What’s the point of becoming a B Corp?

'To B or not to B': following the launch of the B Corp movement in the UK earlier this year, James Taylor from Bridges Ventures explores the pros, cons and uncertainties of the most recent certification to make its mark in the world of responsible business and ethical trade.  

In the UK, there is no shortage of labels to describe and categorise socially-minded businesses. So can the recently-launched B Corp designation – which began in the US back in 2006, but only officially hit the UK in September – offer these companies anything new or different?

At Bridges, we’ve spent the last thirteen years investing in businesses that are trying to pursue a social and environmental mission alongside their financial targets, as B Corps are required to do. So for our part, certifying as a B Corp (and becoming part of the initial UK ‘founder cohort’) was primarily about supporting the rise of this ‘profit with purpose’ approach – while also creating some extra transparency and measurability around the way we ourselves go about it.

But there are other potential benefits to B Corp status, too. First and foremost, as part of the certification process, companies are publicly rated against global best practice standards of social and environmental performance, accountability, and transparency. By benchmarking themselves against the likes of Warby Parker, Patagonia and Kickstarter, they can identify new ways of improving their impact.

Momentum seems to be growing – but there’s clearly a way to go yet

Equally, in the longer term, certification could serve as a useful differentiator – both to ethically-minded consumers, and to the growing number of talented young people who want to work for companies with a strong sense of purpose. It could lead to collaboration and new business opportunities with other B Corps (an area that B Lab, the not-for-profit behind the movement, is keen to foster). And ultimately, acting in the interests of all stakeholders (which is a legal requirement for certified B Corps) could help companies build the kind of trust that will translate into greater resilience during tough times. All of these factors ought to improve a company’s performance over time, boosting its value and attractiveness to investors.

So there are a number of reasons why mission-driven for-profit businesses may wish to certify – regardless of whether or not they consider themselves to be ‘social’ businesses.

That said, certification won’t be for everyone. Some companies will feel that the inherent ‘mission lock’ – whereby they have to change their legal articles (or in some US states their legal form) to reflect a commitment to acting in the long-term interests of all stakeholders – may prove unduly restrictive or off-putting to investors (since although not technically irreversible, it appears to reduce the ability of shareholders to run the business as they see fit in the near term). Others will conclude that the benefits of B Corp status as a marketing or recruitment or business development tool remain insufficiently proven.

What’s very clear is that the ultimate significance of the B Corp movement – both in terms of its value to individual companies, and any catalytic impact it might have on the market more broadly – will largely depend on how successful it is in getting its messages to a wider audience.

There are some positive developments here. According to B Lab, some 33,000 businesses have now taken its online test globally. This year, Etsy became the first high-profile B Corp to list on the NASDAQ stock exchange (although it has performed disappointingly since). And at the B Corps UK launch, Unilever CEO Paul Polman said his company would lead a working group to examine how his company (and other large listed multinationals) might certify as B Corps. Momentum seems to be growing – but there’s clearly a way to go yet.

 

Bridges Ventures has published a paper entitled ‘To B or Not To B: An Investor’s Guide to B Corps’, which discusses B Corps’ attractiveness as an investment proposition, which is available here.

Photo credit: Todd DeSantis