Alexander Mudie

With the recent climate marches taking place all over the world, the global climate crisis has been at the forefront of major news sites. The Guardian Media Group (“GMG”) is the first major media organisation to become a “B Corp” – an organisation forming part of a community of businesses committed to redefining the roles of business in society. In order to obtain its ‘B Corp’ status, GMG has committed to achieve zero net carbon emissions by 2030.

What is a ‘B Corp’?

B Corps have been around since 2006 when B Lab was originally founded by Stanford alumni Jay Coen Gilbert, Bart Houlahan and Andrew Kassoy. B Lab is a non profit organisation which is responsible for certifying businesses that can adhere to rigorous standards. In order for a business to become a certified B Corp, it must pass an impact assessment across five key areas: governance, workers, community, environment and customers.

A B Corp is effectively a for profit business that has social objectives. The core belief of the B Corp community is that the traditional ‘for profit’ model can and should be adapted as a force for good.

The B Corp Movement

There has been a proliferation of B Corps globally and there are currently around 3,000 certified B Corps worldwide. Amongst their ranks are well known brands like Ben & Jerrys, Patagonia and Innocent Drinks.

In the UK, there are now over 200 certified B Corps. GMG and The Body Shop have announced their certification status this month.

The trend is clearly gaining traction in the UK, but what are the incentives or risks for businesses that are considering certification as an option?

Not Just for Profit?

It is important to remember that B Corps are still “for profit” businesses and stakeholders will invariably want to ensure that they are getting a return on their investment. A major concern for companies that have an established organisational strategy will be how much time and resources ought to be dedicated to pursuing this certification and how this will impact on existing stakeholders and any further investment required.

Customers are becoming increasingly selective about what brands or businesses they choose to buy from. Concerns for sustainable development and the ability to demonstrate social responsibility do have an important role to play in developing and maintaining brand attractiveness. The media attention that B Corp businesses are getting is certainly good news for wary investors. The number of B Corps in the UK is expanding rapidly and companies which have achieved certification are reporting an increase in growth of approximately 14% on average year on year. In 2018, B Corp businesses were reported as growing 28 times faster than UK GDP.

Who can become a B Corp?

The focus of the media attention has been on the major brands, but certification is open to any business that has been trading for at least a year.

In Scotland, Matter of Focus (providers of outcome management software) started up in 2017 and have already achieved B Corp status.

The Scottish Government is also supporting the B Corp movement with the “Scotland Can B” programme; a programme which derives inspiration from the impact assessment tools utilised by B Lab and encourages businesses to consider their impact in building a more inclusive and sustainable economy.

Business Impact: UK Companies

The rigorous standards of assessment require companies to think about their overall governance. Companies looking to become B Corps will need to consider how their Articles of Association will need to be amended to give sufficient weight to the five core areas. Amending the Articles of Association of your company would also require shareholder approval of at least 75%. The commitment required for certification does therefore have a tangible impact and shareholders must back the decision.

A Force for Good?

The B Corp movement is persuasive in that it provides visible and measurable data on how a company is performing against an impact assessment. The business’ performance is scored against the five key areas to produce an overall “score” and a score of over 80 (out of 200) is required to gain certification. The certificate needs to be renewed every three years.

The certification process is entirely voluntary and relies on the certified businesses continuing to adhere to the standards set by B Lab. There are no legal consequences for businesses that lose or no longer want to pursue certification status if they no longer feel that it is working for them.

If the community of B Corps continues to grow as quickly it has been doing, then the reputational damage for failing to maintain its certification could be what makes or breaks a business in the future.

Due to the relative infancy of B Corps – particularly in the UK – it is difficult to say with any degree of certainty what the long term impacts will be. However, the positive reception and support from local government will likely lead to a continued rise in the number of B Corps in the immediate future.

Alexander Mudie is a Solicitor at Wright, Johnston & Mackenzie LLP.