What is a B corporation?

What is a B corporation? It’s a relatively new term describing businesses with a verified dedication to environmental and social accountability. 

They are two of the three pillars of ESG – a topic that continues to grow in importance in boardrooms worldwide. 

Getting certified as a B Corp takes a lot of work, but depending on your company and the people it needs to please, it could significantly boost your image and profitability.

Because the certification is issued by third-party non-profit B Lab, it makes sense to use their definition: 

“… businesses that meet the highest standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose. 

B Corps are accelerating a global culture shift to redefine success in business and build a more inclusive and sustainable economy.”

• By now, B Lab and B Corps are well-known terms that could give you a robust and recognisable label.
• The process for achieving certification is challenging, so the achievement is rare and thus has an element of value.
• The certification aligns closely with ESG, which commands more and more stakeholder attention and investment each year. In other words, B Corp is an award that could easily highlight potential in modern business.

To get the certification – companies must:

• Carry out B Lab’s impact assessment and risk review, both measured in a social and environmental context. The score required to pass is 80. 
• Change their structure to be legally accountable to all stakeholders, not just shareholders. 
• If available in their jurisdiction – achieve “benefit corporation” status
• Commit to transparency so outside parties can view their progress in adhering to B Lab’s standards.

There are pros and cons:

• Your company would enjoy a boost in reputation, especially if your stakeholders are ESG-orientated.  
• It might go a long way in pleasing your employees – especially younger employees, whose values tend to align more with those the certification considers most important. 
• You may create long-term value for your business. With the certification, you can present your business as a sound, sustainable, forward-thinking company. This will likely attract the attention of ESG investors or similar. And don’t forget, ESG investing is an industry worth tens of trillions of dollars.

• By late 2023, only 7,939 companies help B Corp certification across 162 industries and 92 countries. It’s a hard badge to earn, and it costs to earn it. Because of that, you might find that pursuing it takes too much of your company’s resources. 
• When you commit to B Corp certification, you commit to adapting your governance structure to meet its requirements. This may reduce your corporate flexibility and be a massive “culture shock” in the boardroom and amongst management. 
• You may deal with both internal and external opposition because stakeholders are concerned about what the effort might do to profitability.

You need to weigh your long-term corporate strategy against stakeholder expectations and your realistic capacity to answer this question. 

For some businesses, B Corp certification is a meaningful and achievable goal. For others, it’s an idea that sounds nice but would be way too hard to implement in practice. 

As a board member, it’s your job to assess which of the two categories your company is in. Ensure that you liaise with all relevant stakeholders as you carry out this exercise. Decisions like this need widespread input. 

You can read more about B Corps here.