With a growing global focus on Environment, Social and Corporate Governance and Corporate Social Responsibility , you may have heard the term “B Corp” floating about quite a bit.
But, as B Corps rise in popularity, you may be asking some of the following questions:
- What exactly is a B Corp?
- How long have B Corps been around?
- Is It worth becoming a B Corp?
- How do you get B Corp certification?
- Are there any well-known organisations that are B Corps?
All these questions are explored in more detail below.
What Is A B Corp?
A B Corp (also known as a Certified B Corporation) is an organisation that has demonstrated commitment to being socially and environmentally responsible.
Being a B Corp means that the organisation has been officially certified by B Lab. B Lab is a global not-for-profit that aims to hold businesses to a higher standard of accountability, so when a business meets their specific standards, they can be recognised as a B Corp.
Read on to learn exactly what’s involved in becoming a B Corp.
What Does It Mean To Be A B Corp?
Receiving B Corp status means an organisation has gone through B Lab’s assessment process. The process sees B Lab assess the organisation against a number of eligibility factors, including the impact criteria and governance requirements.
What Is The B Impact Assessment?
It’s one thing to tell people you’re making a positive impact on the community, but a B Impact Assessment is a questionnaire conducted by B Lab to prove this.
Essentially, they take a closer look into your internal policies, what contributions you’re actually making and other metrics to decide whether you have a positive impact on your community.
Once this is done, your business receives an impact score. To be a B Corp, you’ll need a score of at least 80.
It’s a similar process to a business receiving a “Fairtrade” certification from Fairtrade International except — among other differences — rather than certifying certain products, B Lab certifies an entire company.
B Corps Vs Social Enterprise
One thing to note is that B Corps shouldn’t be confused with charities or social enterprises. B Corps aren’t necessarily organisations with a social purpose at the heart of what they do (although they can be!). Instead, B Corps can be more “traditional businesses” focused on profit generation.
The idea is that businesses can receive B Corp status if they’re making positive social and environmental impacts whilst also looking out for their bottom line. In fact, this is exactly why B Corps were invented — but more on that in the next section! !
It’s important to note that being a B Corp doesn’t carry any particular legal or government status in Australia, unlike registering a charity or being a recognised Public Benevolent Institute with the ACNC. This also means that (for now, at least) the government doesn’t provide any tax exemptions or other concessions to B Corps.
The History Of B Corps: When Did B Corps Start?
B Lab as an organisation was founded in 2006 in the US with the goal of driving change in how businesses operate. B Lab wanted to see businesses balance profit and purpose.
The work of B Lab, as well as support from community and businesses, has led to the majority of US states now having certain legislation in place for companies to set up as an entity known as a benefit corporation. This essentially means that the company operates as a regular company but has an added legally enshrined obligation to a diverse set of “public benefit” stakeholders, not just shareholders and their profits.
B Lab has since grown its operations around the world and a key part of their work is advocating for other countries to introduce into law some form of benefit company model. In 2013, B Lab started this campaign in Australia. However, after 8 years of consultations and advocacy work, they decided to cease their efforts.
Instead, B Lab introduced a set of governance requirements specifically for Australian entities which, if an organisation meets them, B Lab sees this as being sufficient for the organisation to be given B Corp status.
B Corp Certification
The only way to receive B Corp certification is to apply directly with B Lab. According to the B Lab website, at the time of writing, the whole process takes (on average) 10 months to complete.
It’s a relatively straightforward process as B Lab provides clear process guidelines and lots of material to help you apply.
The process, though, can be quite involved. You’ll have to:
- Complete a detailed B Impact Assessment (we covered this earlier)
- Make the necessary changes to your governing documents (see: B Corp Governance Requirements below)
- Wait until B Lab is able to review and verify your application and the above documents
Most Australian legal structures qualify for B Corp status (including sole traders, partnerships, trusts and companies). However, there are certain eligibility requirements:
- The business must have been operating for a minimum of 12 months; and
- The business must not hold Deductible Gift Recipient status.
There are also costs involved in B Corp certification with an annual certification fee charged based on your organisation’s annual revenue.
In Australia, while B Corps don’t have official legal status in Australia, it still means you are verified by B Lab and carries a lot of weight that you can be trusted to meet your stakeholder governance goals. It’s similar to where, if you go to your local grocery store and come across tuna cans with the ‘dolphin-friendly’ label on it, this looks really good for their brand in terms of sustainability.
