Mon 08 Nov 2021

B Corporation Certification: Encouraging companies to ‘B’ more socially and economically accountable

With the COP26 conference in Glasgow well underway, companies in Scotland and across the UK are being encouraged to recognise their responsibility in addressing the global climate crisis. Since the adoption of the Paris Agreement in 2015, there has been an increased emphasis on corporate social responsibility and a strive for the private sector to transition to a low-carbon and climate resilient future.

The Scottish Government has also set out its commitments relating to the recovery of the Scottish economy in a way that is green and sustainable in its recently published ‘A Fairer, Greener Scotland: Programme for Government 2021-2022’. Importantly, this recovery plan includes establishing the Business Purpose Commission for Scotland which will promote more purposeful businesses and better corporate governance.

In line with this clear movement towards better corporate responsibility, one way for organisations to demonstrate social and environmental accountability for decisions they make is through achieving B Corporation Certification. B Corporations (‘B’ stands for Benefit) are certified by B Lab UK, which is a not-for-profit organisation actively working to transform the global economy to benefit society, communities and the environment. B Corp certification is given to organisations that meet a minimum score against a set of social and environmental standards. Certification needs to be renewed every three years and there is an annual fee, which scales with the revenue of the company, starting at £500.

With a view to encouraging the private sector to take action in tackling the current climate emergency, B Lab UK has promised to support every B Corporation in the UK to make a Net Zero 2030 commitment by COP26. Therefore, now is an ideal time for companies to consider working towards this certification.

What are B Corporations?

Certified B Corporations are businesses that meet the highest standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose. Certifying as a B Corporation goes beyond a product or service certification. It is the only certification that measures a company’s entire social and environmental performance.

B Corporations have been in existence in the United States since 2007, with brands like Ben & Jerry's and Patagonia achieving certification. Since the initiative launched in the UK in 2015, the number of B Corporations has consistently risen, and includes household names such as: Propercorn, Graze and Innocent drinks. Globally, there are currently over 3,500 Certified B Corporations in more than 70 countries.

The aim of B Corporations is to contribute to, and accelerate, the global culture shift to redefine the measure of success in business and build a more inclusive and sustainable economy.

Key requirements for achieving B Corporation certification

B Corporation status can be achieved by receiving accreditation from B Lab UK. The assessment for certification considers the company’s performance against 5 areas of impact: Governance, Community, Workers, Environment and Customers.

Scotland Can B is an organisation that supports Scottish businesses meeting the above requirements and in the general management of their social, environment and governance performance. Further information and useful resources in relation to B Corporations in Scotland can be found through the Scotland Can B website.

As part of the process of certification, B Corporations are required to embed in their articles of association (constitution) an overarching commitment to have a “material positive impact on society and the environment” through their core business activities and operations. This may be achieved by creating an obligation on the board of directors to consider the impact of their decisions on all of the stakeholders of the company (rather than just the shareholders).

The B Corporation status emphasises that a company has a purpose beyond that of making profit for its shareholders as a stakeholder is anyone who is affected by the actions of the company, for example, employees, members of the local community in which the business operates, or members of the community in which the business has an environmental impact.

What are the benefits of becoming a B Corporation?

Environmental, Social and Governance considerations (ESG) are now a key element in many financial statements and for many investors. The environmental standards to which a company must adhere in order to maintain certification, can make B Corporations increasingly attractive to consumers.

A common perceived barrier to becoming a B Corporation is that the legal requirements imposed could inhibit growth and restrict the ability to focus on profit. However, it is becoming increasingly accepted that the benefits of achieving B Corporation Certification can outweigh any drawbacks.

Particularly in the current employee friendly job market, B Corporation certification can give employers greater recruitment appeal. It can also increase the attractiveness of an organisation for investors, many of whom are increasingly focused on the ESG impact of their investments. For larger businesses, B Corporation status can also greatly assist with ESG reporting and audit requirements.

Ultimately, companies can use B Corporation Certification as an opportunity to gain a competitive advantage whilst having a positive impact on the environment and wider society.

This article was co-written by Clare Tuohy, Trainee Solicitor.

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