B Corporations – what's the Benefit?

Where have B Corps come from?
Over the past 20 years there has been a considerable shift in the emphasis of both consumers, who are increasingly opting for products that come from sustainable sources and are beneficial to society, and businesses, which are looking to create value for a wider range of stakeholders (including employees, the local community and the environment) than just for shareholders.

This has fuelled the emergence of a new organisational form: the Certified B Corporation. The B Corp movement began in the United States in 2008 and arrived in the United Kingdom in 2015. Today, there are more than 2,000 B Corps in 50 countries across 130 different industries.

What are B Corps?
Any business can apply for B Corporation certification, regardless of its size, legal structure or industry.  B Corps are for-profit businesses that have been verified by B Lab, a non-profit organisation that certifies businesses based on how they create value for non-shareholding stakeholders. The B Lab certification requires businesses to meet social sustainability, environmental performance and accountability standards, and to be transparent to the public.

Many SMEs and family-owned businesses already take these considerations seriously, but have not, until now, had an opportunity to formalise or receive recognition for their commitment to positive impact business. These businesses therefore may be in a position to apply for B Corp status without making significant changes to their operations.

The certification has been especially popular amongst small and medium sized enterprises and family-owned businesses that wish to use a purpose led approach to culture and branding to develop business.

How does a company become a B Corp?
To obtain a B Corporation certification, businesses complete an assessment process which analyses their entire operation and measures the positive impact of the business in areas of governance, employment practice, community and the environment, whilst also considering the product or service the business provides.

If a business crosses a certain performance threshold in relation to these standards, it is invited to make amendments to its constitution to incorporate the interests of all stakeholders into the fiduciary duties of directors and officers. The company pays an annual fee to retain B Corporation status.

What are the advantages of becoming a B Corporation?
1. Provides a public identity for the business as an organisation interested in both shareholder and stakeholder success with a clear public commitment to societal and environmental agendas.
2. Attracts talent in a job market that increasingly places emphasis on the social impact of employers.
3. Increases transparency and accountability.
4. Increases attractiveness to investors and consumers.
5. Entitles businesses to various discounts, including on credit card processing.

The future of B Corporations
In a world in which environmental, social and ethical practices are increasingly of interest to employees, customers and investors, the value of a B Corp accreditation may be significant. SMEs and family-owned businesses that are focused on seeking long-term growth and avoiding risks to wealth and control should keep abreast of this developing movement in positive impact business.

If you require further information on anything covered in this briefing please contact Emma James or your usual contact at the firm on 020 3375 7000.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, July 2017