The B Corporation certification process
B Corp certification is a voluntary process that requires businesses to commit to consideration of the impact of their decision-making on customers, employees, suppliers, community and the environment. Certification is provided by B Lab, a not-for profit organisation. As part of the process, all businesses looking to certify must achieve a minimum score of 80/200 on the B Impact Assessment ("BIA"), which assesses the day-to-day operations of the business alongside the business model.
If a business successfully obtains certification, they become part of the B Corp network. They will be able to utilise B Corporation intellectual property and they will become a part of the B Corp Directory. In a market where the social, environmental and ethical considerations of a business are ever more important, this can be a real benefit to those businesses wanting to demonstrate their ongoing commitment to a conscious and sustainable culture.
If a company is looking to certify that has related entities, consideration should be given as to which is the appropriate entity to pursue certification. B Corp have released guidance on this subject, which we have summarised below.
Parent company with subsidiaries
For a parent company with subsidiaries, each operationally independent subsidiary can take their own assessment. Each subsidiary must meet the performance requirements set out in the BIA, fulfil the B Corp transparency requirements and pay their own certification fees. The parent may certify once all subsidiaries have achieved certification.
Alternatively, the group can certify together if certain aspects of the group (for instance, governance, procurement and operations) are centrally managed. If pursuing this option, only one application needs to be completed for the group. However, if the group companies operate individually (i.e. without centralised management and operations), each subsidiary should complete their own assessment.
Subsidiaries can certify independently of their parent company if the parent is not interested or unable to certify themselves. To certify, the subsidiary must be operationally complete and distinct from their parent. This requirement is in place as certification is intended to assess the performance of a complete business, rather than one small part of it.
Subsidiaries with the same name as their parent may only certify alone if they demonstrate (this also must be approved by B Lab), that the subsidiary is complete and distinct from its parent. However, if the revenue of the parent company is less than $1B, the parent will need to also commit to their own certification within the next six years of the subsidiary's certification date. Therefore, for instance, if a holding company shares the same name as an operational company within the same group, it is likely preferable to certify together (assuming B Lab's prerequisite conditions are met).
If the parent and subsidiary have different names, the subsidiary may certify independently provided that the subsidiary operates as a complete and distinct business. The parent company would not need to pursue their own certification in this instance, but also would not be able to use any B Corp intellectual property.
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.