B Corps: a complete guide

'Corporate Social Responsibilty' sign in the shape of an arrow.

If you run a company, corporate social responsibility (CSR) and sustainability are now more important than ever. That’s why many company owners across the globe have started to pursue a B Corp certification — and research indicates there are a number of incredible benefits that go hand-in-hand with this certification.

Over the course of the last decade, corporate social responsibility (CSR) has rapidly risen to become a critical focus for companies of all shapes and sizes — and when you break down the numbers, it’s not hard to see why.

If you’re new to the concept, CSR simply refers to the idea that a company shouldn’t just be responsible for creating value for its shareholders. Instead, businesses should also be working to realise tangible benefits for the broader communities in which their respective organisations operate.

Corporate social responsibility can take many forms.

For example, a company could choose to sponsor a scholarship program designed exclusively for under-represented students from the area in which the business is based. Alternatively, an organisation might plant one tree for every book it sells, donate a packed lunch to a homeless charity for every lunch you buy, or purchase carbon credits to make sure business operations are carbon neutral.

You get the idea: there are a wide range of CSR initiatives and projects that a company can pursue to demonstrate to its consumers and stakeholders that the business is serious about sustainability. But until relatively recently, the business sector had no standardised distinction which company directors could use to show their organizations have achieved particular sustainability levels.

That’s why the B Corp certification was introduced — and for those companies wanting to become more sustainable and share that commitment with the wider community, B Corp certification poses an incredibly attractive opportunity.

To help you understand what B Corps are and whether certification is right for your business, we’ve produced this quick guide to explain what a B Corp certification is and how the process itself actually works.

What is a B Corp?

Before we speed right on to how your company can achieve a B Corp certification, let’s pump the brakes and talk about what a B Corp actually is.

A B Corp — or “Certified B Corporation” — is a business that meets a particular standard of verified social and environmental performance, public transparency, and legal accountability. B Corps commit to balancing profit with purpose, and work to create more inclusive and sustainable economic practices through their own operations and initiatives, as well as in the partnerships they engage with.

The B Corp certification is a voluntary distinction that companies can apply for, and it’s valid all over the world.

The certification process is carried out by a US-based non-profit organization called B Lab. Companies that want to pursue a B Corp certification have got to complete a thorough application process demonstrating the ways in which their business is combatting (or is willing to combat) global problems like social unrest, corporate transparency, climate change, wealth inequality, and more.

The B Corp certification was launched in 2007 as a way to hold companies to account where CSR is concerned. Because there were very few standardised gauges for success in this arena, the certification was created so that there would be a minimum level of standards for companies to adhere to.

Fast-forward 14 years, and there are now more than 1,700 certified B Corporations in 50 countries. The vast majority of B Corp certifications are held by privately-owned small and medium-sized enterprises (SMEs). That being said, any company is able to apply for B Corp status — regardless of its size, legal structure or industry.

Before we press on, it’s important to note the distinction between two different types of corporations.

When you hear people talking about B Corps, they often use the term interchangeably with another business distinction: the Benefit Corporation.

A Benefit Corporation is a for-profit company structure recognised in most US states.

As a B Corp, a Benefit Corporation is an organization that’s driven by both mission and profit. Shareholders are bound to hold a company to account in order to produce a tangible public benefit alongside profit — and these benefits are made transparent and public through annual benefit reports.

In some US states, these reports are mandatory.

If you are a US company that achieves a B Corp certification from B Lab, you’re likely going to be required as part of the certification process to reincorporate your company as a Benefit Corporation within two years of gaining your B Corp status.

Yet while reincorporation as a Benefit Corporation is a requirement for many new US B Corps, it’s important to bear in mind that the Benefit Corporation status is only available in the US.

That means UK limited companies (or companies in any other country or market) wanting to apply for and maintain B Corp status through B Lab can’t reincorporate as a Benefit Corporation.

That’s okay because B Lab has alternative and localised requirements that apply to each country.

Likewise, a US-based company can legally incorporate as a Benefit Corporation without achieving B Corp status from B Lab. We’ll explain what UK limited companies and partnerships must do to achieve a B Corp certification in just a minute. But first, let’s cover why companies choose to become B Corps in the first place.

Why do companies choose to become a B Corp?

Now that we’ve covered what a B Corp is, let’s talk about the benefits companies tend to realise by achieving a B Corp certification.

There are a number of reasons company owners want to become a B Corp — but the biggest reason is growth. In one B Lab survey charting the performance of certified corporations, UK B Corps reported an average 14% growth in year-over-year (YoY) revenue after acquiring the certification.

Why does B Corp certification boost company growth by so much?

A whopping 77% of consumers say they’d rather purchase from companies that are committed to making the world a better place. Meanwhile, 73% of investors say that efforts to improve the environment and wider community in which a business operates make them more likely to invest in a company.

Translation: companies that care about sustainability and social responsibility are more likely to win over customers and get new investment — two of the primary building blocks required to initiate business growth and acceleration.

Likewise, becoming a B Corp company has the power to generate positive brand equity growth. Because UK consumers are more cautious with their money post-pandemic, UK businesses have got to fight harder than ever to win new customers.

