To B (Corp) or not to be? Navigating the B Corp certification

Despite slow beginnings in 2006, the nonprofit organization, B Lab, managed to hold its ground and blossom into the household sustainability certification that many know and recognize today. The reputable outdoor apparel company Patagonia’s B Corp certification brought the certification to new heights in 2012. Since then, B Corp has become a highly sought after stamp of approval by companies and organizations globally.

The modern-day definition of the term sustainability was coined in the ‘80s but the idea became almost a fad when ESG came into the picture and sustainability reporting morphed from a “nice to have” to a “have to” for listed companies. This brought an onslaught of acronyms, legislations, and compliance measures that companies were made to follow and that had sustainability managers scrambling to keep up to date with. Due to this, there have been many accreditations emerging. B Corp is one such certifying alphabet that has come out of this era of sustainability.

Is B Corp just another floater in the alphabet soup of environmental policy or is it something worth diving deeper for? 

B Who?

‘B’ stands for ‘beneficial’ and B is hoping to benefit people, communities and the planet as a whole simply because there is no Planet B. 

B Lab is a global nonprofit organization. They’re the ones working towards transforming the global economy. They claim to do this by creating, “standards, policies, tools, and programs that shift the behaviour, culture, and structural underpinnings of capitalism”. This dedicated global team comprises of “standards experts, business analysts, development officers, product and program managers, people and culture specialists, partnership managers, storytellers, strategists, and engineers”, so you know you’re covered. 

B Lab focuses on Europe and North America. Latin America is covered by Sistema B, B Lab’s more recent (2012) addition. B Lab Asia-Pacific (2015) covers the Asian market and their Singaporean office that opened in September 2019 has certified 51 B Corp companies to date. 

The B Corp certification is B Lab’s very own. It is a designation awarded to businesses that meet high standards of social and environmental performance, accountability, and transparency. This is established through the B Impact Assessment (BIA). This tool has been used by over 150,000 business to “measure, manage, and improve positive impact performance for environment, communities, customers, suppliers, employees, and shareholders”. 

Other certifications that exist in the market include 1% for the Planet, a commitment-based certification where companies pledge 1% of all sales to environmental causes rather than measuring impact. The LEED certification focuses on buildings and infrastructure, specifically assessing environmental performance in terms of energy efficiency, water use, and building materials. The Fair Trade Certification applies to products, focusing on fair wages, safe working conditions, and sustainable production practices, mainly in supply chains for foods and textiles. There is also the ISO 14001 certification that is part of the ISO family. This certification is an Environmental Management System (EMS) that helps companies manage their environmental impacts but is often more operational and compliance-focused than B Corp.

B’s Importance

To date, more than 8,500 companies from 162 industries have already been B Corp certified around the world. But why is this certification necessary and what good will it do for your company or organisation? 

A study by B Lab, compared the survival rates of B Corp certified companies to non-certified ones during the pandemic and revealed 98% of certified companies proved resilience, compared to 88% in non-certified companies. The resilience of B Corp certified companies comes from B Corp’s challenging but comprehensive framework of of questions that helps your organization identify areas for improvement, thus amping up resilience capabilities. 

Apart from this, connecting to the B Corp network opens doors to sustainable businesses globally. Your B Corp certification gives you open doors to other organisations who have done and are doing their work and who are not afraid of showcasing it. 

B’s Process

As part of getting B Corp certified, companies are scored based on questions around the company’s governance, workers, environment, community, and customers with 140 points to gain in total. Positive practices add to your score, but no negative points are given. 

The latest updates were done in 2020 with three current B Corp Certification Performance Requirements:  

1) Positive Performance: Demonstrated by a verified score of 80 or higher on the BIA 

High-scoring activities included transparent governance with publicly available impact reports, employee ownership and profit-sharing initiatives, investing in local communities, and the use of renewables. Low scoring activities on the other hand included having mission statements with no legal commitments, limited transparency, no active policies on sustainable material sourcing, and minimal community engagement. 

2) Risk Performance: Not having any material issues related to negative impacts that would prohibit the company from certification

These include supply chain risks, environmental impact, product impact on consumer health and safety and data privacy. 

