What is a B Corp, and should your business become one?

More than 1,700 businesses have signed up, but what is a B Corporation?

by Jack Torrance
Last Updated: 25 May 2016

Lots of business leaders are interested in making their company more sustainable and ethical but talking a good game isn’t always enough to convince this generation of sceptical consumers. Becoming a B Corp is one way of showing to customers, as well as investors, suppliers and staff, that your company is adhering to a particular set of ethical and environmental standards.  

The movement began in the US, where it is pushing individual states to create a new legal form of ‘benefit corporations’, companies that are legally obliged to consider their impact on all stakeholders, not just their owners. In the UK, where the rules governing private companies are more flexible, it takes the form of a certification programme like Fair Trade. That means businesses can remain limited companies rather than adopting a non-profit model. More than 1,700 businesses have signed up globally including 89 in Britain, where the scheme is co-ordinated by B Lab UK, a charity. 

Should your business become a B Corp?

Many of the UK companies that have chosen to become B Corps are intrinsically focused on making a difference – including renewable energy businesses and ‘impact investment’ firms – but there are some with more traditional business models too.

Property might not be the first industry that comes to mind when you think of ethics but Edinburgh’s Umega Lettings is all about injecting a dose of transparency and social responsibility into this much maligned sector. ‘When we started the business over 10 years ago, the negative stereotypes that letting agents had created an opportunity for us to do things in an open, transparent and more human way,’ says MD and co-founder Neil McInnes. ‘When B Corp came along...it seemed like something we had been looking for for a long time.'

Another British B Corp is the organic baby food company Ella’s Kitchen. Founder Paul Lindley says the movement is ‘the beginning of a wave...that will change the business environment and the way we operate businesses.’ He says B Corp certification gives the management more freedom to pursue policies that aren’t about maximising short-term profit, acts as a kitemark for customers looking to buy from ethical companies and ‘inspires our employees and potential employees’.

It’s probably not for every business though – at least at this point. The process of becoming a B Corp is more than a box-ticking exercise and requires businesses to demonstrate quite thoroughly that they are adhering to certain standards.

How to become a B Corp

There are two main elements to becoming a B Corp. Companies have to change their articles of association to commit to focusing on a ‘triple bottom line’ – maximising benefits to the environment and society as well as shareholders – and requiring board members to consider the impact on all stakeholders when making a decision.

Secondly companies have to meet B Lab’s ‘performance requirements’. That involves taking a questionnaire assessment that asks about various sustainability and ethics issues – for instance, how many sick days workers get, or what proportion of the management team is from ‘underrepresented populations.’ That gives you a score out of 200. Companies only need 80 points to pass, which affords some flexibility, but Lindley says those 80 points are still hard-won. Both Ella’s Kitchen and Umega spent three months or more ensuring they could reach the threshold.

Those who manage to pass 80 points are audited by B Lab before being allowed to become B Corps. For most that will involve providing documentation proving they have answered 8-12 questions correctly, but 10% of B Corporations get an on-site inspection each year. 

And there is a fee involved of course. Start-ups with less than 12 months of trading history can become a ‘Pending B’ for £250, but the cost goes up in line with company revenues up to £50,000 or more for large corporations with more than £1bn in sales.

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