We know that consumers are more likely to give their money to companies that can demonstrate credibility where sustainability is concerned, and so being able to show off a B Corp certification could give a UK company the competitive advantage it needs to keep shoppers engaged and attract more footfall.

But a CSR certification like the B Corp distinction doesn’t just attract customers and investors. It can help you to attract fresh talent, too.

According to PwC’s recent Workforce of the Future study, an increasing number of jobseekers now view corporate responsibility as a business imperative. Workers representing the Millennial and Generation Z (“Gen Z”) age groups clearly want to work for companies that are doing something positive for the planet.

If you run a local takeaway or accountancy firm, it can be difficult to show prospective workers how you’re making the community a better place. But if you’ve attained a B Corp certification, you can clearly communicate to new talent what your company is doing for the wider community and explain the commitments you’ve made as part of the B Corp certification process.

Finally, there’s research to indicate that registering as a B Corp can actually save your business money in the long term.

When you achieve a B Corp status, B Labs allows you access to wider B Corp community data. This data shows how and where other organisations have worked to become more sustainable, which can help you reduce your overheads and tighten existing or future CSR initiatives based on the successes of your peers.

How does B Corp Certification work?

If you’re keen to leverage the benefits we’ve just outlined by achieving B Corp status, the process of becoming a B Corp is actually pretty simple — but that doesn’t mean it’s an easy process.

To get a B Corp certification, a company must achieve four steps.

First, you’ve got to take and pass the B Impact Ratings System. This is a test that gives you a score based on your organisation’s existing environmental and employee practices.

Second, you’ve got to conduct a phone interview with a member of the B Lab team. During this interview, B Lab will review the findings of your B Impact Ratings System test with you — and if you score above 80 points, it means that your company will be eligible for B Corp certification.

The third step towards certification is that you’ve got to adopt the B Corporation Legal Framework within your company. This legal framework understandably varies from country to country.

For example, we’ve already touched upon the fact that US companies are bound to reincorporate as a Benefit Corporation within two years of getting a B Corp certification from B Lab.

Meanwhile, the UK legal framework is different.

UK Companies that want to become a B Corp are required to adopt governing documents that explicitly outline the company’s commitment to maintaining a “triple bottom line”.

If the term is new to you, a triple bottom line is a concept that dictates a business doesn’t just focus on its profit. Instead, the business should also be focusing on the environment, the people it impacts, and its financials in equal measure.

In practice, this B Corp requirement normally means a UK company must add an objects clause into its Articles of Association that states the company exists to promote the success of the business to benefit both shareholders as well as to make a positive impact on society and the environment.

Another UK requirement you must fulfil to get a B Corp certification is that your company states in its governing documents that board members consider a range of stakeholder interests such as society and the environment when making decisions. Crucially, it must be stated within those governing documents that shareholder value is not the supreme consideration when a company decision is made.

UK registered charities and public bodies aren’t eligible to apply for B Corp status. Only for-profit companies and partnerships are allowed to become B Corps.

After administering the B Lab legal framework, the fourth step towards certification is to complete and sign a term sheet. This makes your certification official.

There’s also a certification fee you need to be aware of. Applying for and maintaining your B Corp status isn’t free.

At present, it costs £250 to submit an application. If approved, you’ve got to pay at least £1,000 per year to keep your B Corp status. The exact amount of annual dues you must pay will depend on your company’s annual turnover.

Similarly, you’ll be held to the ethical standards you’ve committed to. After two years of certification, your company has got to recertify. You’re also likely to be subjected to a third-party audit to make sure your business has been putting its money where its mouth is.

The bottom line

At the end of the day, becoming a B Corp is going to make a lot of sense for certain companies. It’s an ironclad way to demonstrate beyond reasonable doubt just how committed your business is to helping the planet and the people inhabiting it.

As a result, customers are statistically more likely to want to give you their money, investors are more likely to take a bet on your business, and employees will feel more engaged working for you. Studies indicate these factors equate to pretty solid growth.

But before you run off to get your certification, it’s worth weighing those growth prospects against how difficult it is to achieve and maintain a certification. The testing process is rigorous, and for some small companies, the annual fees associated with certification could be a tricky barrier to overcome.

Yet, generally speaking, going for a B Corp certification is likely to be a positive step for your company that will ultimately create new opportunities for growth. Just make sure you communicate your intent with stakeholders beforehand and, whenever you’re in doubt, get in touch with a professional to discuss how the change may impact your organisation.

Want to learn more about corporate social responsibility and company structures?

Check out the Linnear COSEC knowledge centre to ensure your business stays in the know on the latest industry news. You can also get in touch to find out how our company secretarial services can drastically reduce your costs and free up your time to help you focus on running your business.

About the author

Nicholas joined in 2018 to set up the Company Secretarial Department in the group’s company formation divisions. After establishing the department, he was a key stakeholder in the development of Linnear CoSec. Prior to joining the group, Nicholas worked in a variety of client-facing positions at an international provider of corporate services, caring for a diverse portfolio of companies. He is a Chartered Secretary and Governance Professional, and holds a bachelor's degree in Politics as well as a Masters in Corporate Governance.

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