A guide to the UK B Corporation movement

What is a B Corp?

B Corp is to business what Fair Trade is to coffee… They are businesses that give as much consideration to their social and environmental impact as they do to their financial returns.

B Corporation certification (assessed by the not-for-profit B Lab) is given to for-profit organisations who achieve at least a minimum score against a set of social and environmental standards.  

B Corps have been around in the US since 2007, with brands like Ben & Jerry's and Patagonia achieving certification. At the time of writing there are 2,778 B Corp organisations worldwide, in 60 countries.

In 2015 the initiative launched in the UK and there are now 193 B Corporations, including household names: Propercorn, JoJo Maman Bebe, Innocent drinks and Abel & Cole. (Source: www.bcorporation.uk)

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B Corporations in 2020 and how they've been impacted by Covid

Why should you consider it?

A commitment to the environment and society is increasingly on everyone’s agenda. Environmental, Social and Governance (ESG) is now a key element in company statements. For some, B Corp status could be seen as suppressing agility and restricting the ability to focus on profit. But for others it is an opportunity to achieve competitive advantage, as well as benefiting the wider world.

Becoming a B Corp can have obvious benefits; like a positive impact on brand equity and greater recruitment appeal, but there are also some less obvious ones.  It can drive performance - in a B Lab & Ella’s Kitchen survey UK B Corps reported an average growth rate significantly higher than the national average. It can improve the saleability of an organisation too - Investors are also looking to bring diversity to their portfolios and there may be less due diligence required in a B Corp sale.   

The pace of change is accelerating and we are seeing more and more consumer goods organisations take the B Corp plunge. Danone is a standout example, working to become the world’s largest B Corp, with 11 certified subsidiaries (including Danone Dairy UK).  Unilever has also engaged strongly in the B Corp movement, owning 5 B Corp brands including possibly the most recognisable B Corp of all: Ben & Jerry's'.

One thing is for certain; in 2018 the volume of discussion on B Corps increased significantly and investors and management teams will need to think through where they stand on B Corps.  These factors and an increasing number of B Corp acquisitions mean more and more business will look favourably on B Corp certification.

What do I need to do to get certification?

B Corporation status can be achieved by receiving accreditation from B Lab (a non-profit organisation). Certification requires a score of at least 80 (out of 200) against 5 areas of impact: Governance, Community, Workers, Environment and Customers.

The initial step is to complete an on-line assessment (B Impact Assessment). After completing this assessment, B Lab then assesses and verifies that your score meets the certification standards. As part of this process, you meet virtually with the B Lab team to submit any confidential documentation and to sense check your responses.  

Certification needs to be renewed every three years and there is an annual fee, which scales with revenue and starts at £500.

The Pros and Cons of B Corporation status

Pros

Growth

It’s early days but there is evidence certification drives performance. In a B Lab survey, UK B Corps reported average revenue growth of 14% year-on-year since launch in 2015. If your consumers, employees or investors are suggesting sustainability is informing their choices, make yours accordingly.  

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Positive brand equity growth

Sustainability is now mainstream.  Our studies show that the UK consumer is becoming more cautious with their money.  Brands are having to fight harder to win. For many, positive sustainability credentials gives your brand a competitive edge and keeps you on top of their mental shopping list.

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Greater recruitment appeal

New hires are increasingly looking to an organisation’s ethical credentials before they agree to take on a role. Our Workforce of the future study highlights four work scenarios, including the “Green World”. Here corporate responsibility isn't a nice-to-have but a business imperative. Workers and consumers demand that organisations do right by them and the wider world. Having B Corp certification shows your potential new recruits this is fundamental and increases your likelihood of getting that great new hire.

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Greater investor appeal

There is a growing “impact” investor community focused on financing profit-led businesses with strong environmental, social and governance (ESG) values.  Private equity houses too are coming under scrutiny. They use ESG specialists to show their backers that their portfolios reflect positive standards and best practice.  For all it’s more and more important investments are diverse, inclusive and accountable. B Corp status requires a certain level of due diligence, which means future investors can have more trust in a B Corp and potentially less cost when they perform their own. Many investors are also positively screening for B Corps to check a potential investment fits with their organisations values. So when it comes to funding, B Corp status could be the deal-clincher.

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Cons

Change in focus?

B Corp certification requires thinking beyond profit in creating and delivering your organisational strategy. In the Articles of Association you must include a commitment "to promote the success of the company for the benefit of its members and, through its business and operations, to have a material positive impact on society and the environment, taken as a whole". Legally, you are then required to make decisions which consider all these factors, not exclusively profit maximisation. Is your organisation able and ready to have a change in mindset?

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Cost and time for accreditation

Certification needs to renewed every three years and there is an annual fee, scaled according to revenue and starting at $500. Certification requires a score of at least 80 (out of 200) against 5 areas of impact: Governance, Community, Workers, Environment and Customers. The time taken to achieve accreditation varies with each organisation and its complexity, but the process typically takes four to six months. B Corp status is a long term commitment and needs to be resourced accordingly with the appropriate checks and measures in place.

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Investor caution

Whilst there is a growing community of investors who find B Corp status appealing it is still early days. As B Corporations will need to take decisions not necessarily around profit maximisation, investors are rightly cautious that such a certification could inhibit growth and flexibility (a commonly cited perceived tradeoff is cost base vs ethical supply chain). If you are looking for investment in the future it is worth considering now who you are targeting and their likely response to your B Corp status.

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What to do next?

For a conversation around B Corps, contact us

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Isabella Fox

Isabella Fox

Manager in Corporate Finance M&A ICAEW Chartered Accountant, PwC United Kingdom

Tel: +44 (0)7753 463986

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