to enhance your business. To find out more about membership offerings and to join today, visit iod.com/membership