I keep reading about ‘B Corps’ – what does it mean?

B Corps are businesses which have been awarded an external accreditation by B Lab (a US-based non-profit organisation), for what B Lab describes as ‘high standards of social and environment performance, transparency and accountability’.

B Corp status does not change the legal form of the relevant company, but is intended as a mark of approval that the business in question not only operates to generate profit, but for the betterment of its employees, customers, society and the environment.

Can my business become a B Corp?

B Corp Certification is available to companies, sole traders, partnerships, mutuals and co-operatives but is not available to charities and non-profit organisations. Generally, businesses in operation for at least one year can seek B Corp Certification.

Why would I consider becoming a B Corp?

B Corp Certification can act as a stamp of approval to prospective employees, suppliers and customers that your business is committed to having a positive influence on society and the environment, as well as just making a profit. This may have its own commercial benefits by attracting talent and customers who care about these things, which it may be hoped would lead to faster growth and potentially greater success at securing external finance.

Are any specific legal steps required for a business to become a B Corp?

Yes. A crucial step towards becoming a B Corp is meeting what B Lab refer to as ‘the legal requirement’, which is amending the company’s governing documents to include specific wording to reflect the underlying principles which B Lab are seeking to achieve. For UK based limited companies, this means amending the company’s Articles of Association.

The wording prescribed by B Lab is intended to expand the existing directors’ duties as set out in section 172 of the Companies Act 2006 to enhance the broader focus of B Lab and covers the following matters:

• The company’s objects must include having a material positive impact on society and the environment, as well as promoting the success of the company for the benefit of its members as a whole
• In seeking to meet the objective above, directors having regard to the long-term impact of decisions, the interests of employees and the impact on the community and environment, amongst other factors
• An obligation to circulate an annual impact report analysing the company’s impact in light of its objects

What else does a business need to do to become a B Corp?

B Lab’s legal requirement is just one element of a number of steps businesses must take to become a B Corp, the primary aspect being the B impact assessment (BIA). This takes the form of a set of questions used to measure a business’s positive impact on its workers, suppliers, community and environment, and a certain score is required to become B Corp certified.

The BIA includes a ‘Disclosure Questionnaire’, which allows businesses a chance to disclose any sensitive practices (for example producing or trading tobacco), fines (such as tax penalties) and sanctions affecting or relating to the company.  

The BIA is prepared by the applicant company and then verified by B Lab, and it is very unusual for a business to achieve the relevant score on an initial assessment. B Lab offers various ways to help a business improve their score, such as goal setting and best practice guides, and we can also help with this, as set out below.

Once a business has a verified score of more than 80 points on its BIA (which includes points for the legal requirement), it is eligible to sign the B Corp Agreement, pay the annual fees and officially call itself a B Corp.

Are there any ongoing obligations?

Once a business is B Corp Certified, it must re-certify every three years to maintain its status. There is also an annual certification fee which is determined by the relevant company’s revenue.

My company is only a start-up, does that make a difference to the process?

The process of applying for B Corp status is likely to vary depending on whether the applicant company is a start-up or a large enterprise.

If an applicant is a start-up and has been in operation for less than a year then it can become “pending B Corp”, which allows the relevant company time to prepare for an application for full B Corp certification.

Larger enterprises are more likely to apply directly for full B Corp status.

Can Russell-Cooke help us with the B Corp certification process?

B Lab’s Legal Requirement

Russell-Cooke can help an applicant company to meet B Lab’s legal requirement by assisting the company with amending its Articles of Association.

This requires a special resolution of the members of the relevant company, which means more than 75% of the company’s voting shareholders voting in favour of the amendment.

The company may also require other approvals depending on the terms of any shareholders’ or founders’ agreement such as the unanimous written agreement of the founders or certain investors, and we can help to review those agreements to see what’s required.

The board will need to hold a meeting to circulate the special resolution in written form to shareholders, or call a shareholders meeting (which is far less common) and obtain any other bespoke consents required.

The applicant company will need to ensure that the new Articles of Association and resolution are filed at Companies House in the requisite timeframe, which is within 15 days of the resolution being passed.

The applicant company may also wish to amend any shareholders’ or founders’ agreement it has in place to demonstrate its commitment to the B Corp principles.

At Russell-Cooke we will ensure that the process of amending a company’s Articles of Association and any other legal documents is as quick and efficient as possible, using electronic signing software and making Companies House filings online wherever possible.

B Corp Impact Assessment

We can also offer assistance in answering the BIA questions and improving your score. The questions cover governance, workers, community, environment and customers and, as one example, we might be able to review your employee and contractor contracts to help you answer questions in the ‘workers’ section.

We can also help you to improve your BIA score, by assisting with drafting or amending documents required by the BIA. These might include data and privacy policies, an employee handbook or a policy designed to reduce the environmental footprint caused by corporate travel or commuting.

In doing so, we can help ensure that your company keeps up the necessary practices in order to maintain its B Corp status.

Get in touch

If you would like to discuss any of the aforementioned topics, please contact Satinder Johal or Sally Johnston in our corporate and commercial team. Alternatively please complete our online enquiry form, or call us at 020 3826 7550.