- Should your business be more B Corp?
Should your business be more B Corp?
Should your business be more B Corp?18th January 2021 - Published by Kuits Corporate team
What is a B Corporation?
A “B Corporation” is a business that meets the highest standards of verified social and environmental performance, public transparency and legal accountability to balance profit and purpose.
This kind of business uses profits and growth as a means to create a positive impact for their employees, communities and the environment.
A declaration of interdependence sits at the heart of what a B Corp is. Some of the key points in this are:-
- Create benefit for all stakeholders not just shareholders;
- We must all be the change we seek in the world;
- All business should be conducted as if people and place matters;
- Businesses should aspire to do no harm and benefit all through their products, practices and profits;
- We all should act with the understanding that we are dependent on one another and thus responsible for each other and future generations.
This is a noble aim undoubtedly, and there is an Impact Assessment that businesses can carry out to evaluate how their operations and business models impact the stakeholders and the overall positive impact of the business. The results of the B Impact Report should be published on bcorporation.net and companies should amend their corporate governance documents to require their board of directors to balance profit with purpose.
According to bcorporation.uk, over 50,000 businesses have used the B Impact Assessment so far.
Why become a B Corporation?
Over recent years, people have been increasingly placing more weight on the impact businesses make on society and the world as a whole, with B Corporations being part of that movement. In 2018, Forbes espoused the benefits of becoming a B Corporation and highlighted that the majority of millennials generally have the priority to make the world a better place.
Being a registered B Corporation can allow businesses that live the necessary values to outwardly demonstrate that to their stakeholders, who will likely appreciate such commitment to positively impacting the world. It certainly complies with the swing of public opinion towards caring about the community, the environment and looking beyond oneself.
However, the fact that there are less than 4,000 registered B Corporations in the world, although over 50,000 have taken the impact test, suggests that it has not yet achieved wide traction – perhaps the requirements to be an official B Corp are not commensurate with its perceived benefits, or perhaps there are not enough businesses out there yet that can demonstrate that they achieve the criteria.
Being a B Corp is of course only one of the many ways that businesses can demonstrate their ESG credentials. Whether or not the popularity of being an accredited B Corp increases over time and how companies and their directors navigate the potentially competing demands and interests of operating the business for profit and the requirements of being a B Corp, whilst complying with their directors duties including to act in the best interests of the Company for the benefit of its shareholders as a whole, remains to be seen. In any event, we expect to see increased numbers of businesses adopting some of the principles in order to meet the ESG expectations of their customers and employees.
Certified B Corporation
There is a process to become a certified B Corporation including:
- Carrying out the Impact Assessment and achieving a score of at least 80 points;
- Publishing a B Impact Report; and
- Amending legal governance documents to require their board of directors to balance profit and purpose.
To remain B Corp registered, companies must verify their updated score every three years and pay an annual certification fee.
How do you become a B Corporation?
Your UK business is likely to be eligible for certification if it can demonstrate that it:
- Generates the majority of its revenue from trading;
- Competes in a competitive marketplace;
- Is not a charity; and
- Is not a public body or otherwise majority owned by the state.
You will need to have, or adopt, governance documents that include a commitment to a ‘triple bottom line’ approach to business i.e. you treat social and environmental concerns equally with profit.
Practically speaking, such steps may involve you amending your articles of association to include the following provisions:
- An objects clause stating that an object of the company is to have a materially positive impact on society and the environment;
- That board must consider various stakeholder interests when making decision; and
- That Shareholder value is not the main focus of a B Corporation.