Why the B Corp movement is at a crossroads

Last year, B Lab appeared to be riding high. On certifying its 5,000th B Corp in May, the non-profit issued an optimistic statement. “Together, we’re transforming the global economy by harnessing the power of business as a force for good,” said co-founders Andrew Kassoy and Bart Houlahan. But behind these celebrations, a schism was opening up.

The following month, in a letter facilitated by US fair trade advocacy organisation Fair World Project, 23 B Corps collectively argued the integrity of B Corp was “at risk”.

This was following the controversial accreditation of Nespresso. Signees claimed the Nestlé-owned brand had an “abysmal track record” on human rights that was “at odds with the ethical and just future B Corps want to build” – while Nespresso has pointed to its stringent procedures.

Nespresso wasn’t the only controversy. A few months later, BrewDog lost its B Corp status amid allegations of a toxic workplace culture.

It only served to amplify frustrations with a system that should weed out unethical practices. Some 40 B Corp members joined an ‘unofficial back channel’ dubbed ‘We Gotta Talk About B Corp’ to vent concerns.

Now, as B Lab consults on new standards, it faces a division among its members. On one side are those railing against the certification of multinationals such as Nespresso. On the other are those who believe B Corp should be open to major corporations, which have the capacity to effect the biggest change. And both are seeking to influence the direction of the movement.

To understand the scale of the controversy, it’s important to understand the roots of B Corp. It was founded in 2007 as a gold standard in ethical, social and governance (ESG) certification.

In B Lab’s own words, accreditation demonstrates 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”.

Under the B Impact Assessment, companies seeking to qualify are asked more than 200 questions across five core pillars: governance, workers, community, the environment, and customers. There are also sections on carbon offsetting, workforce diversity and waste reduction programmes, among others – each answer carrying a number of potential points.

The average business only scores 51, according to B Lab. But those that score 80 or above can progress to the next stage, which includes providing evidence to assessors to back up their answers. There is also a requirement to embed commitments into the legal structure of the business to consider all stakeholders and ESG principles in decision making.

Business minutiae

It sounds rigorous, and many B Corps insist it is. “We were forced to go into the minutiae of the business, look at absolutely everything and assess where we were,” says Will Dennis, group head of sustainability at Daylesford, which achieved certification in March this year. During the audit stage, Dennis had to provide a huge breadth of supportive evidence.

The amount of scrutiny is also highlighted by Jon Walsh, co-founder at prebiotic brand Bio&Me. His business officially became a B Corp in May, following a long assessment. “The certification process is incredibly thorough,” he says. “It’s like a full-on accounts audit, where you have to provide documentary proof for every answer you give. No proof equals no points.”

It isn’t enough to scrape past the 80-mark once and rest on your laurels, either. Under the B Corp scheme, companies have to make progress to achieve recertification three years later.

“If we’d not done anything differently from when we first recertified, we wouldn’t be able to retain our B Corp certification,” says Pip Murray, founder of Pip & Nut and board trustee at B Lab UK. “If we’d assumed what we’d done to certify the first time around was enough, we’d have lost it. To retain your status you need to continue to push forward.”

Major corporations, like Nespresso, would have been subject to even greater scrutiny, according to B Lab. It says it has increased risk screening and additional steps in the verification process for both publicly traded companies and wholly owned subsidiaries.

“B Lab always says they call themselves a lab because they don’t know all the answers”

This tallies with the experience of Adam Garfunkel, co-owner and UK MD at international consultancy Junxion, and a member of the B Lab UK Standards Advisory Council. Although he accepts that “you can look at some of the large company B Corps and wonder whether they’ve genuinely committed to a different, fairer, more regenerative economy based on their activities so far”, he is confident they would have met B Corp’s high bar. “My experience working with larger companies is that there are more analysts, more people checking your score, more of the questions with more rigour than in smaller companies.”

It means many supporters are open to multinationals gaining accreditation – so long as they are subject to the same scrutiny.

“It’s completely contradictory for people to say that multinationals shouldn’t be welcomed in,” says Annabel Thomas, founder of distillery Nc’nean, which was named a 2022 ‘Best for the World’ B Corp with a score of 136. “If you genuinely feel we’re trying to make the world a better place, rather than using B Corp as a competitive advantage, why would you not want the biggest corporations in the world involved? It’s crazy.”

But others argue it is crazy to hold up controversial multinationals as the gold standard in purpose-led business, on a par with pioneers in this space.

“We’d already been watching B Corps for a long time and had been unhappy with the way their certification was written and how they were doing things,” says Dana Geffner, co-founder and executive director of Fair World Project.

Flashpoint

The certification of Nespresso in April 2022 acted as a flashpoint for these concerns. Speciality Scottish coffee supplier Glen Lyon Coffee Roasters was among the UK-based B Corps to speak out publicly at the time.

