B Corporations – What Are They, and How Do You Become Certified?

With the market's increased focus on environmental, social and governance (ESG) initiatives, and consumers becoming more concerned with a company's ethics, as well as the nature of a company's products, sustainability credentials and the environment as a whole, the B Corporation status is becoming more appealing to companies in England. 

What is a B Corporation?

A 'B Corporation' is a for-profit business that publicly certifies it meets a certain standard of social and environmental accountability, performance and transparency. 

Obtaining B Corporation status does not change the legal form or status of the company but will lead to some changes to the company's constitution, decision-making processes and structure.

To obtain B Corporation certification, there are generally three steps that need to be taken:

1. Impact assessment 

The business must complete and achieve the requisite verified score of 80 out of 200 in the 'B Impact Assessment', which measures in five areas: 

1. Governance
2. Workers
3. Environment
4. Community
5. Customers

The company will also need to submit a disclosure questionnaire that contains details of any sensitive practices, fines or sanctions to which the company has been subject which can ultimately affect its overall eligibility for certification.

If B Lab, the certifying body, identifies a disclosed issue that it considers to be material, the company may be required to provide additional disclosure and potentially implement remedies to obtain or maintain its B Corporation certification.

Once completed, the B Impact Assessment score is reviewed and verified by B Lab, which evaluates the positive impact of the company's business model and operations.

A one-off subscription fee of £250 plus VAT is payable on submission of the impact assessment.

3. Certification and recertification 

Ongoing obligations following certification

The annual certification fee is between £1,000 and £50,000, based on the company's previous 12 months' total revenue.  

Certification has a term of 3 years. At this point, a B Corporation must update its B Impact Assessment and verify its Impact Assessment score to maintain its certification.

As well as this, a B Corporation must produce an Impact Report annually to describe how the company has promoted its success for the benefit of its members as a whole and how it has sought to have a material positive impact on society and the environment, taken as a whole, through its business and operations.

The Impact Reports are public, and a summary of these reports is made available on the B Lab website.

B Corporation directors should not pursue strategies, whether about M&A activity or any other strategic decision, that create a positive impact for one stakeholder group at significant expense to another.

It will therefore be important in the context of M&A to assess a target's practices concerning its workers, the community, the environment, and its suppliers, as well as the impact that the proposed acquisition would have on the acquiring company's key stakeholders.

Given the increasing pressure for all companies to be more environmentally and socially aware, the structure provided by the requirements to obtain and retain B Corporation status can give companies a blueprint for achieving their ESG goals.