With B Corp companies gaining stride globally over the years – in fact, 5000 companies are currently B Corp in more than 70 countries – there is growing confusion as to what it is, why it’s linked to ‘sustainability’ and how it contributes to ESG responsibilities.
In this article, we’ll clarify the above concerns while also showing how becoming B Corp certified will help you with your ESG strategy.
Why Is B Corp Gaining Attention?
B Corp stands for ‘benefit corporation’, which are for-profit corporations by B Lab whose core focus is benefiting all stakeholders. They do this while building a more socially inclusive and sustainable economy for all. The actual process is rather difficult to achieve the B Corp certification, but for good reason.
Taking company size and revenue into account, according to B Lab, companies need to complete B Impact Assessment and reach a score of at least 80. Moreover, they also need to legally commit to being held accountable to all stakeholders by changing their corporate governance structure.
Companies like The Body Shop and Pukka Herbs have taken the B Corp route as consumers continue to demand accountability from them. However, consumer transparency is only one aspect companies consider when deciding to become B Corp certified.
A Harvard Business Review article suggests that leaders who turn B Corp do so as a way to shift from short-term profits into long-term ones by reprioritising their focus on people and the planet. This is an effective way to enact and promote social and environmental change – exactly how B Corp certification does this we’ll explain below.
What Can B Corp Certification Do For Your ESG Strategy?
While ESG is a wide field in itself, B Corp Certification plays an important role in maximising the effectiveness of an ESG strategy.
One of the main benefits of having a B Corp certification is that a company is now publicly obligated to make decisions in the best interest of all stakeholders involved, not just a few shareholders. To illustrate this point, a 2021 study found that UK B Corp companies that held “high levels of environmental performance” were able to eliminate greenwashing, which was a key concern for stakeholders with ESG in mind. Greenwashing is a rising problem within the ESG ecosystem as seen here, but because B Corp requirements enforce and push companies to become transparent with their data, companies are encouraged to balance both profit and purpose, rather than just the former.
Moreover, this third-party recognition that B Corp provides adds a different perspective to the ESG movement. As the partner and general counsel of MMC Ventures, Victoria Ferguson says: “there is a requirement to renew every three years and the marking and scoring system alters to reflect a rising standard so there is a challenge of needing to improve year-on-year.”
As such, while ESG centres directly on the portfolio, and is therefore externally focused, B Corp looks at the company itself and is therefore an internal and holistic approach. That is why B Corp certification is complementary to any ESG strategy a company uses and is therefore effective at driving long-lasting positive change.
Why B Corp Certification Should Be Encouraged
Large, medium and small companies can and are becoming B Corp certified as there are a whole host of benefits in doing so, such as:
- Attracting top talent
Purpose-driven companies are more likely to attract loyal employees because being B Corp certified shows your company stands for more than just profit.
Passionate employees thrive in an environment where there is a mission to achieve beyond certain revenue targets – especially when the mission involves global issues such as the environment and sustainability.
- Increased Credibility
It’s one thing to claim to be a sustainable and environmentally friendly company, but it’s another thing to actually prove it. Because companies need to “incorporate stakeholder governance into the legal structure of your startup” according to B Lab, there is legal accountability to prove the company is abiding by its commitments, both social and environmental.
As a result, this not only limits greenwashing by being environmentally responsible but also increases consumer loyalty as they are guaranteed that your company is truly doing good work for people and the planet.
- Attracting investors and partners
Investors are increasingly on the lookout for forward-thinking and greener organisations to include in their portfolios. As Larry Fink, Chairman and CEO of Blackrock says, long-term company success means providing “a contribution to society” and becoming B Corp does exactly that.
ESG strategies and analysis play an important role in the investment process, where 85% of investors back in 2020 considered elements of ESG before investing.
As such, being B Corp certified is an important aspect of becoming a sustainable business.
Maanch’s Impact Strategy Program and ESG Consulting solutions help companies embed sustainability throughout the organisation for lasting impact.
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