Published 7 June, 2022
How our standards are driving systems change
We are living through a moment in history where corporate behavior matters more than ever. An increasing number of companies of all sizes are evaluating how they can work to rethink their business practices and improve their social and environmental performance. Over the past two years this has led to a huge acceleration in both the number of Certified B Corporations and companies applying for certification.
The growing visibility of the B Corp movement invites added scrutiny, and rightfully so. There have been increased conversations about B Lab’s standards and certification among B Corps, sustainability advocates, consumers, and other stakeholders. This has grown as we welcome larger, more complex businesses into the B Corp movement, among them Nespresso.
This feedback is welcome. Our movement is built on continuous improvement and stakeholder input — both are critical to the ongoing evolution of our standards. Yet to echo B Lab Global Head of Standards & Insights Dan Osusky: “While B Corp Certification is difficult, and requires verified and concrete performance on the standards, it doesn’t mean that a company is ‘perfect.’ Companies are not expected to have every possible best practice, or even be free from mistakes.” This principle is key to the B Corp movement: We set rigorous standards not to designate perfect companies, but to provide a framework for systemic change.
In listening to this commentary about our work, we have identified some common questions about B Corp Certification, which we walk through below.
Labor and human rights are among a number of social and environmental issues B Lab takes into consideration within the certification process. We’ll outline the five main ways in which we assess these issues as a part of a company’s certification:
Controversial Issues statements.
B Lab continuously works with our Standards Advisory Council to evaluate the potentially negative impacts of different industries and practices. In order to be eligible to certify, companies must meet the requirements of our Controversial Issues statements. There is a natural tension between the inclination to exclude companies in controversial industries and the need for leadership with the potential to transform culture, behavior, and impact of these industries. In some cases, such as the bottled water industry, we have determined that there was greater opportunity to create real change by working with the industry, and so have required companies to undergo additional requirements and increased scrutiny. In other cases, we have determined that an industry as a whole is ineligible from certifying.
B Impact Assessment.
Companies must achieve a minimum verified score of 80 points on the B Impact Assessment, a holistic assessment of a company’s social and environmental performance across all of its stakeholders. All B Corps must provide documentation supporting their responses, which is then verified by our analysts. The assessment awards points for specific, positive practices, but does not mandate any practices. For example, while the B Impact Assessment acknowledges implementing policies and programs to improve the social and environmental impact of suppliers as a best practice, it is not a required component of certification if the company is meeting the overall score of 80 points.
Disclosure Questionnaire.
Alongside a positive score, we assess negative impact through a Disclosure Questionnaire. This involves answering a series of confidential “Yes” or “No” questions about specific sensitive issues (e.g. historical fines, sanctions, material litigation, or sensitive industry practices) which will then be verified by B Lab. If issues selected in the affirmative are considered material, the company will at a minimum have to publish their Disclosure Questionnaire, which would include details such as a summary of the issues, the size or scope of the issues (e.g. financial implications, and number of individuals affected), impact on stakeholders, and any implemented management practices, on their B Corp public profile. In some instances, B Lab might determine that the issues are material enough and/or the company’s handling of the situation insufficient, and they will need to complete remediation practices before they’re able to certify. Further, B Lab may refer the company to our Standards Advisory Council to determine eligibility for certification.
Multinational parent companies with $5B+ in revenue.
B Lab’s additional requirements for multinational parent companies generating $5B+ in annual revenue recognize that the overall scale and influence of these companies requires societal obligations that go beyond overall performance on the B Impact Assessment or the risk screen, requiring that specific minimum positive practices also be in place —including a human rights policy. For more information, refer to the Guidance on Baseline Requirements for Multinational Companies over US$5billion.
Complaints Process.
After a company achieves certification, our robust Complaints Process is an essential tool for B Lab and all stakeholders to ensure that a B Corp is adhering to the practices they outlined when they certified. B Lab encourages anyone with credible knowledge of a B Corp’s alleged misconduct or misrepresentation to file a complaint.
The B Corp Certification legal requirement means that a company must change their fiduciary duties to become legally accountable not just to shareholders, but all stakeholders — including customers, employees, suppliers, communities, and the environment. The vast majority of for-profit companies are structured to do the exact opposite.
At B Lab, we refer to this type of corporate governance as stakeholder governance. If a company has legally committed themselves to stakeholder governance, they remain “mission-locked” — but this doesn’t mean that they won’t face leadership changes, or that poor practices will never occur. This is why it’s necessary for companies to engage with meaningful and robust third-party performance standards to ensure they’re continuously assessing, managing, and improving their impact.
Furthermore, B Lab has always maintained that individual company choices alone are incapable of changing a global business culture that prioritizes shareholder profit above all else; policy change is needed. Learn more about how our colleagues around the world are advocating for government action towards stakeholder governance.
B Lab is developing new performance requirements to ensure that B Corp Certification remains a differentiation of high-performing companies using business as a force for good. We see this as an opportunity to ask big questions about how our current performance requirements meet the needs of the moment, and how we can optimize the B Corp movement for the future. We’re currently exploring evolving from a flexible scoring system to having a non-negotiable requirements on a number of environmental, governance, and social topics — including human rights, fair wages, and climate action and more.
While we’re engaging with a diverse range of stakeholders to develop these standards, including subject matter experts, B Lab’s Standards Advisory Council, and regional standards advisory groups, we also welcomed any individuals to share input on this process and will have more opportunities in the future for input. Review the draft version of the standards here.
The B Corp movement is built on the principle of continuous improvement. To remain in the community, B Corps must recertify every three years — and meet the requirements of a continuously evolving B Impact Assessment. To stay above the 80-point minimum score, companies are driven to do more to improve their practices.
The B Impact Assessment also has several features that allow companies to better understand their performance and where there is room for improvement. Learn more about the Improvement Report and Best Practice Guides that are included as a part of the process here.
Yet there is more we could be doing to ensure B Corps are working to improve. We arecurrently exploring how we mandate continuous improvement in the certification and recertification process as part of our development of new performance requirements.
Our network of B Lab and Sistema B organizations also encourages regional B Corp communities to drive improvement across business sectors through collective action.
B Corp Certification has never been a superficial branding exercise; nor will it become one. Every B Corp that has certified since 2007 — no matter its size, revenue level, or geographic location — has completed the B Impact Assessment and achieved a verified score of at least 80 points; had its negative impact assessed and reviewed through B Lab’s Disclosure Questionnaire; committed to changing its corporate governance structure to be accountable for all stakeholders; and make their B Corp Certification performance transparent on their B Corp public profile. All companies provide full documentation to back up their responses when engaging in the verification stage of the certification process, with additional rigor for large enterprises and multinational companies, including a risk screen, a mandatory site review, increased transparency requirements and more.
No company is perfect, and organizations will join the movement from different starting points. We see a company’s certification as a commitment to manage, measure and improve a company’s impact.
One of the key pillars of B Corp Certification is transparency, and we encourage companies to communicate about the meaningful actions they are taking. We do not condone using the certification as a shield to fend off criticism of poor behavior. This is why our complaints process is an important tool in ensuring B Corps remain accountable for their actions.
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Just as we encourage B Corps and all companies to put people and planet over profit, B Lab strives to prioritize the integrity of our standards and the B Corp movement over the growth of our B Corp community. Even as we’ve surpassed 5,000 B Corps after 16 years in existence, at the heart of our work is creating rigorous standards that will drive all businesses to improve — not just B Corps.
We understand that this article may have raised some additional questions or comments. We encourage you to reach out to your regional B Lab teams, as well as provide any feedback on how our standards are evolving.
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