“I can understand B Corp’s perspective that if we’re going to create positive impact on a larger scale we need to engage with bigger companies and encourage them to change their practices,” says co-owner Jamie Grant.

“However, bringing multinational corporations such as Nespresso under the same certification scheme as small businesses like ours is challenging as we have completely different values, objectives and are operating with vastly different scales and impacts.”

Though he recognises the progress Nespresso has made in some areas, and insists the brand remains a positive promoter of the movement, he says “we were vocal about our concerns around Nespresso being certified as a B Corp and stand by them”.

Some argue that, if Nespresso can meet the bar, it isn’t high enough. “Parts of the community feel it should be an exclusive community that does not allow anyone with a whiff of potential negative practises getting in,” says Ryan Honeyman, partner at Lift Economy and co-author of The B Corp Handbook. They want to “make damn sure we’re not watering down those standards” to let in larger companies, he says.

“Parts of the community feel it should be an exclusive community that does not allow anyone with a whiff of potential negative practises getting in”

Others believe the bar is simply in the wrong place. One retailer feels the standards are now outdated and catered better to bigger businesses making small reductions to, say, single-use plastic, rather than SMEs with baked-in sustainability.

“We achieved the lowest score on our ‘environmental impact’, but reducing waste is why I founded the store,” says the retailer. “If that’s not reflected in my B Corp score, is B Corp a good reflection of who we are? We repeatedly went back and forth on our environmental score, and I almost didn’t sign.”

Even among those that broadly support the B Lab certification, there are questions around the ‘flexible’ way in which brands can reach the minimum score of 80. The process currently doesn’t set a baseline score for any of the five pillars. It is therefore theoretically possible to score incredibly poorly in the way in which workers are treated but still obtain 80 points by making impressive strides on climate action.

To its credit, B Lab UK is acknowledging the criticism. “We recognise the tension between those B Corps within our community who are pioneering impact-first business models, and welcoming larger and more complex businesses who have committed to this movement,” says executive director Chris Turner.

He sees this “a positive tension that will accelerate our progress, particularly as we shape the future of the standards”.

A ‘crossroads’ review

This brings us to the crux of the matter: the review of its certification requirements. Having announced a review in 2020, B Lab published the results of its first consultation on the suggested new assessment in May. These include a move away from flexible scoring and a system that takes into account a company’s long-term track record on key issues.

The proposals received broad support among the B Corps that responded. A second consultation is now planned for later in the year.

One person in favour of change is Giles Brook, founder of Bear Fruit Snacks and now CEO of Whitespace Ventures, an investment fund focused on food and drink startups. “I am a huge advocate and a massive believer in B Corp but I do think that they’re at a crossroads,” he says.

“Having been through the process with nine of my businesses and looked at some of the criteria I do think it’s a little too easy today, and it means that some businesses that I don’t think are that purpose-led can find a way to work the scoring system and get to that magic 80,” he adds.

“There’s a danger that, if they’re not careful, people will roll an eyeball if you say you’re B Corp certified as it’s that easy to get accredited and it shouldn’t be. It should be ball-busting to be accredited.”

For Garfunkel at Junxion, changes to accreditation requirements have the potential to address one of the big contributing factors to rising tensions.

“The real issue is that the current version of the standards – the sixth – was published in 2019 and things have moved on a lot in that time,” he says. “The pace of change has increased, with much more attention and depth of focus on sustainability issues. So what was set as a high bar in 2019 just isn’t as high as it needs to be in 2023.

“The ambition for B Corps for the new standards ought to be that they help companies embody and live a truly social purpose, and bring about a fairer economy,” he adds. “That’s what B Corp should aim to do and I sincerely hope it does.”

Still, not everyone believes tweaks to the accreditation process will be a silver bullet in making B Corp a gold standard. Take Erinch Sahan, business and enterprise lead at Doughnut Economics Action Lab. As he sees it, to become a B Corp is “a way of showing you have some good policies, you’re aware of your impacts and consider them in decision-making, but it’s not a gold standard for what the future of the business world needs to be.”

For him, that doesn’t mean B Corp has lost its value. Instead, he says it serves a more important purpose: providing a model for the mainstream corporate world.

“It starts to demonstrate what’s possible and what’s not for larger companies. That’s what the certification always was. It no longer characterises itself as only for the pioneers and most advanced, and instead brings in a broader perspective on what it means to be a B Corp.”

This doesn’t exactly tally with the original aims of the movement, though. So now is the time for B Lab to decide what it wants to stand for in the future.

It is likely open-minded to all feedback. “B Lab says they call themselves a lab because they don’t know all the answers,” says Lift Economy’s Honeyman. “They say they’re a lab experimenting with ways to make incentives for high-impact businesses to certify and create a movement of business that are a force for good.”

The spirit of trying and testing may just prove vital as the organisation reaches a crossroads – one that may just push some members in another direction.