Neither of these are something that’s registered with the government, but provide consumers with trust in your brand to uphold certain standards.
B Corp Governance Requirements
The general governance requirement for B Corp eligibility is that an organisation “considers the impact of their decisions on all of their stakeholders” – this is stakeholder governance. Business owners must have mechanisms in place to prove they are giving equal weight to the needs of employees, the broader community and the environment as well as to profits.
B Labs has in place specific governance legal requirements to receive B Corp status in every jurisdiction. For example, your governing document needs to comply with B Corp requirements (our lawyers can help you with this), as well as specific legal requirements based on the entity type.
What Documents Do I Need For A B Corp?
In Australia, it’s pretty straightforward to satisfy the B Corp governance requirements. B Lab provides guidance on this, but essentially, the requirement is that an organisation has within its governing documents a commitment to a ‘triple bottom line’ approach to business. This is done by inserting specific clauses into your governing document.
For example, in the case of a private company, you can do this by enshrining your approach to stakeholder governance in your Company Constitution (which is your company’s governing document). This document sets out the rules under which your company will operate and to be a B Corp, will need to include a statement on your company’s purpose and an obligation on directors to take certain things into consideration when making decisions.
If your business was under a trust structure, however, this would look a little different as you’d need a Trust Deed.
Now, this doesn’t mean you can rush off to copy and paste things into your governing documents.While the clauses are relatively simple, you need to make sure that you incorporate them into the appropriate section of your governing document and that you execute the document legally.
There are certain formal requirements under Australian laws for how you modify your governing documents. For example, with Company Constitutions, you’ll need to make the changes and then pass a special resolution.
Is It Worth Becoming A B Corp?
The decision of whether or not to apply for B Corp status really hinges on an organisation’s values and future plans. There are a number of pros and cons to consider when deciding whether to apply. We’ve set out a few of them below.
Pros of B Corp Status
- Internationally recognised certification of your commitment to more than just profits. In an era of “greenwashing”, customers are increasingly conscious that it’s easy to say you’re doing good, but it’s harder to know whether you actually are. B Lab’s independent certification can demonstrate your desire to balance profits and purpose.
- Learn more about whether you’re making a positive impact and how to improve. The B Impact Assessment process is a valuable assessment that identifies the positive contributions your business is already making to the community and ways in which you can improve. Even if you’re unsuccessful in your first round, the assessment gives you an opportunity to go make some positive change.
Cons Of B Corp Status
- There are upfront and annual fees associated with certification and renewal. These are dependent upon the annual revenue of your organisation (see the B Lab website).
- If there’s a slip and you lose your B Corp certification, it’s not a good look. It could affect the reputation of your business, clients, public image and marketing. Attaining a B Corp certification is one thing, but B Lab conducts an annual review. You’ll need to make sure your organisation continues to comply with their requirements, otherwise they might remove your status!
- There are administrative costs associated with meeting and maintaining the B Corp requirements. It’s worth getting your head around these additional costs before deciding to commit.
- Applying for and maintaining a B Corp status may absorb a lot of your focus. Depending on how your business’ operations are set up and how important the certification is to you, the B Corp process could create extra hassles and take time away from other work you need to do.
Famous B Corps
Having B Corp status has helped multiple businesses demonstrate an outward commitment to sustainability. Here are just a handful of B Corps you may have heard of:
- Unilever- A global brand that sells personal necessities, food, drinks and some home essentials
- Brew Dog- A pub chain and brewer
- United by Blue– A sustainable outdoor apparel company
These companies have all made environmental consciousness a focal point of their marketing campaigns, and B Corp certification allows them to actually back up their claims of doing good for the planet.
These three brands are a valuable study in how B Corp certification doesn’t just improve how your business operates, but also builds consumer trust in what you’re doing.
Of course, obtaining B Corp status isn’t just useful for giant companies with million-dollar ad budgets and massive customer bases. When considering the pros and cons of B Corp certification explored above, it makes sense that Australian SMEs and startups are increasingly pursuing B Corp status.
B Lab provides an industry-respected framework for building an ethical business and their certification shows clients you’re serious about doing good. After all, no business is too small to make a change.
Receiving B Corp status is a great way to show how your business strives to balance profit and purpose.
If you’re considering applying to have your business certified as a B Corp and you’re unsure about the relevant governance requirements, we’re here to help! Our legal consultants are available for a free chat about transitioning to a B-Corp and how to implement the requirements into your business’ operations.
Our expert lawyers can help.