B Corp: The Certification that won’t save the planet

Summer 2023 #42
written by
Michael O'Regan
illustration by
Connie Noble
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The UK government has made post-Brexit regulatory reform a priority and has stated that the UK's exit from the EU creates a “unique opportunity” to support “the best interests'' of UK businesses and citizens. The zeal to deregulate and a backlash towards “woke capitalism” means the current government has increasingly delegated responsibility for standards and rankings in areas such as environmental protections and corporate accountability to private and commercial certifications, as well as public pledges. Rather than be seen to impose constraints on businesses, such as assessments for gender and/ or racial equity, or stand accused of adding ‘red tape’, the government is supportive of outsourcing the load of managing and verifying various standards. Whilst participation in such schemes is voluntary, businesses are pressured to change and show their commitment to issues important to stakeholders. Wanting to show that they are acting in a way that is deserving of trust, businesses have rushed to support certificates such as the Carbon Trust Standard Zero Waste to Landfill Certificate, the Living Hours accreditation and the Cradle to Cradle Certification, as well as pledges such as United Nations’ ‘Race to Zero’ campaign. However, long standing questions that have plagued certifications have re-emerged, such as high fees, and the fragmented nature of process-driven standards.

The private B Corporation (B Corp) certification of for-profit businesses is one of the most well-known schemes and, while it is a global certification, there are a disproportionate number of UK B Corps. As it grows, both in numbers and revenue, questions are emerging as to its claims of creating social, environmental, and financial value for all stakeholders. By providing a snapshot score every three years, critics argue it is not a true consideration of a whole business and its impacts. They argue it may entrench bad practices rather than make businesses and business leaders transformatively good. As news stories about alleged poor practices at current and former B Corps, such as Brewdog, Spadel, Nespresso, and Evian become more well known, scepticism about the role of B Corp certification has increased.

The origins of B Lab

B Lab is the global nonprofit network which developed the B Corp certification for for-profit businesses in 2006. With the modest aim of “transforming the global economy to benefit all people, communities, and the planet”, it has now registered in the region of 7,000 certified B Corp businesses worldwide, and had US revenue of nearly $16M in 2020, with over 50% going on executive compensation and other salaries and wages. It is, according to the network, “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”. This certification, while having no legal status, is designed to show that its holder gives equal weight to people, planet, and profit. Any for-profit business can fill out the initial B Corp Impact Assessment, and can usually complete and attain certification process within 12 months. To be successful, a company must score 80 or above out of 200 in its ‘B Impact’ assessment of their practices, which relate to governance, workers, community, the environment, and customers. These categories, though, do not adequately address business externalities, given that businesses can impact individuals not immediately involved with the business, such as workers within the supply chain. However, businesses must sign a ‘Declaration of Interdependence’ as part of their certification, making a commitment to embody the values of the B Corp. They must also amend their governing bylaws or corporate charter, so as to allow directors to “consider stakeholders besides shareholders in company decision-making”. Businesses should also confidentially disclose information on any sensitive practices, fines, and sanctions related to the company or its partners.

In the UK, there are more than 1,300 B Corps, including Innocent Drinks and Jojo Maman Bébé. London is now known as the B Corp capital of the world, with more than 500 registered B Corps, many with a famous face at the helm such as Jamie Oliver (The Jamie Oliver Group) and Bear Grylls (BecomingX). Testimonials from notables such as Rose Marcario (Former CEO of Patagonia) have ensured B Corp is never far from a financial newspaper headline.

Illustration by Connie Noble

B Lab claims it is leading a revolution, building a movement, and creating B Corp communities across the globe. Adopting activist language, such as referring to themselves as ‘Movement Builders,’ they have sought to attract ‘purpose-driven’ leaders to transform the global economy. They argue they are creating a new kind of business by setting the “Gold Standard for Good Business and are inspiring a race to the top”. Recurring B Corp networking events can connect you with like-minded business leaders from New York to Yorkshire, while a Champions Retreat in North America gathers B Corps, partners, and values-aligned people. In the UK, the B Corp Community recently gathered at the Natural History Museum (which is also a B Corp) to celebrate growth.

Given that the certification standard is more directed at business leaders rather than consumers, leaders are portrayed by B Lab cofounder Jay Coen Gilbert as part of a revolutionary struggle to evolve the system of capitalism by building “communities, not just profits”. In addition to boosting the profile of certain business leaders, B Corp can allegedly boost the brand of a business, support or increase valuations, help them to secure equity finance and retain staff.

In a global ‘alphabet soup’ of sustainability certification systems available to businesses, B Corp stands out. For proponents, B Corp certification bypasses sector-specific or national certification frameworks, with standardisation reducing confusion and increasing clarity for consumers, investors, and businesses alike.

A win-win for businesses, consumers, and the planet?

