· 11 min read
This is part two of a six-part series on sustainable business practices in Africa. You can find part two here, and part three here, part four here, and part five here.
"Every company should consider getting certified as a B Corp, at least in spirit and approach" (Polman and Wiston, 2021).
That is a bold statement. Over 8,000 businesses have taken the advice and are certified as 2024 (source B Lab). But as a business leader, you may ask what it is. How can I get certified? Why is it important?
We live in a changing world. On whichever part of the spectrum you may be placed in, there is scientific evidence that our extractive model has created imbalances on the ecological and social side. (For more, see Steffen, 2015 and on the social side UNDESA, 2020)
Academics, regulators, and the people increasingly recognise this ecological and social crisis at the planetary level and businesses' crucial role in solving it.
At a macro level, a holistic response has been the Sustainable Development Goals launched in 2015 by the UN as a comprehensive roadmap to eliminate inequalities and address the climate crisis. Businesses are critical for achieving the SDGs, and numerous initiatives have been launched to involve the business community in support of the Goals, the most notable being the UN Global Compact, a voluntary commitment to sustainability.
However, those frameworks may appear broad and somehow distant for a business. As an owner, manager, or director, you feel the external pressure from consumers to regulators. Consumers, particularly younger generations, now demand more sustainable products (PWC, 2021). Even regulators are stepping up their requirements, and even emerging economies like Kenya have introduced strict measures for businesses, like the recent Sustainable Waste Management Act of 2022.
Consequently, the private sector increasingly recognises the need for change, and even traditional forums, such as the Business Roundtable, have in recent years changed the common mantra of shareholder value to embrace stakeholder value (Business Roundtable, 2019). Even more importantly, investors joined the effort and demanded change, the most cited case being Blackrock's annual letter (Fink, 2022). However, the risk of greenwashing remains very high and present.
B Lab and the B Corp certification are part of this business transformation movement, willing to promote the business as a force for good movement. It started slowly in 2006 and has now come under the global spotlight. Can it be something of interest to a business? What are the pros and cons? After discussing with many companies, I have tried to summarise the many discussions into a digestible compendium.
What is a B Corp?
As consumer and regulator pressure increases, many certifications have been proposed to improve confidence in businesses' sustainability credentials.
B Lab emerged in 2006, intending to be a holistic certification rather than product-specific or industry-specific, like Fair Trade or FSC (an excellent book to get details is Marquis 2020). It is important to note that the certification is voluntary and holds no legal value.
B Lab focuses on the concept of the triple bottom line, proposing a rigorous assessment of the firm through the B Impact Assessment (BIA). It is a free-of-charge onlinetool with a set of 150 questions, now at the 6th revision, which scores the business in five critical areas: Governance, Workers, Community, Environment, and Consumers. Each question has a score based on multiple answers, and for certification, a company must achieve a minimum of 80 points. The assessment is then verified and audited by B Lab. The B Corp certification has to be renewed every three years, and each year, B Lab assesses around 10% of certified B Corp for annual audit. The questions on the BIA vary depending on several factors. The taxonomy of the business, the number of employees, and, recently, the geographical location (emerging or established markets) differentiate the set of questions presented to the company. After the audit, a company is certified upon payment of fees based on the turnover figures. Companies must also sign the declaration of interdependence, a vision of a new economy "that uses business as a force for good" (as in the word of B Lab). In addition, they have to change their corporate statute to mission lock stakeholders' consideration.
B Lab was instrumental in fostering the creation of a new corporate entity, the Benefit Corporation, a "traditional corporation with modified obligations committing it to higher standards of purpose, accountability, and transparency", as stated on the B Lab's website. The new corporate form ensures that in case of a change of ownership, the stakeholders' view and the principles of the B Corp movement are enshrined in the company's constitution and are not easily changed.
Recently, B Lab has launched an overall revision of the system to make it more strict, shifting from the "flexible approach linked with the score" to 10 core requirements on social, governance, and environmental impact (and the revision is still ongoing with the new certification starting in 2025).
