B Corp certification Guide for directors

Certified B Corporations – or B Corps – are companies verified by B Lab to meet high standards of social and environmental performance, transparency and accountability.

B Lab is the non-profit network transforming the global economy to benefit people, communities and the planet.

It was created in 2006 with the mission to inspire and enable people to use business as a force for good. There are B Labs across the globe. B Lab UK is a charity that was launched in 2015.

As part of this international network, B Lab UK’s purpose is to redefine success in business through building a community of engaged businesses, raising awareness of the B Corp Movement and influencing change in the UK economy.

The UK has the second largest B Corp community in the world. B Corp certification is seen as the gold standard of sustainability credentials, enabling companies to have a more positive impact on the planet and its people.

Benefits of B Corp certification

According to B Lab UK, businesses that have become B Corps are rewarded with ‘committed and motivated employees, increased customer loyalty, higher levels of innovation and market leadership’.

The benefits of certifying as a B Corp include:

• Improving impact through participation in working groups and sharing best practice
• Collaborating with other B Corps to find solutions to specific challenges
• Networking and attending exclusive community events
• Alignment with B Lab and the B Corp Community on global issues
• Brand building
• Engaging employees, attracting and retaining talent and creating an inclusive and diverse workforce
• Attracting new customers and investors.

Recent research by B Lab UK shows that B Corps outperform their UK peers. Compared to surveys of UK SMEs, B Lab UK found that B Corp SMEs have on average:

1. Faster annual growth in turnover:

B Corps saw an average growth of 26% in 2017-2020 compared to the average for all UK companies of 5%. B Corps also have higher expectations about future growth.

2. Faster annual growth in employee numbers:

The mean average annual employee headcount growth for 2018-2021 for B Corps was 14% compared to the average for all companies of 1%.

3. Greater levels of employee retention, engagement and diversity:

B Corps reported an average staff attrition median rate of 8% compared to a range of 16-20% for the wider UK business population. 84% of B Corps leadership teams include at least one woman compared to 55% for the average SME. The average gender pay gap is 4% for B Corps compared to 15% for the average UK business.

4. More robust governance processes:

74% of B Corps state they have a formal business plan compared to 41% of the wider SME population. 84% of B Corps state they have processes in place to ensure formal tracking of business performance compared to 52% of all SMEs.

5. Greater focus on civic and community engagement

Working to enhance civic and community engagement is important to 93% of B Corps SMEs compared to 50% of the wider SME population.

6. Higher levels of innovation:

43% of B Corp SMEs have applied for, or received, R&D tax credits in the past three years compared to 6% of the wider SME population.

7. More successful at securing finance:

70% of B Corps who sought equity finance secured all of the required amount compared to 56% of the wider SME population.

B Corps build trust with consumers, communities, and suppliers, attract and retain employees and draw like-minded investors. As they are required to undergo the verification process every three years in order to recertify, B Corps are focused on continuous improvement, leading to long-term resilience.

Certification also form part of a wider ESG (Environmental and Social Governance) strategy to support your community and the environment.

*B Lab UK November 2021 survey with 102 respondents.

Potential drawbacks

While companies can gain several advantages by being B Corp certified, there may be some potential drawbacks.

The Yale Center for Business and the Environment found that potential disadvantages included a higher level of scrutiny where activists check that companies are living up to their social and environmental claims.

The B Corp certification process can be perceived as laborious said the Center, noting that it can take months if not years to achieve the accreditation.

The certification can also require additional resource such as a commitment to paying employees a living wage.

The B Corp certification process

B Corp certification is unique because it measures a company’s entire social and environmental performance. From supply chain and input materials to charitable giving and employee benefits, B Corp certification verifies that a business is meeting high standards of social and environmental performance, transparency and accountability.

Certifying as a B Corp is a comprehensive and rigorous process. The steps to achieving B Corp certification are:

Eligibility

Any for-profit company that has been operating for a year or more can apply for B Corp status. Some companies, such as start-ups and large multinational and public companies, have additional requirements.

Pending B Corp status is available to early-stage companies operating for less than 12 months.

Pricing

A one-off fee of £250 covers the submission of a company for B Corp certification. Certification fees are paid annually and fee bands are in place to ensure B Corp certification is affordable for all businesses.

The B Impact Assessment

This assessment helps you to measure and manage your impact. A company’s performance is assessed on a points system and measured against five key categories: corporate governance, workers, customers, community and the environment, using credible, independent and verifiable standards of social and environmental performance. All companies must score a minimum of 80 out of 200 points to achieve certification.

The assessment will evaluate your company’s mission and engagement. It specifically looks at your social and environmental impact, ethics and transparency. The assessment also looks at how a company treats it staff, focussing on financial security, health and safety, wellness, career development and employee engagement and satisfaction.

Other sections in the assessment evaluate how a company engages with and benefits the communities within which it works; its environmental management practices and their impact; and its care and management of customers through the quality of its products and services, marketing and data privacy.

B Corp legal requirement

The legal requirement is a large part of certification. It involves amending a company’s legal structure to demonstrate its commitment to being a responsible business.

If you are a limited company, you will need to amend your Articles of Association to include the specific B Corp legal requirement wording. This legally commits you to use business as a force for good by:

• creating a material positive impact on society and the environment through your business and operations
• considering stakeholder interests including shareholders, employees, suppliers, society and the environment.

The review process

Having completed the B Impact Assessment, there is a review process involving evaluation by B Lab UK and verification by B Lab Global.

Reporting your impact

All B Corps in the UK are required to produce an annual impact report. They also have to re-certify every three years.

Why should directors care about B Corp certification?

B Corp certification is an independent verification that a business is meeting high standards of performance, accountability and transparency on factors such as employee benefits, charitable giving and supply chain practices.

The certification demonstrates high social and environmental performance and a legal commitment by a company changing its corporate governance structure to be accountable to all stakeholders not just shareholders.

B Corp certification demonstrates that directors and their organisations are leading by example, part of a global community of businesses holding each other accountable and helping each other improve their practices.

The designation also demonstrates the positive social impact organisations and businesses have on their employees, customers and communities.

Business should be used as a force for good, says B Lab UK which is leading economic systems change to support a collective vision of an inclusive, equitable and regenerative economy.

Its purpose is ‘to redefine success in business through building a community of engaged businesses, raising awareness of the B Corp Movement and influencing change in the UK economy’.

Justice, equity, diversity and inclusion are central to all of B Lab UK’s operations, creating a framework for ‘how we build teams, cultivate leaders and make business a force for good’.

Directors are encouraged to support the B Corp Movement which aims to move the global economy from a system that profits few to a model that benefits all.

Gaining B Corp status shows that a business is committed to making a positive change, treating people, communities and the environment respectfully, sustainably and ethically.

Certified B Corp companies

B Corps range from multinational companies to sole traders. There are more than 7,000 B Corps worldwide including more than 2,000 in the UK. UK B Corps feature in a range of sectors from food and drink to fashion and beauty. They include:

• Riverford Organic Farmers
• Charlie Bigham’s
• Innocent Drinks
• Veja
• JoJo Maman Bebe
• Patagonia
• The Body Shop
• Rituals
• Umberto Giannini

Resources

You can find out more about B Corp certification here.

IoD member Richard Hagan talks about his experience of the B Corp certification process as an SME in our podcast series. Listen to the episode here.

Don’t forget full IoD membership gives you free access to independent and confidential business advice from a panel of expert advisors who cover a vast range of business topics. Find out more about our Information and Advisory Service here.