While any for-profit business can become a B Corp, a lack of full transparency and rigorous vetting means that certification should not be seen as wholly reliable from the perspective of either the general public, investors, or regulators. The minimum score – 80 out of 200 – is very low, and assessment questions are too subjective. Moreover, it’s not possible to boil down something as complex, subjective, and uncertain as a business into a single score.

For investors and consumers seeking ways to align their values, coupled with real concern about equality, diversity, and inclusion, as well as climate change, a B Corp certification score can provide the appearance of an answer. However, B Corp standards don't override the profit-driven focus of the company, and neither the board nor the corporation are liable for damages if a company fails to meet them. While Etsy.com allowed the certification to lapse, Brewdog walked away and got a Positive Planet Accreditation after dozens of ex-employees signed an open letter claiming they were bullied and treated like objects. In 2023, Chris King Precision Components ditched B Corp because they believed the standards were too low.

Critics also point out that British firms have always had the flexibility to amend their articles of association with shareholder consent to reflect their social responsibilities. As B-Corp does not set targets for improvement, it is not a framework for evolving action. Numerous cases have shown that B Corp certification may not mean a business be any friendlier to its consumers, its employees, or the planet. Coffee giant Nespresso became a certified B Corp in 2022, causing tension both with Fairtrade advocacy groups and with smaller B Corps. They alleged Nespresso received its status despite a history of human rights violations on farms that grow their coffee. Innocent Drinks also had its advertisements banned in the UK during 2021 after a formal complaint arguing that a brand that mass-produces plastic packaging should not be implying that its products deliver a net benefit to the environment.

Illustration by Connie Noble

B Lab will argue that, despite being a private certifying body, it doesn’t fully set and regulate its own standards. Its Regional Standards Advisory Council in the UK, for example, is nominally independent and includes representatives from Big Society Capital – a social impact investor, Aegon UK – a Financial services company, and Business in the Community – a business-community outreach charity. B Lab UK, which had revenue of £1.6M in 2021, has trustees that include Pippa Murray, the founder of an ethical peanut butter brand; Thom Kenrick, Head of Social Strategy & Impact at NatWest Group; George King IV, a senior investment professional who works with high net worth families on their cross-border financial needs; and Nicola Clark OBE, CEO of UMi, a Durham-based B Corp. B Lab UK is currently lobbying for the Better Business Act, which hopes to change UK law to ensure every company in the UK aligns their interests with those of wider society and the environment. Of course, the Act, if passed, may help increase B Corp certification rates, as it would require businesses to change their articles of association. More broadly, B Lab has pushed for legislation granting legal status in the US to benefit corporations and has led eff orts to pass over 50 corporate statutes globally that enable stakeholder governance.

In response to increasing scepticism about ESG (Environmental, Social and Governance) and CSR (Corporate Social Responsibility), B Lab will broaden its assessment categories in 2024, to include Purpose & Stakeholder Governance, Worker Engagement, Fair Wages, Justice, Equity, Diversity & Inclusion, Human Rights, Climate Action, Circularity & Environmental Stewardship, Collective Action, Impact Management and Risk Standards. Despite these changes, the outsized claims that B Lab makes about evolving capitalism, combating climate change, and increasing growth and profit, require external oversight. A global accreditation body should be created to oversee the creation of universal standards, so as to increase credibility and comparability amongst schemes. Certifications processes, and the claims they make, should also come under the remit of national consumer associations, to ensure they are transparent, objective, and truthful.

Illustration by Connie Noble

Even if 100% of all businesses worldwide became B Corps, they could not save the planet or remake capitalism.

As things stand, B-Corp will not and cannot force the radical change required to organisational culture, ownership models, manufacturing processes, or supply chains. There is no longitudinal evidence to suggest that B Corp improves business standards, or any difference between businesses with or without B Corp certification. The B Corp concept and those behind it might be well meaning, but there is no ‘win-win’ if certification does not fundamentally evolve the capitalist system, fight climate change and ensure justice, equity, diversity and inclusion.

B Corp cannot scale up and periodically review the 5M businesses in the UK, 26M in the EU, and 48M in China. Even if 1% of all businesses worldwide became B Corps, they could not save the planet or remake capitalism. The worry is that future business leaders may look at certifications as an option to alternative legal structures and use such certifications as a voluntary commitment to ‘sustainable’ and ‘socially responsible’ practices. This “Capitalism through certification" embeds the practice of using certification processes and standards within a capitalist economic system. Until regulatory interventions by UK authorities emerge, alternative legal designation such as co-operatives, community businesses, and community interest companies should be promoted.

Michael O'Regan, PhD is a Lecturer at Glasgow School for Business and Society, Glasgow Caledonian University. The opinions expressed in this article are solely those of the author and do not represent the views of his employer.

Summer 2023 #42
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