B Corp: The gold standard in muddy waters

With an apparent growing focus on enlisting multinationals, smaller certified businesses are questioning B Corporation’s focus; is it still about transforming the economy, or rather improving the behaviour of global conglomerates? Should asset managers turn to B Corp accreditation to demonstrate their commitment to sustainability? What does it say about portfolio companies?

In this blog we’ll look at what the not-for-profit sets out to do, and what certification means along the all-important road to ESG resilience.

The B Corp mission

B Corp status is a certification mark that recognises companies for their commitment to meeting high standards of social and environmental performance, as well as legal accountability to all of their stakeholders. It requires businesses to meet certain criteria in order to become certified, including the demonstration of an overall positive impact on society and the environment. Companies must also have transparent governance structures, invest in employee education and career development, and give back to the communities in which they operate.

As part of certification, businesses must amend their legal structure to reflect their commitment to balancing profit with purpose. Becoming a B Corp shows a commitment to customers and employees. It boosts credibility, more than through environmental advertising claims, for example, and it’s considered to hold business transparency at its heart. B Corps are a global movement of certified businesses in 158 industries, from fashion to finance. Today, there is a growing community of 6400+ companies committed to business with purpose and social responsibility around the world.

A force for good

But with a growing number of mega brands proudly promoting accreditation; some with parent-company reputations of paying low wages and concerning environmental impacts; what does this say about B Corp? And is it being used to mask far-from-perfect environmental practices?

Last year, drinks company Innocent had an advert banned by the Advertising Standards Authority after environmentalists reported it for claiming that drinking its smoothies is good for the environment. Innocent highlighted its B Corp status in defence for the ad’s messaging. While Innocent’s commitment to becoming a B Corp demonstrates their understanding of the importance of sustainability, that alone cannot erase any potential negative effects associated with how they conduct their business.

Despite being accredited for their transparency, B Corporations are not immune to scrutiny. Recently, BrewDog was met with serious allegations of employee mistreatment and environmental non-compliance. Following a BBC expose, the beer brand lost its status less than two years after joining the scheme.

Going mainstream?

A concern from smaller certified companies is that the movement’s intention has shifted from transforming how business is done, to enlisting multinationals in a bid to merely encourage them to behave better. Ultimately, B Corp won’t be perfect and nor will the companies it signs up. But it does offer a set of specific and appealing aims that leadership can get on board with, which is crucial to enabling more widespread implementation of stakeholder-based sustainability plans.

Additionally, the scheme emphasises accountability – companies must raise their game on a three-yearly basis, or risk losing their status. New, more prescriptive standards will set the bar higher next year. Ten specific topics, including fair wages, diversity and inclusion, human rights, action on climate change and risk standards will all need to be addressed by companies.

If all companies strived to meet B Corp criteria, society and the environment would no doubt be improved. Certification shows that a corporation is trying to do better when it comes to sustainability. But critics suggest the scheme is on the precipice of moving its reputation into ‘membership club’ territory.

As with everything ESG, particularly environmental issues, there is no time to waste. Dissenting opinion, though small, only serves to discredit the direction of movement, which is generally a very important one. The fact engagement is high and attrition rates low suggests B Corp is in good health, and any criticism can only help to raise standards.

It might not be perfect, but what is? B Corporation status remains a great framework to follow and aim for along the road to change.

 

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