Following Ecosurety becoming the first UK recycling compliance scheme to receive B Corporation (B Corp) certification, we look at what a B Corp is, why an increasing number of companies are seeking this certification and some key points to consider.
What are B Corps?
B Corps are for-profit companies certified as meeting rigorous standards of social and environmental performance, accountability and transparency. They commit to taking a 'triple bottom line' approach to business with social and environmental outcomes being part of their mission. There are currently over 3,300 certified B Corps globally, including a number of well-known household names such as Pukka Herbs, COOK and Ben & Jerry’s. Certification covers a wide range of sectors ranging from food and drink to financial services.
Why are companies seeking B Corp certification?
When asked why Ecosurety had sought certification, James Piper, Chief Executive Officer explained: 'Ecosurety has a long-standing commitment to delivering change for good; not only for our members and the recycling sector upon which we rely, but our staff, our communities and our shared environment. Receiving this B Corp certification has provided Ecosurety with welcome recognition that the change we strive to deliver outside of the recycling compliance sector is having a positive social and environmental impact.'
This reflects the holistic view that an increasing number of companies are taking. With Environmental, Social and Governance (ESG) being a key consideration for companies, it is about more than just the balance sheet. It is an opportunity for companies to distinguish themselves, both from their competitors and when hiring new employees who are attracted to the ethos of a B Corp.
What are the criteria and steps for becoming a B Corp?
Any UK business is likely to be eligible for B Corp certification as long as it can demonstrate that:
- it generates the majority of its revenue from trading
- it competes in a competitive marketplace
- it is not a charity
- it is not a public body or otherwise majority owned by the state.
There is a prescribed assessment process which includes completing an Impact Assessment to measure a company’s positive impact on its workers, community, customers and environment and, if successful, signing the B Corp Agreement. Certification is granted for three years and after that a company is required to recertify.
A company must adopt governing documents which include a commitment to the 'triple bottom line' approach to business. This includes stating that the board members of the company need to consider a range of 'stakeholder interests' – including shareholders, employees, suppliers, society and the environment – when making decisions and, critically, that shareholder value is not the supreme consideration but is one factor amongst the many stakeholder interests.
What to consider before becoming a B Corp?
Before deciding to apply for certification, some of the issues a company should consider include:
- shift in mindset – as directors are not required to place shareholders’ interests ahead of other interests, this could create a scenario where the directors look to take a longer-term and more risk-adverse view of the company’s interests than previously.
- impact on directors’ liability - B Lab's view (the non-profit organisation body responsible for B Corps) is that the B Corp framework should reduce the liability for directors by creating legal protection for them to take into consideration the interests of multiple stakeholders when making decisions.
- future investment – if external investment is sought, being a B Corp could be beneficial as there is a growing community of investors looking for strong environmental, social and governance values in order to diversify their portfolio. However, if an investor is not familiar with B Corps/what a B Corp is, there may be an element of educating the investor about the shift in focus of the directors' duties away from profit maximisation.
- any proposed sale - as the directors will need to take into account the interests of all stakeholders and not just the shareholders, this could impact on the sale price. Guidance from B Lab states that this may conceivably result in the company or shareholders receiving a lower price on a disposal than might otherwise be the case. However, it is difficult to assess what impact this may have (if any) as it will ultimately depend on what a buyer is willing to pay.
If you would like to discuss the B Corp process or have any questions, please contact Julie Book, Dominic Davis or your usual Burges Salmon contact.