Contact Our Corporate Solicitors
If you want to speak to a legal professional regarding B Corporations and how to become certified, please contact Myerson Solicitor's Corporate team on:
With the market's increased focus on environmental, social and governance (ESG) initiatives, and consumers becoming more concerned with a company's ethics, as well as the nature of a company's products, sustainability credentials and the environment as a whole, the B Corporation status is becoming more appealing to companies in England.
What is a B Corporation?
A 'B Corporation' is a for-profit business that publicly certifies it meets a certain standard of social and environmental accountability, performance and transparency.
Obtaining B Corporation status does not change the legal form or status of the company but will lead to some changes to the company's constitution, decision-making processes and structure.
How to register as a B Corporation
To register as a B Corporation, a company would be assessed on the extent of its positive impact on its workers, community, environment and customers, in addition to its governance structure and accountability.
For a business to achieve B Corporation status, it needs to have operated for the previous 12 months and satisfy the following conditions:
(a) generate the majority of its revenue from trading;
(b) compete in a competitive marketplace; and
(c) not be a charity, public body or otherwise majority owned by the state.
Once these conditions are satisfied, the business can seek to obtain B Corporation certification.
How do you obtain a B Corporation certification?
To obtain B Corporation certification, there are generally three steps that need to be taken:
1. Impact assessment
The business must complete and achieve the requisite verified score of 80 out of 200 in the 'B Impact Assessment', which measures in five areas:
- Governance
- Workers
- Environment
- Community
- Customers
The company will also need to submit a disclosure questionnaire that contains details of any sensitive practices, fines or sanctions to which the company has been subject which can ultimately affect its overall eligibility for certification.
If B Lab, the certifying body, identifies a disclosed issue that it considers to be material, the company may be required to provide additional disclosure and potentially implement remedies to obtain or maintain its B Corporation certification.
Once completed, the B Impact Assessment score is reviewed and verified by B Lab, which evaluates the positive impact of the company's business model and operations.
A one-off subscription fee of £250 plus VAT is payable on submission of the impact assessment.
2. Legal Requirements
If the business is a company, it must also adopt specified wording into its articles of association, including a commitment to a "triple bottom line" approach to business (being a focus on social, environmental and financial performance or "people, planet and profit").
The required wording of the B Corporation legal requirement has also been drafted for businesses that are not companies limited by shares, including companies limited by guarantee, community interest companies (either limited by shares or guarantee) and limited liability partnerships.
B Corporation Agreement and Declaration of Interdependence
The company would then enter into the B Corporation agreement and declaration of interdependence, which sets out:
The terms on which B Lab UK certify the company as a B Corporation.
The circumstances under which B Lab will continue to certify the company as a B Corporation, including the amount of any annual licence fee, which is determined based on the company's revenue.
The ongoing obligations of the company as a B Corporation.
The company's rights to use certain intellectual property of B Lab, including the B Corporation logo.
The declaration of interdependence, which is signed alongside the B Corporation agreement, is a statement of belief that recognises the intention of business as a force for good, including a statement that each B Corp's business should aspire to do no harm and benefit all through their products, practices and profits.
3. Certification and recertification
Ongoing obligations following certification
The annual certification fee is between £1,000 and £50,000, based on the company's previous 12 months' total revenue.
Certification has a term of 3 years. At this point, a B Corporation must update its B Impact Assessment and verify its Impact Assessment score to maintain its certification.
As well as this, a B Corporation must produce an Impact Report annually to describe how the company has promoted its success for the benefit of its members as a whole and how it has sought to have a material positive impact on society and the environment, taken as a whole, through its business and operations.
The Impact Reports are public, and a summary of these reports is made available on the B Lab website.
B Corporation directors should not pursue strategies, whether about M&A activity or any other strategic decision, that create a positive impact for one stakeholder group at significant expense to another.
It will therefore be important in the context of M&A to assess a target's practices concerning its workers, the community, the environment, and its suppliers, as well as the impact that the proposed acquisition would have on the acquiring company's key stakeholders.
Given the increasing pressure for all companies to be more environmentally and socially aware, the structure provided by the requirements to obtain and retain B Corporation status can give companies a blueprint for achieving their ESG goals.