By Chantelle Adadevoh, above, Corporate Solicitor, Devonshires
Today businesses know that it’s no longer a choice between making money or “doing good”. Indeed, to satisfy investors, clients or the end customer many companies now need to demonstrate more than just financial profitability; they need to show a commitment to environmental and social concerns. One of the best ways a company can demonstrate that it has a real commitment to this is by achieving B Corporation status.
B Corporations, or “B Corps” as they are commonly known, are still relatively new, with the first companies achieving certification in 2007. There is often a lack of understanding around what B Corps are; B Lab, the non-profit network responsible for certifying B Corps, defines B Corps as: “businesses that meet the highest standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose.”
Many small and medium enterprises often assume that B Corp status is for the big players or that it will be too onerous and time consuming to achieve. However, while there are stringent standards that need to be met, the procedure is relatively straightforward. Below is a step-by-step guide breaking down the process.
Step 1 – Complete and submit the B Impact Assessment (BIA)
The BIA is used to measure and verify your company’s social and environmental performance. The BIA consists of around 200 questions which are tailored to your organisation’s size, sector and location to measure its impact on its employees, suppliers, the wider community and the environment. You will need to score at least 80 points to achieve B Corp status.
Step 2 – Improve BIA Score
Most organisations do not achieve 80 points on their first attempt so usually companies will need to take additional measures to improve their score. B Lab offers resources to help companies improve their score.
Step 3 – Meet the Legal Requirement
Businesses often make decisions exclusively through a profit maximisation lens. However, a fundamental requirement for B Corps is to be legally accountable to all of their stakeholders including employees, communities, customers, suppliers and the environment – not just the shareholders. This means that directors have a duty to act in good faith to promote the success of the company as a whole and not prioritise any particular stakeholder interest or group of stakeholder interests over any other.
B Corps are required to integrate this stakeholder governance into their Articles of Association and there is specific wording that must be used to ensure B Corps protect their mission and confirm that the company will continue to practice stakeholder governance after capital raises and leadership changes. There is also a specific process that must be followed for a company to adopt new Articles of Association by obtaining both board and shareholder approval.
It is important to ensure that your company adopts the correct wording in its Articles of Association as the precise wording varies depending on the type of entity. If your company is part of a group then you will also need to consider which entities in that group must comply with the requirements. The timeframe for meeting these requirements also varies depending on the company’s size.
Step 4 – Submit, review and verification
Once your organisation has scored at least 80 points on the BIA and you have completed the Disclosure Questionnaire (designed for you to confidentially disclose any sensitive practices, fines and sanctions relating to the organisation with no impact on your BIA score), you are ready to submit your assessment. B Lab will undertake initial background checks into your company’s eligibility and a standards analyst will request any additional supporting evidence they require. It is worth noting that during this verification process, your BIA score may be subject to change.
Step 5 – Certification and next steps
Once your organisation has been certified, you will be asked to sign the Agreement for Certification and pay the annual fee. As a B Corp, you will have to recertify by scoring at least 80 points on the BIA every three years and must publish an annual Impact Report sharing your organisation’s progress.