3) Baseline Performance: For $5B+ parent companies only, having specific practices in place regarding transparency and management of material issues

Material issues here included the management of workers, governance, customers, the environment, and the community.

Be Honest

Apart from these, any potentially negative attributes are assessed in a separate Disclosure Questionnaire. Here, questions like, “Has your company's operations had any negative impacts on local communities, such as displacement, environmental degradation, or adverse health effects?” or “Has your company been involved in any cases of misleading advertising, false claims, or deceptive practices?” make businesses fess up to risks associated with their actions and practices. (Of course, skilled PR or communications professionals could probably spin-doctor their way through these.) 

While it may sound like career suicide to disclose anything that might be detrimental, honesty is the best policy. Disclosing potentially harmful information builds trust and accountability. For example, a company might disclose that it sources raw materials from regions with limited labour protections. By disclosing this, it shows it’s aware of the risk and could attract customers who value transparency and ethical progress, even if its practice isn’t perfect yet. Since the B Corp certification is reviewed every three years, it also gives companies a chance to highlight commitment to improving policies and practices.

B’s Status 

The B Corp certification is also available to companies at different growth stages, accommodating their development. For smaller or less established companies or start-ups, B Lab allows for a ‘pending’  B Corp status. If you meet the legal accountability requirement by incorporating stakeholder governance into your legal structure, submit your BIA, and pay a one-time fee based on your company’s revenue, you can apply for this temporary status (18 months) while you work towards a full B Corp certification. This option allows organizations to demonstrate their commitment to environmental performance while gaining access to B Lab’s networks, resources, and support.

Multinational companies with over $1B in annual revenue on the other hand, can join the B Movement Builders. The idea here is to change the narrative of capitalism, allowing big MNCs to act as forces of good. While similar to the B Corp Certification, the B Builder Movement has its own nuances. Companies must therefore undergo a Risk Review to determine eligibility.  

Be Aware  

Before you get anxious about airing potential dirty laundry, B Corp keeps all of the reports in confidence and only the final scores are made public. Achieving a low score may put your company in the spotlight for not doing more, however it gives one the room for improvement. Actively working towards increasing low scoring sections and a good communications strategy can show the sincerity of intent. Clear improvements at the next verification date (every three years) will be a testament to the company’s continued fervour and contribution to social and environmental practices. 

While the review provides a chance for redemption, organisations should clearly highlight to investors the improvements made. Of course, many companies do not survive three years. If they do, however, this is a more than sufficient grace period to advance one’s ESG systems. 

Be Careful

Like most certifications, B Corp is not fool proof. There is the potential of both green and impact washing where companies may misuse or exaggerate their certification to appear more ethical or sustainable than they are in reality. 

For example, some companies may make basic, surface-level changes to pass the BIA, such as implementing minor recycling programs or reducing energy in office spaces without addressing the more significant environmental or social issues in their supply chain, labour practices, or resource use. 

In 2022, Nespresso, a subsidiary of Nestlé, obtained its B Corp certification. This raised concerns due to Nestlé’s history of environmental and social controversies, including labour issues and plastic pollution. Another example was when critics claimed that the B Corp certification allowed Danone to overstate its sustainability efforts, especially in terms of packaging waste and intensive farming practices.

Be Certain

Despite its shortcomings, there are still over 8,500 B Corp certified organizations across 90 countries worldwide, a number that seems to be growing with companies choosing to highlight their ESG commitments and display these proudly to the world, slapping their B Corp certified logos right next to their brand.

If you’re willing to put in the work required for the marathon known as BIA, there are a lot of benefits at the end of the finishing line. However, be clear that the B Corp certification isn’t a one-off sprint. Stamina and training are required to maintain and improve rating scores. Firms can choose to be intentional and become B-Corp certified out of good will and foresight. However, with new companies being added to the B Corp list every day, there might come a time when you might have no choice – so, if you can’t beat them, why not join them? 

Learn more about the different ESG rating methodologies in CSP SG’s Applied Sustainable Investing in Wealth Management courses, available at both a L3 (introductory) and L4 (intermediate) level.