What is a Certified B Corporation?

Tuesday 6 July 2021

A Certified B Corporation is the only certification, obtained via the non-profit organisation B Lab, which verifies a company’s success in achieving the ‘highest standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose’.

To achieve this certification, businesses must go beyond decision making that centres around attaining a profit and further consider the wider impact on their employees, communities and the surrounding environment. Values and aims encapsulated in the Declaration of Interdependence, which is signed prior to certification, lie at the heart of each certified company’s core beliefs.

What are the legal and practical steps required to become a Certified B Corporation?

Businesses should be aware that the assessment process, costs and timescales differ subject to a company’s location, size and industry, however the overall process can be fragmented into three overarching stages:

1. Completing the B Impact Assessment (BIA)

The BIA comprises of two components: ‘Operational Impact’ and ‘Impact Business Model’. To progress, a company must score at least 80/200 across five ‘Impact Areas’ assessing: Governance; Community; Workers; Environment; and Customers. This stage also consists of the ‘Disclosure Questionnaire’ where companies share further information, including sensitive information such as imposed sanctions.

2. Meeting the Legal Requirements

This stage effectively cements commitment, requiring a company to build B Corporation values into its corporate DNA. Again, a range of factors affect the specific requirements of this stage, but examples include updating Articles of Association, reincorporating as a benefit company or making structural changes.

3. Verification

Here, companies submit items from stage one, along with additional information and documentation, as requested by B Lab, which relates to answers provided in their BIA. Companies may be subject to an ‘Assessment Review’ call to verify application areas; this could potentially affect their BIA score. Various background checks are carried out by B Lab before a company becomes eligible to sign their B Corporation Agreement and the Declaration of Interdependence.

Pros and cons of becoming a Certified B Corporation

• Positive Impact – Certified companies are taking an active role in positively impacting surrounding people, communities and the environment.
• Business Credibility – Certification can be appealing to customers, employees and investors. However, some investors may be hesitant with reduced focus on profit considerations.
• Investment of Time and Money – Applications can be lengthy and companies operating with less than 12 months service are only eligible for a Pending B Corporation status. Companies must update their assessment every three years, obtaining the required score and submitting additional information. Companies must also pay submission fees and annual recertification fees based upon revenue figures.
• Commitment – Companies are required to fully embrace certification. This includes for instance, considering a greater range of factors when making decisions, having reports published in the public eye and being subject to in-depth site reviews.

Is this right for my business?

Businesses are advised to conduct thorough research and to seek legal advice when deciding whether this is appropriate for their business.

If you have any questions about Certified B Corporations, please do not hesitate to email or phone our Corporate Law team on 0113 207 0000.