By Mollie Williams, Corporate Commercial Paralegal at Legal Futures Associate O’Connors Law
Almost every day another company becomes B Corp certified, reflecting their exacting standards of social and environmental performance, transparency, and accountability.
B Corp companies are verified by B Lab UK, a not-for-profit network transforming the global economy to benefit people, communities and the planet, enabling people to use businesses as a force for good.
A key characteristic of a B Corp is having corporate governance and a business structure in line with the B Corp requirements.
Five main steps to certification
The 5 main steps to certification are:
- the B Impact Assessment (BIA)
- improving the BIA score
- meeting the legal requirement
- submitting & reviewing
The BIA contains approximately 200 questions that cover governance, workers, community, environment and customers. Taking each of the areas in turn, below sets out what is likely to be required to satisfy the assessment:
In terms of the governance of a business, some of the key documents to be considered and amended to satisfy the BIA are the articles and memorandum of association. The scope of the assessment is much wider than meets the eye. When assessing a business, B Lab will analyse the corporate structure and corporate governance documents, with an aim to evaluating the social and environmental impact, ethics, and transparency. They will also consider whether the company and its structure facilitate stakeholder decision-making. Simply adding a clause or two to key documents will not be sufficient, each change must be amplified and enacted throughout the whole business, through policies and procedures.
According to B Lab, whilst the business itself is of high importance, the staff who enable its growth and maintenance are of the utmost importance; this ranges from support staff to management, including all members of staff in between… everyone matters! The BIA will particularly focus on how a company contributes to their employee’s financial security, wellness, health and safety, as well as how it encourages career development through incentive schemes. There are many ways in which a company can achieve these goals through programmes like bonus schemes, incentivisation programmes, employee benefit schemes, employee ownership trusts and so on. At the heart of all of this, are the employment contracts, which might need to be amended to satisfy this element of the BIA.
The community in which the business operates and the involvement they have with their community also holds significance. Not only must the business display their charitable nature, but also demonstrate diversity and equality, offering equal opportunities and fairness to all current and potential employees. Business models that are distinctive in this area of the assessment are those which directly target issues specific within their own community.
The impact a business has on the environment will be stringently examined. B Lab like to see that there are policies and procedures in place to help the environment and minimise harm. The list is not exhaustive, but some examples include reducing and recycling waste and the use of renewable energy; for example, installing solar panels and educating staff about environmental issues and how they can help.
It is important that businesses use ethical and positive marketing strategies, engaging customers in an honest and transparent way, as well as handling their date with care and privacy.
Improving the BIA score
The BIA not only takes into consideration the answers to the questions, but it also requires data from the previous 12 months regarding finances and general business operation. If you are considering a move to becoming B Corp certified in the future, the planning and implementation should start well in advance.
The pass mark required for each of the impact areas discussed is 80+ points, and most businesses do not pass first time around. The uncompromising nature of the assessment reflects the commitments that need to be made in order to achieve B Corp certification. Each element should be considered in turn, and it would be advisable to assign an individual or team to each impact area. If a second attempt at the BIA is required, it may be sensible to source external help with amending documents and re-evaluating the governance of the business, as sometimes it is easier for someone independent to advise on areas that need to be improved. Helpfully, B Lab will review your governance documents prior to certification and provide feedback for you to work on moving forward.
Meeting the legal requirement
The B Corp legal requirement must also be achieved in order to become certified, meaning, the company must consider the stakeholders (shareholders, employees, suppliers, society and the environment) and their interests in all decision-making. The company must also be seen to create a material positive impact on society and the environment through the business and its operations, and only if both are achieved will the company become certified.
The governance documents and policies must demonstrate how the business will operate and how decisions are to be made. Whilst the wording required by B Lab in the articles of association must be verbatim as per the draft set of articles they provide, they are not responsible for providing legal advice and therefore it may be that companies require that extra level of support from trusted legal advisers when it comes to their all-important constitutional documents.
Submitting, reviewing & certification
Throughout the review period B Lab will require documentation and evidence regarding the changes to the company structure across the board in order to prove their alignment with the B Corp ethos and requirements. Upon certification, the company must then enter into the B Corp Agreement, which establishes the business’s rights and obligations as a certified B Corp, therefore this should be reviewed with diligence in order to avoid any future surprises.
B Corp certification is a long and rigorous process that requires immense commitment in the form of business restructure, ranging from attitudes of staff to amendments of key constitutional documents and is unlikely to be a smooth ride. However, with the right people within the business and supporting externally, this is achievable and can contribute to the future of the business, society, stakeholders, and the environment.
Entering into the B Corp community, otherwise known as ‘The B Hive’, will allow you to network and gain contacts and business friends who are like-minded and share the same motivations. With luck, a business match made in heaven.
Mollie is a Liverpool law graduate with work experience in the Bar and private practice. As a paralegal Mollie works to support the team in the delivery of delivering corporate, commercial insurance and regulatory advice.
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