Are B Corps The Future Of British Business?

by | Jul 22, 2022

Only 10 years ago it would have been a challenge to find many outside of the business world aware of what a B Corp was. This was, of course, rather problematic considering that much of the driving force behind B Corp status is consumer demand. However, though there were just 82 certified B Corps in 2007, this has now increased to 3,500 in over 70 countries including over 500 B Corps in the UK.

Perhaps what’s been even more surprising than the spread of B Corps, is the increased stability. Whilst some interpretations of capitalism promote that profit must proceed all else in terms of importance, certified B Corps were found to be 64% more likely to survive the 2008-2009 recession than other businesses. This seems to directly oppose the 1980s Wolf On Wall Street claim that ‘greed is good’. This is positive news for the planet since sustainability in business must prove to be…well…sustainable, if we are to prioritise it.

So, are B Corporations the future of British business? Just what does it mean to be a B Corp certified and, most importantly, what are the advantages of becoming a B Corp?

What is a B Corp?

B Corp is a type of business, much like sole-proprietorship, ltd and nonprofit are. B Corps are companies that have proven their practices create value for both shareholders and the public equally. This does not make them not-for-profit, which often sees them lie between an NPO and an Ltd. It does mean they must operate with high standards, ensuring ethics across their supply chains, accountability, charitable contributions, eco-friendly practices and transparency.

It is difficult to categorise a B Corp as the status is not defined by structure but achieved through meeting a range of criteria. How well a company meets these criteria is assessed during a BIA (B Impact Assessment) which gives a company a score that, if high enough, would lead to certification.

Another key difference between B Corps and other types of organisations is that the status is reviewed every three years. B Corp status can be removed if the company’s score falls below what is required.

B Corporations can be more easily defined by their approach to business which recognises the relationship between business, profit and economic success, and social issues, such as equality, the environment, inclusivity, health and human rights. Conscious of this relationship, B Corps strive to ensure their impact on social issues is predominantly positive.

Advantages Of Becoming A B Corp

Essentially, the point of becoming a B Corp striving to do what is right. Therefore the key advantage of becoming a B Corp is knowing that your business is doing all possible to avoid having a negative impact on the planet and society. These days, that is becoming far more important to many business owners who strive to operate with good conscience. However, it’s also important to consumers and employees.

Here are some of the key advantages of becoming a B Corp:

Attracting Talent

In a 2020 survey commissioned by Reuters, 65% of respondents said they’d be more likely to work for a company with strong ethical policies. Climate change, human rights and social equity were among the issues most important to workers, especially millennials.

These ethical practices are key to becoming a B Corp and hence, B Corps may find themselves attracting more talent.

Brand Building

It is increasingly essential to consumers that the businesses they buy from are ethical. With many people becoming more environmentally aware, both in terms of sustainability and social impacts, this impacts their choice of products and services. Where once we were unaware of the practices of businesses, social media and the need for transparency have made business operations, once kept behind closed doors, far more accessible. Armed with information, consumers now have the option to invest in brands with good business practices and reject those they see to be falling under parr.

However, researching a company’s practices can still be a minefield. One advantage of becoming a B Corp is that consumers know the business has been assessed and found to be operating to at least a reasonable ethical standard.

Investment and Business Relationships

Investors are increasingly attracted to B Corps, not only for ethical reasons but because of the impressive growth and stability they have recently proved capable of.

In addition, as more companies become B Corps or at least adopt more ethical practices, it becomes a key requirement that other businesses they work with hold the same values. To be a B Corp and have a supplier that does not support inclusivity, for instance, would be like Greenpeace working with an oil company. Therefore, this becomes especially important for B2B businesses that need to be appealing to other businesses, including those who have requirements in place that prevent them from working with businesses that do not operate in a way they deem ethical. Again, the status of B Corp can make establishing and advancing business relationships far easier to navigate.

Faster Growth In B Corps

Various analysis shows that B Corps grow at a faster rate than other businesses, especially SMEs. In fact, between 2017 and March 2020, SMEs with B Corp status saw their employee headcount increase by 8%, compared with 0% for other SMEs. Annual turnover is also higher, with a median average of 15% compared with 3% for SMEs generally.

Perhaps this is a result of the other advantages to becoming a B Corp, or perhaps it is because of the perceived value in a B Corp.

Protecting Your Mission

As a business grows it can sometimes drift further away from the values it was built on and its original purpose. Naturally, a business should change shape and respond to the economy, consumer demands and its competitors. However, in doing so what can be lost is the foundations upon which the company was built. Due to B Corp status being something that is regularly reviewed (every 3 years), a B Corp business must have an ongoing dedication to its social and environmental responsibilities. Furthermore, this means that if the Directors change or investors begin to have influence, they will not be able to change anything which has led to achieving B Corp status. Therefore, protecting your mission.

Innovation In B Corps

Whilst 41% of all SMEs claim they have introduced new or significantly improved products or services in the last 3 years, this has been the claim of a staggering 84% of B Corps. Sometimes operating in a sustainable or socially conscious way means the usual routes and methods are no longer open. Rather than restrict us this can often encourage innovation because it becomes necessary for B Corps to find ways to do things that do not negatively impact their mission or core values.

Being that B Corps are on the rise, the trend does also tend to attract new talent and interest that can lead to more enthusiasm for innovation.

Disadvantages Of Becoming A B Corp

It’s important to recognise that there are no tax benefits for B Corps as they are not charities. Furthermore, being that they have equal responsibility to shareholders and the public, they must focus on making a profit whilst also ensuring that is not negatively affecting the environment, inclusivity, health, human rights and other factors.

A key condition of becoming a B Corporation is accountability. Therefore, organisations must be meticulous about their supply chains, leaving nothing to chance.

There are legal and administrative costs involved in getting and retaining B Corp status. A B Corp’s status is based on achieving a high enough BIA score in assessment. This process must be repeated every three years and this can be involved.

As a B Corp, you are committing to meeting higher standards, which can attract investors and customers and fuel business relationships if you can stand up to increased scrutiny. However, it can also add extra pressure. So, take careful consideration because it is possible to balance profit and public interest, without B Corp status. Although there are certainly many advantages to becoming a B Corp.

Legal Advice For Becoming A B Corp

If you’re thinking about certifying as a B Corporation it is well worth talking to a legal professional to fully understand the process, as well as the pros and cons, of becoming a B Corp. You must be prepared for a rigorous application and assessment where your company values, operations, and social and environmental performance will be reviewed. Becoming a B Corp is not something to do when you have intentions to operate sustainably or to focus more on social impact. These systems must already be set up as companies will need to be able to prove their claims. The advice of someone outside your organisation, in these situations, can be highly beneficial and ensure mistakes are not made in your application.

Businesses may find they need a lawyer to redraft their Articles Of Association to prepare for the B Corp assessment. LegalDrop have access to experts able to help you with the legal help you may need to become a B Corp. Use our time-saving legal professional matching service to help you find a lawyer today.

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