B Corporations

The purpose of companies has, for a long time, been to generate profit and to maximise shareholder value. The success of a firm has always been measured by its ability to make money, until the new century arrived and the emphasis started to shift to social and environmental concerns. From creating dividends for shareholders, companies began to assess their commitment to other stakeholders such as customers, employees and more widely the local community.

This change reflects the way society sees the corporate world. For younger generations companies should improve society whilst doing business and they will more willingly work for firms that share their vision. There is now a real push for companies to adopt a different way of conducting business and to integrate a social purpose to their activity.

The emergence of B corporations is the result of this shift in mindset. B corporations are companies that choose to be socially and/or environmentally responsible whilst performing their commercial activity. The B corp certification scheme started in the US in 2006 and arrived in the UK in 2015. It is granted by a non-profit organisation called B Lab after a stringent accreditation process. The certification will help strengthen the company’s commitments to investors, customers and employees. It will also impact the corporate governance of the business and firms will have to re-certify every 3 years.

Large corporates have been investing in their sustainability policies and putting an emphasis on CSR for the past few years; B corporations tend to be small to medium sized businesses who want to make a difference and show a genuine commitment to society and sustainability. B corps must prove their purpose, which covers the positive impact they have on the community and the environment through their activity; be accountable for the impact their decisions have on employees, suppliers and the wider community and finally be transparent about their activity and its impact.

So why should you become a B corporation? Apart from the fact that it articulates the company’s mission to external stakeholders and brings in a robust governance process as mentioned above, this status can bring growth to your firm. Sustainability is now a huge concern for most consumers, the company’s image is the best way to attract new customers and if your brand reflects their values they will be more likely to buy from you. The same can be said about employee retention and talent attraction. People want to work for firms they relate to and believe in. Highly engaged employees and a diverse talent pool should lead to increased innovation and more future growth. The ability to access funding might also be enhanced as more and more investors are considering the ESG values of a firm before investing in it.

Before making the decision to become a B corp there are a few things worth considering. The certification requires a change in the mindset of the leadership team. Maximising profit and putting shareholders interest at the heart of the decision making is no longer the main focus of the business. The management will have to assess how the choices made are going to impact the firm but also its employees, the wider society and the environment. It also means that the business will have to take a longer-term view and this could impact the growth trajectory. Having the right team in place will be crucial whilst going through the transition. Obtaining the accreditation means going through a rigorous process which can take up to 6 months. An organisation has to be prepared to invest the time and resources needed to gain the accreditation but also to ensure it remains compliant once achieved.

In a highly competitive world where companies need to differentiate themselves to stand out, having the opportunity to do this in an ethical way is attracting more and more business leaders. Being able to do good for the society and the environment whilst pursuing business goals seems to be not only the right thing to do, it also increasingly has a clear commercial motivation.

There is still a long way to go to change the business ethos and for companies to find a place at the heart of the community and be seen as positive contributors to society. Firms that have taken the plunge to become a B corp believe that the crises we are experiencing as a society are mainly linked to the way business is conducted. By redefining the perception of success and establishing new rules the leaders of these organisations could really trigger change in the wider corporate world. We are only at the beginning of that journey, however, if there are now alternative ways of doing of business, it might be time for management teams to ensure they are preparing their organisation for the future.

February 9, 2022