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The ESG Review: To B or not to B Corp?

To aim to become - or not to become - a B Corp is a question that many businesses wanting to become more sustainable have asked themselves.

But now new scrutiny is beginning to throw up more questions about the nature of that certification.

Any company can become a B Corp, according to B Lab, the non-profit organisation that manages the stringent accreditations process. But criticism around the types of companies and subsidiaries that now achieve B Corp status, particularly larger ones, seems to be growing, as depicted in this detailed Financial Times article this week.

Becoming a B Corp can be a hugely positive step for a company wanting to commit itself to being a responsible and ethical business. But with the ‘movement’ now relatively mature, more questions are being asked about how the process of becoming a B Corp is governed.

There are now estimated to be more than 6,000 of them, with the UK very much leading the way in volume. Some are success stories. Natura & Co, which now owns The Body Shop and other beauty brands, is just one of them.

There have also been some public falls from grace. BrewDog, the Scottish-based brewer, has been on the wrong end of negative headlines on multiple occasions, and saw its B Corp status revoked late last year less than two years after attaining it.

The principal questions seem to be about how deeply the impact of the business is really felt, and what effect it also has on all of the other parts of its value chain.

As the FT piece put it, “If a company makes increased profits, how it deploys those funds is not for B Lab to dictate. It could invest in growers or farms, increase staff wages, install solar panels — or just ramp up dividends or executive pay. For these and other reasons, questions linger over whether B Corps are enacting truly meaningful change internally and whether the effects of that change is being felt more widely.”

And it later continued: “Some individuals who work in the sustainability industry also believe allowing subsidiaries of large corporations to attain the status even if the parent is not certified is a way for bigger companies to benefit from B Corp status without fully doing the work.”

That “work” is fairly extensive - and doesn’t just cover operations and outputs. UK companies wanting to become certified have to rewrite their Articles of Association - the legally-binding definitive ingredients of their business - to include a commitment to social or environmental good, for example. This, B Lab believes, means that attaining B Corp status is far more than a tick-box exercise.

But being a B Corp was never intended to be the ‘halo’ that would sit across an entire ESG strategy. It is a mark of commitment, or a meaningful, proven badge that demonstrates a company’s purpose and the value it strives to achieve, rather than a means to an end.

It will be interesting to see how B Lab responds to such criticism if it grows, and in particular whether smaller companies that have been ‘sustainable from the off’ may see it as devalued if larger corporates-in-transition achieve the same status themselves.

The ESG News Review is written by Steve Earl, a Partner at BOLDT.

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