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What: A third-party certification emphasising transparency and accountability.

Why it is important: Its approach includes all stakeholders, which makes it a "fashionable" certification when advertised to the public.

While the pandemic is increasingly emphasising the idea that shareholder capitalism seems no longer adapted to the challenges companies have to face, there is no consensus yet on what should replace the "profits first" approach. But the growing influence of the triple bottom line (profit, people, and the planet) in corporate governance and the need for companies to take all stakeholders into account has led to the emergence of a new certification, called "B Corporation".

What it is

B Corp is a private third-party certification, assessing corporate companies' social and environmental performances. It requires businesses to “meet high standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose” (the 'B' stands for "beneficial"). B Corporations are verified and certified by B Lab, a global non-profit organisation with offices across the world, in Americas, Europe and Oceania.

B Lab assesses the way companies create value for all stakeholders: employees, local communities, and the environment. The organisation was founded in 2006 by Stanford University alumni and businessmen Jay Coen Gilbert and Bart Houlahan, and former investment banker Andrew Kassoy. In addition to awarding the B Corp Certification, B Lab’s initiatives include administration of the B Impact Assessment tool (the platform used by companies to perform self-assessments), management of B Corp consultants, as well as institutional advocacy.

The first B Corporations were certified in 2007. Since then, more than 100 000 companies have reportedly signed up for the B Corp assessment, with now nearly 3,700 B Certified Corporations in more than 70 countries across 150 different industries and sectors, including brands such as Patagonia, Allbirds, or Brazilian cosmetics Natura.

How it works

Beyond product or service-level certifications, B Corp measures a company’s global social and environmental performance. It assesses the impact of its business model and operations on the company’s workers, community, customers, and environment. Any company can apply to B Corp Certification, through the B Impact Assessment, B Lab’s extensive and thorough application process.

Becoming a Certified B Corp is a demanding process, needing a minimum verified score. The assessment process evaluates and scores business impact on governance, workers, community, and the environment, through 200 questions exploring a wide array of topics such as the standards used within the company, the ownership spread of corporate capital, diversity among employees or energy saving processes. It also aims to evaluate whether the applying company has a formal process to share financial information with employees, if it has ensured that its social or environmental mission will be maintained over time, or if it monitors and records its waste production. It takes 80 points out of 200 to pass the certification, and the results of the impact report of successful companies is made public.

Certification is open to any business older than twelve months, with a 3-step process: online self-assessment with a 10% selection rate, verification by B Corp and payment of a fee of between UDS 500 and 50 000 depending on the company annual revenue. B Corporations must re-certify every three years and they can also drop the certification along the way if the standard requirements no longer suit their strategy or threaten their short-term shareholder profitability.

Why it is important

With the increasing importance for businesses to set up a model that differentiates them from competitors, being identified as a B Corporation is a way for a company to publicly claim special concerns about environmental and social performance over profits. In 2016, the Harvard Business Review pointed out that claiming unconventional corporate identity such as being a B Corp helped firms communicate their values and identity to customers, especially the younger ones. With such a certification, smaller businesses can prove they are authentic advocates of stakeholders’ benefits, next to bigger established operators with more means to show their CSR efforts.

At a structural level, and comparable to the Higg Index scoring, the B Corp certification helps a company gauge its social and environmental performance compared to competitors. It is a convenient tool for a business to identify potential points of improvement and to draw a roadmap to more sustainable business practices. It is also a way to benefit from both the B Lab and other B Corporations’ advice. Unlike with the Higg Index though, B Impact Assessment score is disclosed publicly, and every B Corp’s Impact Report is available to anyone on the B Lab platform (example here with Patagonia). Transparency and accountability have been originally part of the standard, and B Corporations are required to embed stakeholder governance principle in their statutes. The B-certified company must modify its governing bylaws to allow directors to “consider stakeholders besides shareholders in company decision-making”, legally committing itself to maintaining a balance between people, the planet and profit in the decision-making.

Standing for a more conscious approach to business is becoming increasingly good for business which explains a growing interest from companies regarding B Corp certification. The consumer’s fast-growing demand for more positive business practices has been accelerated by this year’s pandemic, and the B Certification potential as a leverage for growth is now reinforcing interest in the standard, especially from the fashion industry. In September, WWD foresaw that “B Corps may become Fashion next A-list”, underlining that, despite just 150 companies so far in the B Corp community worldwide, around 1 000 fashion companies have signed up to the B Impact Assessment since March 2020. In August, Vogue Business confirmed that the pandemic pushed fashion brands to consider B Corp status, “a little-publicised sustainability certification that is growing in importance and impact amid a lack of trust in social and environmental guidelines".

Limits and criticism

Despite the fast-growing community of B Corporations, certified members point out their difficulty to express to customers the complexity of the B Corporation certification. Moreover, there is a lack of visibility and understanding of the label among consumers. According to Vogue Business, the certified brands often have to explain B Corp to consumers for the first time, especially on new markets, implying that the standard’s main benefits might still be more B-to-B than B-to-C.

According to WWD, detractors say B Corp Certification is one among many other sustainability initiatives, with a lack of government oversight and little accountability beyond what is owed to shareholders. They also complain that B Corp standards are not legally secured, that neither the board nor the corporation are liable for damages if a company fails to meet them, and that the changes in the company bylaws remain secret.

Although B Lab is a not-for-profit organisation, The Conversation revealed in 2019 it raised over USD 32 million since 2006, with much of its funding coming from major foundations and organisations such as Prudential, Deloitte LLP, the Rockefeller Foundation, or the U.S. Agency for International Development. In 2017, B Lab received about USD 6 million in certification fees, and USD 5.6 million in donations. The article also pointed out that its board members primarily came from the business sector, with the organisation paying USD 6 million in salaries and compensation. The B Lab lobbying activities in the U.S. towards making benefit governance mandatory most probably has a substantial cost, but financial connexions to the private sector and governmental agencies can raise questions about the organisation’s own agenda, especially when it comes to transforming the global economy.

An ambitious target

While the shift from old-school shareholder capitalism to a more balanced model between purpose and profit is underway, the rise of alternative forms of organisations requires to swiftly re-consider how we do business, to initiate positive changes and make sure customers know the values we stand for.

B Corp is not perfect, but the certification comes with a level of transparency and accountability that is still missing in the Higg Index. It is emerging as a useful toolkit for any business, big or small, from any industry, to continuously improve its sustainability performance and to clearly identify itself as willing to be part of a positive change in business practice. However, the very small number of retailers who are so far listed with B Corp raises questions about its relevance for the retail industry (Allbirds, Patagonia and Eileen Fisher stand out more as exceptions), as well as its heavy bias towards the US.

Also, B Corp Certification’s standards remain notably hard to reach, and every candidate might not be able to qualify. It is certainly becoming one of the third-party certifications to have, but it is a hard one, and with just 10% of the applicants passing the assessment, the label may remain out of reach to most.

Credits: IADS (Renaud Pillon)

Read also:

• Sustainability series #1: the cost of being good
• Sustainability series #2: The Higg Index