The Pros and Cons of B Corp Certification: Is it worth it?Article
What is a B Corp?
B Corps were first introduced to the business scene in 2006, when three American friends left their corporate jobs with a mission to create a new way of doing business. They came up with the concept of the B Corp; a legal entity that balances its profit-making interests with those of humans and the planet.
A business that obtains the B Corp certification will have met high standards of social and environmental performance, public transparency, and legal accountability. The certification process goes beyond the products and/or services offered by an organisation; it assesses overall company performance and positive impact on stakeholders.
B Corps fit perfectly in the increasing demand for companies to take more responsibility and accountability for their actions. The traditional way of doing business is redefined into a paradigm that would create a more responsible and sustainable economy. Wealth maximisation for shareholder is no longer, and should no longer be, the main goal of doing business. Rather, profit and business should be employed to create a positive impact on stakeholders such as employees, communities, and the environment.
How do you get certified as a B Corp?
Any company, regardless of its size, legal form, structure, or industry, can become a B Corp. The certification process is administered by Standards Analysts at the non-profit organization B Lab. The standards they adhere to are overseen by B Lab’s independent Standards Advisory Council. B Lab, thus, certifies whether an organization is creating value for its stakeholders. These stakeholders may be employees, the community, the environment, or other non-shareholders impacted by the company.
The Standards Advisory Council is made up of two subcommittees: The Main SAC focuses on overall certification requirements, and the Multinational Company Subcommittee focuses on the specific application of the standards to large multinational companies. The Main Subcommittee oversees, among other things, the performance of a company on the ‘B Impact Assessment’ (BIA).
The BIA is a self-assessment tool for companies to measure their impact on 5 distinct areas: governance, workers, the community, the environment, and customers. To certify as a B Corp, you will need to demonstrably score at least 80 out of 200 against these 5 areas of impact. If a firm meets the minimum score, it is eligible for certification and it will have to make certain legal and governance changes. The governing documents of the business must be amended to include an explicit reference to the consideration of all stakeholders, not just shareholders, in any decision. As a result, respecting and taking account of the interests of stakeholders becomes part of the fiduciary duties of directors of the company. This change may be done either immediately or within 2 years of certification.
The B Corp certification, once obtained, must be renewed every three years, and there is an annual fee to be paid. In the UK, this fee starts at £500, and it scales according to the company’s revenue.
The Pros and Cons of B Corp Certification
- ESG & Investors: B Corps by implication score well on the Environmental, Social, and Governance (ESG) agenda. Investors are increasingly looking for more responsible investments to diversify their portfolios. In addition, B Corps will likely present less issues during a due diligence phase, making them an attractive investment.
- Competitive Advantage: Studies show that it pays to be a responsible and sustainable company. If you want to read more on this topic, here is a compilation of 40 compelling studies demonstrating this.
- Branding and Press: B Corp certification has a great impact on your brand and will likely earn you a lot of positive press opportunities. Your brand will be seen as trustworthy and transparent, which both are increasingly important to the contemporary consumer. The B Corp certification helps you stand out from the massive number of companies currently claiming all sorts of positive impacts, many not more than a marketing ploy.
- Employee Engagement: Companies with B Corp certification have a great recruitment appeal. Furthermore, employees who are treated well and who work for a company with a positive impact are more driven to perform well.
- Enter a Like-Minded Community: When you obtain B Corp certification, you are connected to like-minded companies and individuals in the B Corp network. You will be able to access many member resources created by B Corp.
- Costly: Obtaining B Corp certification may be a very costly endeavour, both in terms of time and resources. Typically, the process of certification takes four to six months, whereby certification is not guaranteed. The fee for certification starts at £500 a year, and this is scaled according to revenue. The B Corp certification is therefore a long-term commitment that needs to be properly planned and thought out.
- Investor caution: B Corps by definition move away from the traditional model of shareholder wealth maximation. Thus, rather than always putting shareholders’ interests first, they take into account a number of stakeholders who may be affected by the company’s operations as well. For some stakeholders, this may be a reason not to invest, as they are cautious about growth and flexibility in this scenario. However, when properly communicated to the investor, you can show them that you actually have a competitive advantage over non-B Corp organizations.
- High Scrutiny: After you are certified as a B Corp, your company will be listed publicly on the B Lab website. If you have scored well on all 5 tested areas, that will be great. However, if there is an area where you did not do as well, this could be a drawback, as everyone will be able to see your shortcomings.
How can we help you with obtaining B Corp certification?
We are happy to assist you with obtaining certification. Based on the pros and cons provided above, you will be able to make an informed decision on whether this is a good option for your business (at this time). We believe that all three ‘Cons’ are easily addressed with the right preparation. We will be able to take the weight of a lengthy certification process of your hands, and prepare your company to score well on all areas in the BIA. Moreover, we are well-equipped to make your company look attractive to investors, all while still creating positive impact for your stakeholders.
Would you like to know more? Please contact us!