The more companies proclaim their social and environmental “sustainability,” the more challenging it becomes for consumers to distinguish between what efforts really benefit workers and reduce pollution, and what is just greenwashing. Certifications are one way to validate responsible decision-making, and today we are going to explore one of the more prominent corporate certifications for ethical practices: B Corporation.
Patagonia, Eileen Fisher, Athleta, and Allbirds are among the small but growing number of apparel companies that proudly advertise their B Corporation status. But what does being a certified B Corp actually mean? Well, it’s kind of complicated. For FVV readers, we set out to provide an explanation that strikes a balance between general guidance to help you decide whether to prioritize B Corp certification when making purchases, while also including a slightly more in-depth exploration of the strengths and weaknesses of this certification process. If you want to go deeper, we’ve embedded links throughout to other articles.
B is for Benefit
In 2006, B Lab was created to help businesses pursue a triple-bottom line, a concept which maintains that businesses are more likely to thrive if their decisions are driven not only by financial results, but by their social and environmental impacts as well. B Lab’s first project was creating the B Corp certification whose proposition is that with certification, and the underlying work it represents, companies increase their ability to recruit top talent, retain devoted customers, and attract investors.
While fashion companies currently represent only a small portion of B Corp certifications, those that have completed the process see B Corp as a useful stamp of approval, one that affirms a real commitment to improving the supply chain and not merely lip service for greenwashing.
Since 2007, B Corp certification has been awarded to companies that complete a lengthy self-assessment and achieve a verified minimum score. The assessment focuses on a company’s levels of transparency, accountability, and performance in four key areas: environment, community, workers, and customers. In fairly granular detail, the assessment questions cover financial transparency; employee demographics, compensation and benefits; the sources of energy at supply-chain facilities, and monitoring of waste production. You can review all of the questions here.
In order to complete certification, companies amend their governing documents to formalize a dual commitment to profit and purpose. Once certified, companies pay a membership fee based on annual sales, ranging from $1,000 to $50,000 USD.
In addition to creating and managing the B Corp certification process, B Lab also lobbies states to create an entirely new legal corporate structure, the Public Benefit Corporation. By registering as a benefit corporation, a company is legally protected to prioritize more than profit. This can be particularly useful in the event of a company sale or IPO. You can read more about the distinctions between benefit corporations and B Corp certification here and here.
Since 2007, more than 3,900 companies across 150 industries in 74 countries have received B Corp certification. Today, 150 apparel brands have the certification. Over 100,000 companies have used B Lab’s impact assessment tool to gauge their companies’ efforts towards sustainability. And B Lab’s domestic lobbying efforts have resulted in the establishment of benefit corporation legislation in 37 states.
Here’s what people like about the B Corp certification’s continuous improvement model:
Transparency: Assessment reports are posted online in a searchable database and updated every three years to maintain certification status.
Third-party validation: The assessment tool is available to any company, regardless of their plans to pursue certification, and generates a roadmap for improvement in the four areas of impact. Companies strive to increase their scores over time to achieve certification or to receive accolades for being top-scorers among the certified.
Governance requirements: Amended governance documents expressly state the commitment to both purpose and profits, and, in the US, companies must pursue Public Benefit Corporation status, if available in their state, to maintain certification.
B Lab has established additional eligibility guidelines for certain types of companies and industries that are deemed controversial in order to encourage leaders in those sectors to transform their impact. These decisions are documented individually and archived on the B Corp website.
Maintaining certification can be complicated as companies grow. A relatively early B Corp adopter was the online marketplace Etsy, which received certification in 2012. However, Etsy’s board decided in 2017 to let the certification lapse rather than complete conversion to a public benefit corporation because of uncertainty about the consequences of that change. Meanwhile, Kickstarter completed its conversion in 2015.
Critics take issue with all three value propositions listed above. They question the rigor of the impact assessment given that everything is self-reported, and in-depth audits only cover a small percentage of companies in any given year. Critics also point to the lack of accountability for amended governing documents since they are not public, making it impossible to understand the depth or breadth of the corporate commitments. And adherence is voluntary.
Furthermore, critics maintain that there are already enough existing corporate structures for companies that want to prioritize purpose and profit, such as Low-Profit Limited Liability Companies (L3C), multi-stakeholder collaboratives, and Employee Stock Ownership Plans (ESOP). However, none of those structures provide a detailed roadmap for improvement of ethical business practices.
These criticisms are valid, but the demand for certification is growing. Today, the B Lab certification landing page alerts potential applicants that due to “overwhelming interest” in certification, the review process may take six to ten months to complete. And B Lab continues to iterate. It has adapted its process so large multinational companies have a means to qualify.
The pioneers include Danone, which now makes 50% of its global sales from B Corp subsidiaries, and Unilever which has acquired multiple B Corps, like Ben & Jerry’s and Seventh Generation, without requiring them to leave certification behind. Recently, B Lab established a Climate Collective to galvanize commitments from 1,000 companies to achieve net zero emissions by 2030.
B Corp for Shoppers
B Corp certification alone isn’t the way to fix everything that is wrong with how goods are manufactured and distributed globally, but it’s a useful tool. Here’s what B Corp certification tells shoppers about a company: this company isn’t perfect but it has identified concrete ways it can do better for people and the planet. Supporting B Corps demonstrates that consumers value these efforts. Being critical of B Corp’s limitations signals the public’s appetite for laws and regulations that will compel companies to do better.
Until certifications are more streamlined, and corporate responsibility becomes required rather than optional, it’s worthwhile to familiarize yourself with other common certifications whose symbols you see on labels and packaging, including Fair Trade, Cradle to Cradle, Positive Luxury, and Leaping Bunny.