B Corps are companies that are purpose-led and voluntarily apply for B Corp certification as businesses that are meeting high standards of social and environmental performance, transparency, and accountability. There are clear priorities for those organisations who are certified as B Corps, including having an ethos of doing business to benefit all people, communities and the planet. A B Corp has both a mission or purpose and a profit motive, and importantly seeks to balance profit and purpose – it is all about a holistic approach to doing business rather than just a focus on monetary advantages, although importantly a B Corp is set up to make profit. In order to be eligible for B Corp status, you must operate for profit in a competitive market and have at least 12 months of operations.
B Corp is not a type of legal entity in itself and most will be registered companies. Sole traders, mutuals and cooperatives are also eligible to certify. There is no minimum or maximum size. Certain companies, such as those under a year old, those with related entities, or large multinational and public companies, have additional considerations and requirements. Depending on the legal entity, the legal structure and constitutional documents governing the entity will vary.
If you’re a large and/or complex business, then you will need to confirm the correct certification approach for your company. With big businesses increasingly aiming to become B Corps, B Lab has created a Large Enterprise Approach to ensure the pathway for such companies is clear, credible and comprehensive. All companies with $1bn+ in revenue will be required to proceed through this approach, as well as companies with $100m+ in revenue with a significant level of complexity (e.g. numerous subsidiaries, locations in various countries and/or operating in multiple industries).
Pending B corps - If your business is a start up with under 12 months of operations, you’re eligible to become a Pending B Corp. Sole traders are not eligible for Pending B Corp status.
Importantly, a non-profit organisation or charity is not eligible to certify as a B Corp. because such organisations, for example Charities, are by definition set up for the benefit of the public. Many charities are dependent on grants, donations and fundraising for the majority of their income and any profit made must be applied for a specific charitable purpose.
A Community Interest Company (CIC) is a non-charitable legal structure that is set up to benefit a community. The assets of a CIC are locked for the benefit of the community. CICs are generally eligible to certify as a B Corp.
B Lab is the not-for-profit certification body for B Corporations. There are B Labs across the globe (forming the B Global Network) including Australia, East Africa, mainland Europe and North and South America. B Lab UK is a charity that launched in 2015.
You can find further information about how the B Corp movement started, how many Certified B Corps there around the world and how to search the B Corp register here: The UK B Corporation Movement
The process is as follows:
The process varies for each company but generally for companies with fewer than 250 full-time employees and less than $100 million turnover can expect the following timescales to apply:
The certification fee ranges from £1,000 to £50,000+ and will depend on the company's turnover. Companies with over £1bn in revenue should contact B Lab UK directly for pricing information.
Pending B Corps pay a one-time fee of £500, which covers the initial 12-month period.
There is also a 40% discount available to small or underrepresented and marginalised community-based businesses for the first three years.
Companies that own subsidiaries must include these within the certification process. This can be by certifying them separately (this means each subsidiary will have its own BIA and profile page) or certifying them together (depending on the structure there may need multiple BIAs but the group will only have one profile page). Subsidiaries are eligible to certify on their own if they are able to demonstrate that they are operationally complete and distinct from their parent company.
In relation to franchises, B Lab is currently looking into the certification eligibility criteria for these. Currently, franchisors can certify if they have geographical distinction and operate stores or operating entities separate to the franchisee (in which they can use certified B Corp IP at those sites) otherwise, B Corp status can only be used at a corporate level. If the franchisor is a Certified B Corp, any franchisee can apply for B Corp certification independently.
If your business has been operating for under 12 months, you’re eligible to apply to become a 'Pending B Corp'. Although you do not gain full B Corp status, this helps to show the surrounding community, including potential clients, stakeholders and future employees, that you are in the process of becoming a B Corp, and also helps to communicate the you are engaging with the B Corp Community.
Any company that applies to become a B Corp will need to amend its articles of association to include specific mission-aligned wording provided by B Lab. This formalises the company's commitment to the B Corp Movement and requires the directors of the company to consider the interests of all stakeholders (including shareholders, employees, suppliers, society and the environment) when making decisions, and running the company on a day-to-day basis.
B Lab have advised that where a group of companies wishes to apply for B Corp status, and all of the subsidiaries of the parent company are directly or indirectly wholly owned subsidiaries only the parent company will be required to amend their articles of association. The parent company can also apply on behalf of the group structure.
The BIA is a confidential online tool used to measure, improve and verify a company's social and environmental performance, and is divided into 5 Impact Areas which cover different policies and practices:
As a Certified B Corp your BIA overall score and category scores will be shared on your public profiles on the B Lab Global website.
It is important to note that public companies and their subsidiaries have extra transparency requirements. This means that their entire BIA needs to be made public, with particularly sensitive information redacted.
In addition, if any companies have detailed any material items on their Disclosure Questionnaire, they may be required to make that specific disclosure transparent.
Please get in touch if you would like any more information on B Corp certification. If you are interested in starting your B Corp certification journey, we would be more than happy to assist you with the process. In particular, we can advise you on the legal requirements and any policies, governance or handbooks that may requiring updating as a result of certification. We can also advise on the new proposed performance standards that are likely to be launched early in 2024.