The off-the-shelf nature of the assessment and the structure has widely popularised the iconic B in recent years with exponential growth in certified businesses, even with the entry of some familiar names. The most iconic B Corp is of course Patagonia, Ben&Jerry, and more big names have entered the scene, like Nespresso, Bailleys, and a good part of Danone. The entry of big multinationals or part of them has not come without controversy. This fact has not stopped the growth; hundreds of thousands of companies have used the BIA, even without going for the certification. However the majority of certified businesses are still SMEs but the situation is evolving, and increasingly bigger players are getting on board.
But the question I usually get asked is: Can you demonstrate any evidence that the process can give tangible benefits?
As with any transformation, the certification is not a walk in the park. Many businesses mentioned to me the lengthy process and the cost involved. Some had to recruit consultants, and others used pro bono programmes to get started, as offered in some sustainability courses.
However, during my interactions, I have found five recurring benefits.
1. Employee satisfaction and retention
One of the most significant benefits of B Corp certification is the improvement in employee satisfaction, retention and attraction. Companies along the spectrum reported a marked improvement in employee morale and engagement, attributed to working for an organisation that aligns with their personal values. In some instances even in sectors with high turnover as tech and the creative space, employee tenure has decisively improved. It is definitely a plus, the key factor to keep in mind as a leader is to have consistency and "walk the talk".
2. Strategic business planning
The process of obtaining B Corp certification often serves as a catalyst for strategic business planning. The BIA acts as a comprehensive roadmap, guiding companies to critically evaluate and improve various aspects of their operations, from governance to social impact. The improving nature of the assessment acts as a positive tension for improvement. Many small businesses used the B Impact assessment to craft their strategies and structure their companies with it.
3. Networking and community engagement
The B Corp certification fosters a strong sense of community among certified companies and is very powerful, especially for small businesses. The Hive network facilitates connections and collaborations with like-minded organisations, creating opportunities for shared learning and business partnerships. This network effect extends beyond mere business leads, fostering a movement-like affiliation among members and feeling like part of a community. The annual events, like the Champions retreat in North America, are a powerful motivation for leaders to learn, share and improve within the network.
4. External recognition and brand image
B Corp certification enhances a company's external recognition and brand image. It serves as a badge signaling a commitment to higher social and environmental performance standards. As several respondents noted, this recognition is not only a point of pride but also a differentiator in the marketplace. For many small companies, it is a selling point, indicating its value in attracting and retaining business partners who prioritise sustainability and ethical practices. The best way to summarise is a quote from an African B Corp: the certification is a way to tell a long story shortly.
5. External impact
Certification drives companies to make significant strides in environmental and social sustainability. The process encourages practices to reduce footprint and emissions, be active in social causes and care for the community, starting from your workers. Moreover, the emphasis on diversity and inclusion fosters more equitable and inclusive workplace cultures.
The benefits lead to more revenues and profit due to external recognition. Some small companies have increased revenue and turnover by over 50%, as reported in my conversations. However, this point is still debated in academia, with some scholars arguing against it and others supporting it (In case you need to feel free to contact me for all the academic references).
However, there are also some drawbacks, and I have summarised the 5 recurring ones, and revenues might be one of them.
1. Complexity and length of the certification process
A common criticism of the B Corp certification is its complexity and length. The process is often described as arduous, requiring extensive documentation and policy formulation, as expressed by several B Corp I have spoken to. Small companies, in particular, find the process complex due to their limited resources and the need for a strong formalisation, preparation of policies and gathering of evidence for the audit. Something that requires a considerable amount of time can be challenging for a small company that is busy in the marketplace.
2. Potential stifling of innovation
The rigid framework of the B Corp certification can potentially stifle innovation. Companies, especially startups in dynamic sectors like technology, express concerns about the certification's constraints limiting their agility and creativity. Another factor is the lengthy time for certification, which can be a problem in the quick-paced startup sector.
