B-Corp – the certification businesses need for radical change?

B Corp, whilst ethical and trying to do a good thing, might attract low-hanging fruit – those already socially, environmentally responsible, or those seeking a short-cut,” said Michael O’Regan, an academic who is researching B Corps.

Given the number of emails I get regarding B-Corp and my conversation article regarding its role, there is widespread confusion as to whether B-Corp certification is a good or bad thing for businesses, and whether it can help tackle the worlds pressing problems. Some thoughts/questions on B-Corp fundamentals.

  • B Corp has had 15 years and has burned through a lot cash to get to where it is and has only about 3,400 private businesses incorporated as B-Corps. That speaks to a (lack of) scalability. We have 5.7 million businesses in the UK/ 27.5 million in the EU/ 78 million businesses in China. B-Corp, whilst ethical and trying to do a good thing – might attract low hanging fruit (those already socially, environmentally) responsible, or those seeking a short-cut. What of the millions of other private businesses? Some may say, its not the fault of B-Corp, but does the model work, for radical change?
  • B-Corp needs to align more with new and developing standards, so that its metrics measure the impact and the contribution towards the UN SDGs. B-corp metrics, are not forcing sustainable practices/ models and disclosures upon businesses. We need to see how these businesses are contributing to SDGs/ and ESG responsibilities.
  • While Environmental, social and governance (ESG) standards are not exactly the same as B-Corp standards. They overlap and have the same function, given they both offer the public, investors and employees (other stakeholders) information on governance, workers etc. B-Corp uniquely scores data, but unfortunately, the data companies disclose about governance, community, workers, environment and customers are not disclosed. All we get is a score (80/200 to pass). We deserve more disclosure. Is “third-party verification” disclosure or does it impair effective due diligence. A recent study, indicates many of the world’s leading certification standards are not only failing to improve the ethical conduct of large corporations but are serving to entrench abusive business practices. 
  • We already have an “alphabet soup” of sustainability standard setters, which is a distraction from the need for companies and investors to do more on UN SDG’s. B-Lab is setting standards, but lacks processes and enforcement (e.g. we don’t know which B-Corps have lost accreditation), and too much focused on the past (e.g. historical fines, sanctions, material litigation) rather than the future strategies, plans for the business). Their award system may also inadvertently suggest particular companies have a sustainable / world –class business model.
  • The EU’s Non-Financial Reporting (NFR) Directive, which mandates that corporations publicly disclose environmental, social and governance (ESG) information will be updated to reflect expanded metrics like stakeholder engagement, and current wages against the living wage for employees, contractors and suppliers. These will be expanded to Small and medium-sized enterprises (SMEs), which are the biggest component of corporate activity, employment and output in Europe. 
  • There are other Global approaches out there. The World Economic Forum International Business Council (IBC) – “Compact for Responsive and Responsible Leadership” and The Sustainable Development Goals Disclosure (SDGD) Recommendations as well as the Sustainable Markets Initiative (SMI) .

Capitalism is good, and corporations are good,” said Dermot Hikisch, head of community development for B Corporation said in 2012.

  • B-Corp is reactive, and could / should reject applications from businesses that lack diversity, abuse human rights, and use child labour. However, it shouldn’t blanket ban all businesses in a sector, or wait until a public out cry to react. Some decisions demand greater scrutiny. There needs to be third-party monitoring/audit of B-Lab (given B-Lab are paid by the self-same corporations they are hired to assess), In addition, unions/ consumers/ NGO feedback needs to be assessed and critics or whistle blowers protected.
  • Environmental, social and governance reporting is filled with competing sets of sustainability-related standards that are in need of simplification and consolidation. We need a common, core set of metrics and recommended disclosures that all businesses, big, and small, can align to, so as to reduce fragmentation and encourage faster progress towards SDGs. Whether at national level/ EU or international, we need to move towards generally accepted international standards.
  • Yes, B-Corp are neither evil or misleading. They mean well, and deserve credit for publicising ESG issues, and pointing out that these responsibilities can be (a) met by for-profit businesses / SME’s. However, it is not driving change fast enough, or does it have the resources/authority to do so.  ESG responsibilities have gone global, we need global answers, and more mandatory reporting and disclosure regulations. B-Corp is not the right vehicle at this time, and not force the radical change required.
  • The majority are businesses that are B-corps are not have generated any real value in achieving and displaying the B-Corp. There is no public recognition. It might drive share price/sales price, but is that the right motivation? Is B-Corp promoted to the public or merely investors/ banks/ analysts?
  • It forces round pegs into square holes, and forces businesses to make decisions not suitable to them, in order to get 5-6 points on the survey, and over the 80/200 threshold. While it might force a businesses to create a employee handbook, does it really change a companies organisational culture or business model?
  • Is B-Corp really any different from doing CSR – a marginal and elective undertaking, but otherwise, business as usual?

If B-Corp certification doesn’t have the potential to radically change the way the economy works or even a particular business, it reinforces business as usual. The disappearance of B-Corp tomorrow may have no significant impact on the economy, and how businesses operate. It might mean investors and other stakeholders have to take the time to really understand the business they are getting involved with. The B-Corp idea and people behind it might be great. However, its neither changing/ or helped the system evolve fast enough. If it’s not helping to speed up change, it may be hindering change.

(Picture Credit: Svoboda v práci)