B Corps - what are they all about?

B Corps began in the US but have become an important part of the UK economy helping to make business a force for good.  There are now over 2000 B Corps listed in the UK.

In this article, we explain what a B Corp is and what companies have to do to become one in the UK. 

What is a B Corp?

B Corps are businesses that have been independently accredited by B Lab as organisations that  meet "high standards of social and environmental performance, transparency and accountability". They commit to positively impacting all stakeholders, including workers, communities, customers and our planet. B Lab UK is a charity founded in 2015 to advance the B Corp movement in the UK.

A B Corp company cannot simply have an intention to commit, it must be able to demonstrate that environmental and societal factors actually form part of its decision-making, and the sole focus is not just profit and financial return for shareholders.

Most companies who operate for profit in a competitive market, and have at least 12 months of operations, can apply to be certified as a B Corp.  There are additional requirements for start-ups and large multinational and public companies.  Sole traders and partnerships are usually eligible to certify but charities and non-profit organisations are not.

What does the 'B' stand for?

The 'B' derives from a type of US corporate structure called a "benefit corporation".  As B Corps have developed across the world, the meaning of the 'B' has been interpreted in a variety of ways, including "better corporation", "benefit for all" and "be the change you wish to see in the world".

How do you become a B Corp?

There are three key steps:

   
•    Completing a B Impact Assessment – This measures a company's social and environmental performance across given impact areas (specifically governance, workers, community, customers and the environment).    
   
•    Signing the B Corp agreement and declaration of interdependence – These include a mission statement of socio-political aspirations and the terms of the certification.    
   
•    Meeting B Corp legal requirements – This involves amending the company's articles of association (their constitution) to embed a commitment for the company, through its business and operations, to:    
         
  •        seek to have a material positive impact on society and the environment; and        
         
  •        widen the lens of its decision-making beyond focusing solely on the interests of shareholders, including considering the interests of employees, suppliers, society and the environment.        
     
     

This last step supplements the existing duty under section 172 of the Companies Act 2006. This duty requires directors to act in a way they consider most likely to promote the success of the company for the benefit of its shareholders whilst also considering certain other stakeholders and considerations in doing so (including the community and environment). While this duty means that companies should already be considering social and environmental matters in their decision-making, B Corp status much more categorically and expressly takes the measurement of success beyond solely shareholder benefit.  We discuss the section 172 duty further in our insight on the Better Business Act, which pushes for a change in UK law to require every company in the UK to align its interests with those of our wider society and environment.

Companies must pay a submission and verification fee during the B Corp certification process, and then an annual certification fee which is based on the company's total revenue on the last set of audited accounts.

How do you stay a B Corp?

Continuous improvement is at the core of the B Corp movement – certified companies are expected to maintain their ideals and be seen to increase their score under the impact assessment.

A B Corp must therefore recertify every three years and in the intervening years must produce an annual impact report for its key stakeholders and investors.  These reports should show the company’s progress and future plans, anything which may significantly affect its social and environmental impact and should be published on its website.

Why become a B Corp?

Research from a B Lab UK survey in 2021 shows a variety of benefits to B Corp certification, including business credibility; greater employee retention; engagement and diversity; more robust governance; higher levels of innovation and faster growth in turnover.  B Corp certification also brings with it access to support and collaboration networks within the B Corp community.

However, certification and ongoing compliance require investment, in terms of fees, time and resources, which can be a particular challenge for smaller companies and start-ups.  Certification can also take several months and the legal requirement for B Corps to consider the non-financial impact of their actions can potentially be difficult to navigate.

B Corp certification can certainly be a valuable and complementary element of a company's approach to sustainability but should form part of a much broader sustainability strategy.  Businesses thinking about their approach to ESG have a wide variety of things to consider and resources to draw on.  There is no "one size fits all" approach to incorporating ESG and, ultimately, what is happening on the ground and in decision-making is the most important indication of a company's focus on sustainability. 

Further information

You can find detailed information about the certification process, together with a list of existing B Corps and related networks.  These Frequently Asked Questions are also very useful.

B Lab US is seeking public feedback on new standards for B Corp certification which are currently in draft form. No timeline for finalisation of the new standards has been given but it has been confirmed that no company will need to certify or re-certify based on the new standards before 2025. It is likely that these new standards will substantially transpose across to the UK certification process.

We act for several B Corps and have supported a range of clients on B Corp certification, governance and the related legal requirements. If you would like to know more about how we help companies with B Corp certification, or with ESG on a wider scale please get in touch.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at July 2024. Specific advice should be sought for specific cases. For more information see our terms & conditions.