3. Mixed impact on revenue and business growth
The impact of B Corp certification on revenue and business growth is mixed, as discussed in the previous section. While some companies report positive outcomes, they do not see a direct link between certification and business acquisition. This variance indicates that the certification's financial benefits may not be uniformly experienced across all industries and company sizes. Critically, it also reflects the debate on measuring success. How do you measure success? Is it just profit and revenue, however significant, your only metric?
4. Challenges in supply chain management
The certification necessitates a more sustainable and ethically sound supply chain, which can pose significant challenges. The requirement to source from local suppliers or those with clear ESG records demands reevaluating existing supply chain partnerships, which can be complex and time-consuming, albeit necessary.
5. Issues with adaptability and relevance
Finally, the adaptability and relevance of the B Corp certification model to various business types and sizes are points of contention. This is a complex question, and B Lab has increased the paths for companies to better reflect differences in size, sector, and geographies over the years. However, the one-size-fits-all approach may not align well with certain business models, especially those that are entirely digital or non-traditional.
Another critical aspect of any sustainable business is the awareness and credibility of the certification, which are key to its success. Recent research in Belgium and the Netherlands has pointed out that just 15% of the sample is aware of the B Corp certification, which leaves a good 85% critical for the movement to achieve recognition (for the research, see https://bcorporation.eu/blog_post/7-key-takeaways-on-b-corp-brand-awareness/) In his book Marquis points out that just 7% in the US, data of 2020, so we may estimate around the same percentage of the most recent research. Awareness is critical to increasing the number of businesses and the benefits we have pointed out. There is still more to be done.
Another critical part, especially for voluntary certification, is credibility. As well as new businesses jumping on the certification, there is a need to ensure standards are respected and fraud is avoided. Greenwashing is still possible (Luite and De Giacomo, 2022), however, the B Corp certification is a bold step ahead.
I am now curious to understand your perspective as a business leader or a reader interested in sustainability. What do you think of the certification? What is your experience? Feel free to contact and engage on the social media links above.
illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.
References
B Lab (2024) [online] https://www.bcorporation.net/en-us/
Business Roundtable (2019) Business Roundtable Redefines the Purpose of a Corporation to Promote ‘An Economy That Serves All Americans’ [online] available at https://www.businessroundtable.org/business-roundtable-redefines-the-purpose-of-a-corporation-to-promote-an-economy-that-serves-all-americans
Fink, L. (2022) 2022’s Letter to CEOs [online] available at https://www.blackrock.com/corporate/investor-relations/larry-fink-ceo-letter
Liute, A., & De Giacomo, M. R. (2022) The environmental performance of UK‐based B Corp companies: An analysis based on the triple bottom line approach. Business Strategy and the Environment, 31(3): 810-827.
Marquis, C. (2020a) Better business: How the B Corp movement is remaking capitalism. New Haven : Yale University Press.
Polman, P., & Winston, A. (2021) Net positive: How courageous companies thrive by giving more than they take. Boston: Harvard Business Press.
PWC (2021) The global consumer: Changed for good [online] available at https://www.pwc.com/gx/en/industries/consumer-markets/consumer-insights-survey.html last accessed 6/10/2022
Steffen, W., Richardson, K., Rockström, J., Cornell, S. E., Fetzer, I., Bennett, E. M., Biggs, R. Carpenter SR, De Vries, W., De Wir, C. A, Folke, C. Gerten, D., Heinke, J. Mace, GJ, Person, L. Ramanathan, V. Reyers, B. & Sörlin, S. (2015a) Planetary boundaries: Guiding human development on a changing planet. Science, 347(6223).
United Nations Department of Economic and Social Affairs (2020) World Social Report 2020 [online] available at https://www.un.org/development/desa/dspd/world-social-report/2020-2.html last accessed 6/10/2022.
UN Global Compact (2020a) SDG Ambition - Scaling Business Impact for the Decade of Action UNGC [online] available at https://www.unglobalcompact.org/library/5732 last accessed 6/10/2022.
