You may have seen announcements by companies stating their delight in becoming a B corporation. But what is this and what exactly is all the fuss about?
What is a B Corp?
In recent years, companies have committed a greater focus on their environmental and social responsibilities. Often referred to as the ‘fairtrade of business’, certified B Corporations, or ‘B Corps’, are companies verified by B Lab UK (B Lab) to meet high standards of social and environmental performance, transparency, and accountability. B Lab explain in their mission statement that ‘B Corp Certification is a designation that a business is meeting high standards of verified performance, accountability, and transparency on factors from employee benefits and charitable giving to supply chain practices and input materials.’
B Lab is a non-profit organisation whose purpose is to create a community of certified B Corp companies that work towards ‘reduced inequality, lower levels of poverty, a healthier environment, stronger communities, and the creation of more high-quality jobs with dignity and purpose’.
B Corp certification is desirable for a number of companies, and is a way of demonstrating to customers, potential investors and the greater public that the business values society and the environment. As a result, this can help companies attract new customers, attract and retain staff, and also appeal to investors whose values align with those of the company’s. B Lab has also stated that ‘recent research shows that B Corps out-perform their UK peers across several business metrics’. Waitrose has even introduced ‘virtual aisles’ on their website dedicated solely to B Corp groceries!
Coutts’ Bank, a registered B Corp, has recently been mentioned in the press after closing Nigel Farage’s accounts. The Telegraph has reported that the documents obtained by Mr Farage under a subject access request cited Coutts’ B Corp membership among a list of potential reasons for closing his account.
In the UK, obtaining certified B Corp status has been available since 2015 and a small but growing number of companies are participating with B Lab reporting there are now over 1,300 B Corps in the UK alone. Notable brands which have become a B Corporation include Patagonia, The Body Shop, Emma Bridgewater, Rituals, Gousto and Innocent Drinks, just to name a few.
Who can become a B Corp?
Any for-profit business can become a B Corp, so long as it’s been operating for at least 12 months. If you’re a newer business you can request to obtain B Corp Pending status.
How to become a B Corp
To get your B Corp certification, you must be assessed by B Lab and meet the required standards. There are three steps to this process:
- Complete the B Corp Impact Assessment. You’ll need to score at least 80 out of a maximum 200.
- Make sure you meet the legal requirements and work on what amendments you can make if you don’t currently (see below); and
- Sign the B Corp Declaration of Interdependence and Term Sheet.
Fees for registration
There is an initial fee of £250 (plus VAT) when submitting your business for certification or applying for pending B Corp status. This covers you for 12 months whilst your impact assessment is being processed. To become a pending B Corp, there’s a one-off fee of £500 (plus VAT).
To maintain your certification, you need to update your impact assessment every three years. The price of recertification depends on your business’s annual sales (or turnover), with fees starting at £1,000 (plus VAT).
The B Corp legal requirement
We couldn’t write an article about B Corps without mentioning the legal aspect. As part of the certification process, all prospective B Corps will need to amend their constitutional documents to incorporate specific wording prescribed by B Lab. B Lab state that the B Corp legal requirement must be met by all B Corps to demonstrate their commitment to the ‘triple bottom line’ of people, planet and profit.
The wording required in the constitutional documents of the B Corporations is intended to legally commit the company to consider the impact of their business operations on all stakeholders with an interest in the company (e.g., employees, the community, shareholders, customers, the environment) and not just shareholders.
A limited company is required to amend its articles of association to include the B Corp legal requirement wording, to reflect the following:
- The objects clause of the articles is to either be amended or, an objects clause should be added to state that the company exists to promote the success of the company for the benefit of its members as a whole and to have a material positive impact on society and the environment through its business and operations.
- A commitment of the directors acting in good faith to promote the success of the company while having regard to stakeholder interests without considering the benefit of any particular stakeholder interest as more important than another.
- Wording is to be added to require the company to produce an annual impact report to accompany its annual accounts which sets out an analysis of the impact the company’s business has had over the year so that members can understand the way in which the company has fulfilled its purpose (as set out in the objects clause).
Hill Dickinson’s corporate lawyers can help you with this process from reviewing and amending constitutional documents to preparing the documents for board meetings and resolutions and making any necessary filings at Companies House.
Conclusion
To B or not to B, that is the question. Whilst there are a number of advantages to becoming B Corp certified it is also important to note the thorough requirements of B Lab in order to gain such accreditation.
If your business is considering applying for B Corp accreditation, we strongly recommend seeking legal advice to assist with the certification process.
For further information, please contact:
Sara Mullen, Hill Dickinson
sara.mullen@hilldickinson.com
