Out-Law Analysis 4 min. read
13 Apr 2021, 4:30 pm
With the campaign for the new BBA gaining momentum and set to hit a major milestone on Wednesday, now is an opportune time for businesses to explore ‘B Corps’ certification to get ahead of future potential legislative reforms.
Partner, Head of Retail & Consumer
The practical impact of the BBA could be significant for many businesses
The BBA is the product of a campaign led by not-for-profit body B Lab UK, which certifies organisations that lead the way in addressing environmental, social and economic challenges. Those certified businesses are known as ‘B Corps’. The BBA is scheduled to be introduced at a virtual UK parliamentary reception at 3pm on Wednesday 14 April, registration for which is still possible.
With the BBA, B Lab UK seeks to modify section 172 of the Companies Act 2006 to impose a duty on directors to advance the purpose of the company, rather than to solely promote the success of the company. B Lab UK’s proposals are shaped around a number of core principles:
The practical impact of the BBA could be significant for many businesses.
Depending on the company's current structure, the BBA could be the catalyst for implementing a shift in the company's policies in various respects, such as:
Directors will need to understand what is expected of them and how best they can advance the purpose of the company. Directors will also need to be aware of the reporting responsibilities imposed on the company and ensure that this reporting effectively captures the company's impact performance.
A survey conducted last year found that 72% of UK adults believe that businesses should have a legal responsibility to the planet and people, in addition to maximising profits. This sentiment is likely to grow and intensify, particularly in light of Covid-19. It is therefore essential that companies, and particularly consumer brands, show greater transparency in respect of their impact on society and the environment.
One way that businesses can do this is by gaining ‘B Corp’ status. Pinsent Masons has been supporting a number of clients through this process.
Founder and CEO of Healthy Nibbles
We have a desire to work with investors that support the ethics of the business. B Corp certification provides the opportunity to formalise the company’s ethics and way of doing business
Certified B Corps are defined by B Lab UK as “businesses that meet the highest standards of verified social and environmental performance, public transparency and legal accountability”.
B Corps are most prevalent in the fast-moving consumer goods sector, but they currently exist across 48 industries in the UK. Such companies are subject to B Lab's extensive verification process through the B Impact Assessment. This tool assesses the company's impact in relation to: governance, community, workers, environment and customers. To qualify for B Corp certification, companies must achieve a score of at least 80 out of 200.
Uniquely, the B Corp certification imposes a legal standard on companies. This plays a role in combatting greenwashing and ensuring that companies are genuinely committed to becoming purpose-led businesses.
The process for achieving B Corp status involves three main stages:
High growth companies, particularly in the health and fitness industry, are prime candidates for B Corp accreditation, primarily because the relevant components required of a B Corp company are already fundamental principles.
Interestingly, the market is simultaneously seeing a distinct increase in the important of ESG considerations to investors. B Corp status helps to improve a company’s appeal to investors. One example is the 2020 acquisition of B Corps-certified Mindful Chef by Nestle.
Founder of Battle Cancer and Move Forward Gym
We want to achieve validation from an external body to provide the business with greater international recognition on a global platform. In turn, this can increase the business' exposure to greater opportunities
A number of major brands have already been actively showing support for B Corps and responding to consumer demands for companies to achieve a higher ESG standard and take greater responsibility for their impact. For example, Ocado, Waitrose and Boots have created ‘B Corp’ only digital shopping aisles, which benefits the brands due to their increased prominence on the websites whilst also creating an environment where consumers are enabled to make more conscious shopping decisions.
Purpose is meant to encapsulate what a company is for. To answer the question, why does it exist? When done well, this means undertaking a fundamental process of self-examination, consultation and rigorous thought about the nature of the organisation.
Pinsent Masons went through this process to become a purpose-led business and last year explored how purpose is re-shaping the world’s companies, including how it crosses over with the broader ESG agenda.
Partner, Head of Retail & Consumer
Having spent time to properly understand and articulate its purpose, Pinsent Masons is now in the process of transitioning to being purpose led. Everything that the firm does and the decisions it makes are measured against its purpose and code. That has included changes in the way it measures and rewards success to include the impact on its broader stakeholders, focusing on ESG and increasing the feelings of trust and ownership in the business by distributing leadership and being more inclusive
Co-written by Tom Leman and Samantha Lewis with assistance from Gaby Kay, all of Pinsent Masons. You can contact Samantha Lewis about navigating the B Corps accreditation process at [email protected].