Backdrop:
Set against a backdrop of,
- new ESG legislation in the form of the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD) which will necessitate increased ESG related reporting for 'in scope companies', requiring them, to look at their own position on ESG and in turn, to look closely at the ESG related policies of their value chain partners;
- investors and purchasers increasingly incorporating ESG elements into their investment making and purchasing decisions (thereby escalating the importance of ESG from the perspective of securing capital and attracting potential purchasers); and
- employees (and customers) increasingly seeking out employers (and suppliers) that share core values that are aligned to their own;
any 'for profit' companies (operating for 12 months or more) that are mindful of achieving and indeed, demonstrating high standards of social and environmental performance, accountability and transparency should consider the merits of applying for B Corp Certification.
B Corp Certification – what it is:
Issued by B Lab, a not for profit network established in 2006, B Corp Certification is (in B Lab's own words) "a designation that a business is meeting high standards of verified performance, accountability, and transparency on factors from employee benefits and charitable giving to supply chain practices and input materials."
According to B Lab, there are now over 8,000 B Corps across 95 companies. 25 of them are in Ireland, and B Lab Ireland has just recently been established (in 2023) to oversee the growth of the B Corp movement in Ireland.
Achieving B Corp Certification
To achieve B Corp Certification, a company must (in short),
- complete (and obtain a minimum score in) a B Impact Assessment i.e. a questionnaire (which evaluates a company's practices and outputs across five categories, namely governance, workers, community, the environment and customers);
- change its constitution (which, it should be noted, will
require the approval of the company's shareholders by way of a
special resolution) to incorporate language:
- obliging the company to endeavour to create a material positive impact on society and the environment taken as a whole;
- obliging the company to be accountable to all stakeholders (not just shareholders); and
- requiring the company's members to acknowledge that the inclusion of the above referenced endeavour as an objective of the company may affect the financial position of the accompany and that any such effect may be positive or negative;
- pass the B Lab evaluation and verification review process, during which a B Lab analyst will review the company's structure and its answers to the company's B Impact Assessment and the company will be required to provide details on its employees and suppliers, and back up documentation in respect of answers provided in its B Impact Assessment; and
- exhibit transparency, by allowing information about their performance measured against B Lab's standards, to be made publicly available on the B Lab website.
Time Lines:
Time lines for achieving B Corp Certification can vary depending on a company's size and complexity but companies should allow in or around 12 months to complete the process.
Certification lasts for 3 years and B Corps 'recertify' (thereby ensuring that standards continue to be met) by updating and submitting their B Impact Assessment six months prior to their recertification date.
Fees for achieving Certification:
Fees are payable for achieving and maintaining B Corp Certification. A 'verification fee' is payable as part of the initial application and that fee can range from €2,500 up to €10,000 depending on the value of a company's annual sales. 10% of this fee is paid up front at the submission stage with the balancing 90% being payable at the verification stage1. Thereafter, having achieved certification, an annual fee is payable which, for each company, will again be calculated based on the value of their annual sales, and can range from €2,000 up to €50,000 for companies generating annual sales revenue of up to €1 billion (with higher annual fees being payable by companies achieving annual revenue exceeding €1 billion). The stated intent behind the B Corp pricing model is to ensure that B Corp Certification is affordable for all businesses.
Why Do It:
Independent of simply sharing B Lab's objective of achieving an "inclusive, equitable, and regenerative economy", having a B Corp Certification is a mechanism for companies to be acknowledged globally for having high standards of social and environmental performance, accountability and transparency – a status which will undoubtedly make them attractive to:
- companies that are 'in scope' for reporting under CSRD and CSDDD and actively seeking value chain partners that can assist them in achieving their sustainability objectives;
- banks (having their own sustainability commitments) who are actively seeking to fund ESG borrowers;
- investors, seeking to invest in, and purchasers seeking to acquire, companies that will assist in terms of executing their own sustainability strategies;2
- employees seeking purpose driven work environments; and
- consumers, who are increasingly making their purchasing decisions based on companies ESG policies.
Footnotes
1. B Lab advise that for larger companies i.e. generating annual revenue in excess of €1 billion, they should liaise directly with B Lab for pricing information.
2. In a recent ESG related article, Grant Thornton commented that: "companies who have a clear ESG strategy (and can demonstrate progress) are still being bought at premium values."whilst PWC's 2023 Global Private Equity Responsible Investment Survey cited that 53% of private equity respondents chose not to pursue a deal because of ESG factors and 32% of private equity respondents stated that ESG was a primary driver of value creation in more than half of their organisations recent deals.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.